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€2 billion budget cuts can be avoided* says ESRI

*If economic growth stays strong.

Image: Mark Stedman/Photocall Ireland

THE COUNTRY WILL avoid over €2 billion in planned budget cuts this year – if the economy continues to grow.

That is the opinion of a new report by the ESRI, published today.

The quarterly economic forecast of the think-thank says that GNP will grow by 3.5 per cent this year, driven by an annual increase of 50,000 new jobs and 10 per cent more investment.

It says that if those targets are hit, the government will have to do little to hit budget targets, aside from introducing water charges.

The optimistic forecast is the first sign that there may be no need for an austerity budget this year. It comes just months before the first budget since 2009 that a government has had leeway to postpone cuts.

Finance Minister Michael Noonan had targeted €2 billion in cuts this year, but the ESRI says that with the projected €500 million intake from water charges and economic growth, this could be avoided.

The ESRI says the ‘quite vigorous’ recovery should be approached with caution, however, saying that tax cuts should not be part of Budget 2015.

“The public finances are improving more rapidly than envisaged in the government’s plan. If the forecast in this Commentary proves to be correct, government borrowing in 2015 is likely to come in below the target (3 per cent of GDP) once again, even without the substantial further cuts envisaged for the 2015 Budget.

“However, in formulating fiscal policy it is best to err on the side of caution to ensure that budgetary targets are met in 2015.”

Read: Unemployment rate should fall to 10 per cent of labour force in 2015, predicts ESRI

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