Analysis: The Minister for Finance, Mr McCreevy, has taken great pleasure in pointing out to the "economic commentators" that he met his Exchequer targets last year, despite dire predictions of a big deficit, writes Cliff Taylor.

Now the question is can we repeat the trick and, more significantly, what will the trends this year mean for Budget 2004?

The target for Exchequer borrowing this year is €1.89 billion. At this stage the Department of Finance is saying that taxes will be up to €500 million below target and that spending will be roughly on track.

On the tax side they are being - understandably - cautious. Tax trends have been weak this year. The Department puts the shortfall at just over €200 million to date - due to a carry-over of some €55 million in receipts from last year this may be a slight under-estimate, but the difference is not significant. Excises are particularly weak, hit by a big fall-off in alcohol and tobacco sales.

Income taxes are also behind schedule, although interestingly PAYE receipts are on track, benefiting no doubt from the tax paid by public servants following the first 25 per cent of the benchmarking awards, which had a substantial backdated element. Non-PAYE income tax is running about €100 million behind, but the vast bulk of receipts in this area comes in with the self-employed returns in November.

The Department is obviously leaving room for a substantial shortfall in the self-employed returns. This may happen, but if these returns come in anywhere near schedule then the shortfall at end-December may be considerably less than the €500 million. Throw in some savings on capital spending and national debt servicing and borrowing for the year should at worst greatly exceed €2 billion and at best could be very close to the original target.

But what about next year? The Department will take some comfort from the tax trends. Income tax, while behind target, has improved a little as the year went on. Also VAT has held up relatively well, suggesting some resilience in consumer spending. On the negative side, the significant boost from stamp duty will peter out if the housing boom slows and the smoking ban in pubs will presumably further hit excises.

The key assumption for forecasting tax trends will be the expected economic growth rate. Yesterday's forecasts from the Central Bank will give the Department pause for thought. The Bank expects that gross national product growth will be 2.75 per cent next year, with gross domestic product increasing by 3.25 per cent, representing a relatively modest recovery.

Last year when it published its longer-term economic forecasts, the Department anticipated that GNP growth next year would be 2.9 per cent, with GDP rising by 4.1 per cent. Against this background it predicted that the EU borrowing measure - general government borrowing which excludes money paid into the national pension fund - would rise from 0.7 per cent of GDP this year to 1.2 per cent next year. If growth is noticeably slower than the Department predicted, then potential borrowing will grow.

The combination of slowish revenue growth and pressure on spending means Budget 2004 will not be easy to frame. Much of the pain may come in the spending estimates - annual current spending growth has slowed to 8 per cent and the Department will want to hold it there or reduce it slightly. With pressure on pay due to benchmarking, the implication of slowing overall current spending growth appears to be cutbacks in non-pay current spending - and this will put pressure on services.

Meanwhile the Government will probably allow borrowing to rise a little to pay for infrastructure projects. The Department continues to insist that capital spending - running 11 per cent below 2002 levels - will catch up by the end of this year and does not represent a policy of saving money in this area.

And what of taxes? The prescription may be for a repeat of last year's stealthy increases, while avoiding increases in headline rates. As a Budget it may therefore appear a lot like the 2003 version, as the Exchequer and the public service continues to try to adapt to the end of the boom years .