There are considerable uncertainties regarding the economic impact of any fiscal measures, given that it is unknown how economic agents will react to the various policy changes. In addition, the composition of the fiscal package would be important, as different policy measures would have different economic impacts.
Notwithstanding these uncertainties, the economic impact of fiscal measures can be estimated in broad terms.
A fiscal package designed to raise €4.5 billion in 2009 is the equivalent of about €6 billion in a full year and would amount to around 3½% of GDP for 2009 as a whole. Taking account of a number of factors such as the potential for significant ‘leakages' through imports and some impact on price rather than on the quantity of output it is estimated that GDP growth would be around 1½% lower than would otherwise be the case on foot of these measures. Broadly similar pro rata rates apply to the other amounts.
However, there is potential for considerable variation on the macroeconomic impact depending on the exact nature of any fiscal package. Furthermore, account of the potential for enhanced consumer and investor confidence and greater future certainty that such a package may have would also have to be considered.
