Dáil Éireann Debate, Thursday - 12 June 2014
51. Deputy Thomas Pringle asked the Minister for Finance the impact on the budget deficit if there was no reduction in expenditure or increases in taxation in budget 2015 and there were growth rates of 1.5% and 2.0% in 2015; and if he will make a statement on the matter. [24999/14]
View answerThe fiscal forecast for 2015 contained in April's SPU is predicated on a consolidation package of €2.0bn which has been well flagged over recent years and is estimated to deliver a general government deficit of 2.9% of GDP. The no-policy change scenario sought by the Deputy will, as is the norm, be published in advance of Budget 2015.
In terms of economic growth underpinning this forecast, real GDP is forecast to grow at 2.7% in 2015 and nominal GDP, which is the driver of taxes and the denominator used in the deficit / GDP ratio, is estimated to grow at 3.6%. These macroeconomic forecasts have been endorsed by the Irish Fiscal Advisory Council.
There is no simple answer with regard to the impact of different headline growth rates on the deficit as the exact impact would depend on the composition of growth. For example, growth driven by exports does not have as significant an impact on the public finances as domestically driven growth. A rule of thumb estimate is that for every extra percentage point of GDP growth, the deficit improves by between ¼ and ½ percentage points depending on the composition of growth.
Finally, I would like to reiterate that there remains a lot of moving parts, and the most up to date economic and fiscal information will be used in deciding the adjustment package necessary to deliver on our EDP obligations closer to Budget time.
