Minister for Finance's statement on the Pre-Budget Outlook -2010
The following statement was issued on November 12th, 2009 by the Minister for Finance, Mr. Brian Lenihan, TD as the Government’s Pre-Budget Outlook was launched.
The Department of Finance today published its Pre-Budget Outlook in which the Irish economy is projected to contract by 1½ per cent next year following a decline of 7½ per cent this year. The 2010 forecast is an improvement from the April forecast of just under a 3 per cent contraction.
Unemployment is forecast to peak at an average of 13¾ per cent of the labour force in 2010. This forecast is lower than the 15½ per cent rate contained in the April Supplementary Budget. But the downward revision leaves no room for complacency. The creation and protection of jobs remains the overriding objective of government economic policy. The Government’s planned €4 billion adjustment to the public finances in the forthcoming Budget is forecast to result in the General Government Balance stabilising at -12 per cent of GDP next year.
Commenting on the projections, the Minister for Finance, Mr. Brian Lenihan, T.D., said:
“The last year or so has been exceptionally difficult for us all. And there are significant challenges ahead. But I am pleased to note that the outlook for the economy is now improving. The consensus now is that positive growth will return during 2010, although it will be 2011 before we experience positive growth for the year as a whole. My Department’s Pre-Budget Outlook outlines the emerging macroeconomic and fiscal outlook for the coming years.”
The Minister said the Pre-Budget Outlook sets out three preconditions for a return to sustainable economic growth:
(i) Restoring order to the public finances over the coming years;
(ii) Regaining international competitiveness to copper-fasten a return to solid employment growth; and
(iii) A properly functioning banking system.
“In all three areas the Government has taken decisive and effective action. And we will continue to take decisive action by taking the necessary and difficult decisions in the Budget next month. Our resolve as a Government to do the right thing has boosted international confidence in Ireland. Without international confidence, our economy will not recover. There is light at the end of the tunnel but any deviation from the path that we have now embarked upon will quench the emerging recovery. ”
The Minister stressed his determination to stabilise the budget deficit in order to limit the increase in public debt, restore confidence in our public finances and stop the drain on scarce resources by an ever-increasing interest burden.
“I welcome the broad support for the need to make an adjustment of €4 billion next year because taking decisive action now will bring immediate benefits to our economy.
Now is the time to stabilise the deficit: falling prices and lower interest rates are cushioning the impact of the necessary adjustments on families. The decline in prices this year and the prospect of a further – albeit more modest- decline next year is restoring our international cost competitiveness. Nominal income levels must be seen in the context of declining prices.
The Government is determined to build on the corrective measures we have already taken. Preparation for the budget is well advanced and let me say once more that the scope for further taxation increases is limited; the bulk of the required adjustment will come from expenditure savings. In taking action we are sending a clear positive message to households as well as to the wider international community that we’re determined to restore order to our public finances.
I look forward to the debate next week in Dáil Eireann on the Pre-Budget Outlook, which will be carefully considered by the Government in its budgetary decisions.”
Finally, in response to developments at the European level, the Minister said:
“I welcome the report published by EU Commission yesterday which concluded that Ireland has taken effective action to address the fiscal deterioration and its proposal for a one-year extension for the correction path in recognition of the deterioration in the public finances this year. At the December Ecofin Council, EU Finance Ministers will decide on this matter in the context of their consideration of the one-year extensions for certain other Member States.
This proposed extension, while easing somewhat the adjustments required in the later years, does not change the focus of our need to stabilise our very large deficit. If anything, it reinforces the need to continue to take effective action in 2010.”
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