McCreevy 'to hit Budget day target'

The Minister for Finance will hit his Budget day target this year despite Department of Finance forecasts for a €500 million shortfall in tax revenues, a leading economist has predicted.

AIB economist Mr Oliver Mangan believes the Exchequer will finish the year with a deficit "pretty close" to the €1.9 billion set out by the Minister for Finance, Mr McCreevy, on budget day last year.

He is less optimistic on 2004 and 2005, predicting that Exchequer borrowings will overshoot budget targets in both years. He says the Government's forecast for borrowing of just less than 3 per cent of gross national product in 2004 and 2005 was based on unrealistically low projections for growth in current spending.

"Although growth in spending has decelerated markedly, its largest component, the public sector pay bill, continues to rise rapidly."

For 2003, he says the actual tax shortfall is unlikely to exceed €300 million, as receipt trends continue to improve. He also expects this shortfall to be offset by savings on debt repayments and EU contributions. Capital spending is also on track to come in beneath target, according to Mr Mangan's analysis.

He believes the expected deficit this year would also have occurred in 2002 if the Exchequer had not been boosted by one-off savings and revenues from the sale of State assets.

He says this indicates that the public finances have been put on a more sustainable path after the spending growth and tax giveaways of the past few years.