Govt's huge tax take sees improved economic forecast
The Government tonight revised upwards its economic growth forecast for this year and predicted it would take in an extra €2.2bn in tax.
While warning against expectations of a give-away Budget in December, the Minister for Finance Brian Cowen said employment prospects looked good.
In his Pre-Budget Outlook, October 2006, the minister said the prospects for the economy were positive.
It said Gross Domestic Product (GDP) will grow by 5.25% and Gross National Product (GNP) will grow by 5.75% in 2006.
For the period 2006 to 2008 the department forecast that both GDP and GNP will expand by 5% per annum.
“My department’s economic projections for growth over the forecast period are appropriate to an economy at full employment and achieving its potential rate of growth,” Mr Cowen said.
“There are risks on the international scene of lower growth and variable oil prices but the prudent fiscal policies that this Government has followed give us the flexibility to cope with such risks.”
He went on: “I also welcome the very positive outlook for growth in the published projections notwithstanding the real challenges that we face over the next few years.”
The outlook showed employment grew by 89,000, 4.6%, year-on-year in the first half of 2006 and by the second quarter of the year the level of employment exceeded 2 million for the first time in the history of the state.
Unemployment rates remained one of the lowest in Europe, the report noted. The Department of Finance now forecast employment growth will average 3% per year between 2006 and 2008, with unemployment remaining relatively low.
The report estimates an Exchequer deficit of just €626m euro this year, compared with a €2.9bn deficit expected last December. The improvement is mainly down to €2.2bn euro extra in tax receipts, boosted by a better than expected take from stamp duty and capital gains tax.
Inflation is forecast to hit an average rate of 4% this year.
Mr Cowen said publishing the Pre-Budget Outlook was the first step in reform of the Budget process.
And he said it provided a valuable context and more open and transparent framework within which the 2007 Budget decisions can be set.
“It is a major step forward in my plans to modernise the budget process by providing improved and more relevant information to the public and their representatives,” the minister said.
