The economy is continuing to surge ahead, with new figures showing strong growth in tax revenues and the unemployment rate dropping below 9 per cent for the first time.
This is despite increasing fears for the outlook internationally, with new measures to support the world economy set to dominate week-long meetings of international finance ministers and central bankers, which start in Washington today.
Here, the latest Exchequer figures show that tax revenues are running way ahead of the Budget target, boosted by rising employment and booming retail sales. During the first nine months of the year, Exchequer revenues exceeded spending by £1.3 billion. For the full year, the Government now expects a surplus of £800 million.
With the strong trend in taxes expected to continue into next year, the Minister for Finance, Mr McCreevy, should have plenty of scope in framing his Budget. He cautioned that the economy is vulnerable to the effects of an international slowdown and that he must be "particularly sensitive" to this exposure in his Budget preparations.
The Budget must not add "significantly" to domestic demand, he said, as inflationary pressures remain a major worry, signalling that he favours a relatively cautious tax package. This may lead to difficult negotiations in Government in the weeks ahead, the Tanaiste, Ms Harney, having made the case for significant tax reductions.
The economy is already set for a boost from lower interest rates in the weeks ahead, with a further drop in wholesale rates on the Dublin money market yesterday prompting a belief that a signal from the Central Bank to drop rates will not be long delayed. One month money traded at 6 per cent on the market yesterday, with the one year interest rate falling to a new low of below 4 per cent.
The third quarter Exchequer figures show that total tax revenues were £11.852 billion in the first nine months, 12.6 per cent ahead of the same period last year, compared to a Budget forecast of 6.3 per cent.
Government day-to-day spending rose by 6.8 per cent to £7,794 million. Spending is continuing to come under pressure from pay claims and from the special package agreed for farmers, although the sharp fall in unemployment is helping to offset this.
The downward trend in unemployment was confirmed by yesterday's live register figures, which showed a 5,100 fall in the seasonally-adjusted total last month to 220,000. The unemployment rate is now 8.8 per cent, the lowest since records began in 1983 and below the EU average of 10.1 per cent. The good news on the domestic economy comes as fears grow for the outlook internationally, with President Clinton warning last night that the world faced "the most serious financial challenge in 50 years".
He proposed that international finance ministers support the creation of a new emergency fund to strengthen countries which run into economic difficulty. This is among the new measures which will be discussed by Group of Seven finances ministers in Washington today, ahead of next week's annual meeting of the International Monetary Fund and the World Bank.
Investors worldwide will look to the meetings to provide some evidence of measures to tackle the crisis, and many expect a package of financial aid for Brazil after this weekend's elections. Yesterday share prices once again fell heavily in Europe, and the Irish market lost another 4 per cent of its value, with financial shares hit hardest.
While most European stock markets took another battering, some analysts took comfort from the better tone in New York last night when the Dow Jones index closed nearly 2 per cent higher.