Outside Government Buildings this morning, Minister for Finance Michael Noonan declined a reporter’s invitation to cast the growth spurt in the economy as as some kind of a “Celtic Phoenix” rising from the debris of the crash. “You’re trying to feed me lines now that you can quote. What we have is we have very strong growth figures.”
Noonan was always man for his own sound-bite and it was he, indeed, who said the Irish economy would take off “like a rocket” whenever the turnaround came. Well, this looks like it. Figures out this morning from the Central Statistics Office show that gross domestic product picked up by 7.7 per cent in in the second quarter this year compared with 2013.
Having said only week ago that he was upgrading his official growth forecast this year to a little more 3 per cent from 2.1 per cent in April, Noonan has now introduced a further upgrade to forecast 4.5 per cent growth this year. In sum, the economy is growing now at more than twice the rate predicted only five months ago.
The budget deficit is scheduled to come around 3.5 per cent of GDP, ever closer to the 3 per cent threshold laid down in EU budget rules. Ireland remains saddled with an enormous public debt, but the recovery is gathering pace rapidly. After years of turmoil, the task now is avoid fiscal excess and the return of bad habits. There is no point in having strong growth if it cannot be translated into creation for the recovery is mirage without that.
Noonan denied any clamour for a giveaway budget next month but it is clear that these figures - impressive as they are - will intensify the pressure for income tax concessions. The mantra within the Coalition these days is that public expectations of budgetary largesse must be “managed”. That’s going to be more difficult, as people demand their share of the recovery dividend. The Minister brushed aside questions as to whether he would tackle the universal social charge or the higher income tax rate in 2015, saying he awaits tax returns for September. He also noted that the basic tax burden includes pay-related social insurance.
There is no doubt today’s figures strengthen his position ahead of the Budget on October 14th. “Obviously at the start when you’re in a catch-up phase of an economy after a recession, you’ll get very high growth figures in the early stages,” Noonan said. “ But as it settles I would hope we would have growth of around 3 per cent in the next five, and, God willing, for the next 10 years, if we can avoid a boom and bust model.”
Noonan has identified his challenge it will be no small task to meet it. Inheriting a crash is one thing. The recovery must not be squandered.
