Ireland must move away from from year-to-year tactical and political budgets — Neri

Nevin Economic Research Institute calls for 'multi-annual budgeting focused on long-term strategic economic and societal goals'

Neri co-director Dr Tom McDonnell said the Irish economy and society more generally are facing a series of enormous challenges such as an ageing population, deglobalisation and changes to FDI patterns, climate change and technological disruption from automation and AI.

Economists at the Nevin Economic Research Institute (Neri) said the post-covid economic tailwind has now petered out, but the economy and employment would still grow next year.

Publishing its latest economic report, Neri said the outlook for the next year was more muted, with the tightening of monetary policy and weak consumer confidence dampening consumption and investment.

Nevertheless, it said modified domestic demand would grow by close to 2.5% next year, while employment should increase by close to 1.5%. 

It said the country should remain close to full employment assuming there is no further interest rate hikes and a modestly stimulatory fiscal policy

However, Neri co-director Dr Tom McDonnell said the Irish economy and society more generally were facing a series of enormous challenges such as an ageing population, deglobalisation and changes to FDI patterns, climate change and technological disruption from automation and AI.

"These changes will alter consumption patterns, economic tasks, and labour market opportunities and returns," he said.

"Policymakers need to take a strategic approach to these challenges, including through reforms to labour market policy, industrial policy, and education and skills policy. Just transition principles will need to underpin our response to each of these challenges."

Dr McDonnell said Budget 2024 represented an opportunity to plan for these challenges. 

An expansionary budget makes little sense at this time and would be pro-cyclical. Particular caution is warranted around regressive tax cuts."

Neri said Ireland needs to move away from year-to-year tactical and political budgets to a process of multi-annual budgeting focused on long-term strategic economic and societal goals. 

It said windfall corporation tax receipts should be saved into a series of funds for capital investment, to offset future ageing costs and support public investment in housing.

"Monetary policy should take care not to push the European economy into a recession and the ECB should now pause the cycle of monetary tightening before it is too late," Dr McDonnell said.