THE economic forecasts in the Budget generally provide few surprises. But Finance Minister Ruairi Quinn did manage to pull an extra £50 million out of his hat for which the economists had not bargained.
This allowed him to announce an Exchequer borrowing target of £729 million, or two per cent of Gross National Product, below expectations of a target closer to £800 million.
"There was a lot more fat in the spending numbers than any of us thought," said Mr Dermot O'Brien, economist at NCB Stockbrokers.
Social welfare spending this year came in £60 million below expectations as a result of a boost in PSRI receipts. This allowed over £54 million to be taken from expenditure, thereby reducing the Exchequer Borrowing Requirement below the expectations of most economists.
Mr Jim Power, chief economist of Bank of Ireland Group Treasury, said this should be taken well by the markets, particularly as there is a "reasonable chance that it will actually be surpassed once again" as strong tax revenues may mean that the target is undershot.
The Gross National Product (GNP) growth forecast of 5% is in line with forecasts from the Economic and Social Research Institute (ESRI) and Central Bank of 5% and 4.75% respectively.
But Mr Power said he believes this is "quite conservative" and that a growth figure of 5.5% or higher is more realistic. This, he said, would lead to stronger tax revenues, and to an EBR closer to £650 million.
The Gross Domestic Product (GDP) growth forecast of 5.75% is in the middle of ESRI and Central Bank forecasts of 6% and 5.5% respectively. Mr O'Brien also believes the figures may be marginally conservative, particularly on tax.
The general Government deficit, which is the definition used by the Maastricht guidelines, is forecast to come in comfortably below the 3% required by the Treaty at 2.6% of GDP.
However, the level of GDP was not published. Mr O'Brien said he believes the Maastricht deficit is probably around £1.0 to £1.1 billion, or £300 £350 million higher than the EBR.
This, he said, can be accounted for by £120 million savings on debt service costs carried forward from last year, about £100 million from privatisation and £60 million for the Hepatitis C programme, which was accounted for in last year's Budget but will not be paid out until this year.
These are excluded from the 1996 EBR but included in the general Government deficit calculation.
The overall general Government debt is on target to hit 80% of GDP at the year end, said Mr Quinn. Bank of Ireland's Mr Power added that although the Budget amounts to little, it should keep interest rates heading down and provide support for the pound.
Mr Quinn also forecast that inflation should remain moderate with an expected increase in consumer prices of 2.25%. At the same time, real disposable incomes are forecast to increase by 4% with a corresponding increase in consumer spending of 4.5%. Overall domestic demand is also expected to increase by 4.5%.
Export growth is expected to come in at 9.5%, given continued modest growth in international economic activity and increases in capacity in the Irish industrial sector. Import growth is also expected to reach 9.5%, reflecting "strong domestic and export demand".