There remains a significant downside risk to Ireland’s economic forecast for average gross domestic product growth of 2.8 per cent between 2013 and 2015, according to Goodbody Stockbrokers.
The Government plans to reduce the budget deficit to 3 per cent of GDP by the end of the period.
Its forecast GDP growth of 2.8 per cent may still prove to be “too optimistic” as domestic demand continues to be anaemic, Goodbody said.
“Given the fragility of the international environment, one would have to think that risks to growth forecasts still lie to the downside,” chief economist Dermot O’Leary said today.
“For these reasons, the Irish Government will have to continue to negotiate improved terms from the EU to reduce the overall debt burden, with promissory notes [in Irish Bank Resolution Corporation] being the obvious contender,” he said.
Last week, the Government announced spending cuts and tax increases amounting to €3.8 billion will be contained in next month’s budget.
The adjustment is larger than had been mooted until the summer, but less than advocated by organisations such as the Independent Fiscal Advisory Council.
Minister for Finance Michael Noonan said that the budget would include €2.2 billion in spending cuts and €1.6 billion in additional taxation next year. He said the final figure of €3.8 billion was necessary to satisfy the “sacrosanct” condition of the EU-IMF bailout.
