The latest Exchequer returns indicate that the Irish economy could be expanding by as much as 10 per cent this year. The tax figures for the nine months to the end of September indicate buoyant growth across all sectors of the economy. Private sector and Government analysts have once again been forced to update their economic growth forecasts for the year.
The surplus of Exchequer tax receipts over spending in the first nine months of the year was £506 million, compared to £185 million in the same period last year. As the Government has spent £250 million this year in putting funds into the small savings reserve fund and the post and telecom pension funds, the underlying position of the Exchequer finances is even stronger. Announcing the figures yesterday, Department of Finance second secretary, Mr Michael Tutty said that "things just keep getting better and better. We had been expecting some levelling off, but that hasn't happened".
With tax revenues running ahead by up to 14 per cent, well ahead of official estimates so far this year, Mr Tutty said that Ireland's gross national product could grow by between 7 and 8 per cent. He also hinted that the Exchequer Borrowing Requirement could soon become a redundant statistic, with the Government likely to eliminate borrowing next year.
Private-sector economists believe that the underlying performance of the economy may be even stronger. They predicted last night that the economy was in fact growing at a unprecedented rate of up to 10 per cent. They insist that the Minister for Finance has sufficient funds to deliver a giveaway pre-Christmas Budget and still eliminate Government borrowing next year.
Riada economist, Dr Dan McLaughlin, says the surge in tax revenues suggests a huge number of new jobs were being created in the economy, predicting an increase in total employment of around 65,000, almost 20,000 more than that forecast by the Government at Budget time. Mr Tutty also believes that the job creation figures are running well above its revised half-year forecasts of 52,000, with PRSI receipts almost double that provided for in the Budget.
The boom is also being driven by strong growth in retail sales, with new car sales driving the bulk of the activity. Dr McLaughlin believes that Government finances will be in balance at the end of this year and that there could be a surplus on the Exchequer finances next year.
But despite the financial largesse at his disposal, the Minister for Finance is striving to keep a lid on people's expectations. Reacting to the figures yesterday, analysts continued to suggest that the way was clear for Mr McCreevy to deliver tax cuts worth around £500 million, well above Government commitments under Partnership 2000. But the Minister has moved to dampen those suggestions, stressing that it is important to provide for factors such as the reductions of EU structural funds to Ireland after 1999.
