Red 22 on 2% Growth

Many of us will be gearing up for the wonkfest that is the Budget, and as long time readers probably know, the Estimates of Receipts and Expenditure (.pdf) white paper is a key document in shaping any budget. Seamus has some thoughts on the latest one, and I’d really only add one point: several documents have now made much of the savings and passthrough coming from the full year’s property taxes, last year’s budgetary out turn, and the IBRC liquidation. Fiscal consolidation is on track.

All of this is, of course, predicated on growth coming back in strength, and as you’ll know if you stare at these things, growth is always magically 2-3 years away. The latest HERMES simulations estimate the cumulative effect of fiscal consolidation since 2010 is the reduction of annual growth rates by between 3/4–1%. So with more austerity, and a fragile international environment, growth may be hard to come by.

With two more years of relatively harsh budgets to look forward to, a good question might be what is the probability distribution around those growth estimates, and what downside risks–and resulting contingency plans–exist?

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Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

3 thoughts on “Red 22 on 2% Growth”

  1. I worked it out long ago.

    Take whatever figure the Dept. of Finance comes out with, then take away between 2%-3% and hey presto that’s the growth figure for 2014.

    Then continue with the extend and pretend fiasco and hope that something turns up, a bit like MR. Micawber “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”

  2. Or what Black Swans are lurking in the bull rushes?

    What’s the probability distribution on World War?

  3. We need a budget thread. Given what the Irish Times is reporting it looks like another budget where the poor get hammered and the rich get to continue to party like it’s 1999.

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