Dáil Éireann Debate, Tuesday - 19 July 2016
183. Deputy Pearse Doherty asked the Minister for Finance to outline the revised figures for fiscal space in each of the years 2017 to 2021 in light of the recently revised CSO figures for GDP growth for 2015 to 26.3%. [22356/16]
View answerEstimates of fiscal space based on the expenditure benchmark are largely unaffected by changes in actual GDP. Instead, the relevant input is the estimate of the potential growth rate of the economy, as estimated by the European Commission each Spring.
The rationale for this is simple: budgetary policy should not be pro-cyclical. In other words, fiscal space should not increase when there is a cyclical improvement in the economy and, similarly, fiscal space should not reduce when there is a cyclical downturn.
The fiscal space of just under €1 billion for 2017 set out in the Summer Economic Statement (SES) is not expected to change materially as almost all the inputs used to calculate it under the expenditure benchmark are fixed following the publication of the European Commission's spring 2016 forecasts.
Revised estimates of the fiscal space for the years 2018-2021 will be published on Budget day, based on my Department's projections for key inputs including the GDP deflator, reference rate and convergence margin.
The revised GDP growth rate for last year of over 26 per cent reflects the impact of a small number of large multinational firms, and bears little resemblance to underlying economic developments. In this regard, I want to assure the Deputy that government policy will not be based on one off or exceptional growth. Instead, we will set policy on the basis of more 'normal' growth rates such as those projected by my Department, and endorsed by the Irish Fiscal Advisory Council.
