Everything depends on growth

THE success or failure of a budget, if measured in terms of achieving the targets set out in relation to expenditure and revenue, is largely dependent on the economic assumptions underlying the financial calculations and how realistic they turn out to be.

When growth is stronger than expected, tax revenues will automatically increase and pressure on expenditure will tend to ease, and the overall borrowing targets can be surpassed. On the other hand, if growth disappoints on the downside, tax revenues will tend to be weaker, pressure on expenditure will be greater, and the deficit will tend to be wider.

In Budget 2012, delivered last December, the Department of Finance based its budgetary calculations on GDP growth of 1.3% and GNP growth of 0.7%.