DUBLIN – Ireland unveiled a growth-oriented 2017 budget on Tuesday that builds on the country’s rapid recovery from an international bailout with 1.3 billion euros ($1.45 billion) of spending increases and tax cuts.
Finance Minister Michael Noonan told lawmakers that he expects Ireland’s economy to grow 4.2 per cent this year and a more modest 3.5 per cent next year because of the negative impact of the United Kingdom’s planned exit from the European Union.
Ireland’s export-focused economy, driven by the operations of about 1,000 high-tech multinationals, is once again the fastest growing in Europe following the country’s 2013 emergence from a banking crisis.
But Ireland’s biggest market is Britain, representing 16 per cent of total exports and 40 per cent of goods and services exported by domestic companies — and that trade is already taking a hit because the British pound’s exceptional weakness makes euro-denominated Irish products more expensive.
Noonan said a tenth of Ireland’s 2 million-strong workforce is dependent on trade with Britain, which joined the then-European Economic Community alongside Ireland in 1973. “Whatever the final settlement, what we know with certainty is that Brexit has increased risk to the Irish economy,” he said.
Tuesday’s budget includes income tax cuts for low-wage workers, a 10 euro cent increase in the minimum wage to 9.25 euros ($10.25) per hour, big increases in spending on hospitals, new subsidies for child-care costs, tax breaks for first-time home buyers, and plans to create a national savings fund to safeguard Ireland against surprise economic shocks.
Noonan, Ireland’s finance chief since 2011, said the government was committed to ending budget deficits and pruning national debt. He said the deficit this year would fall to 0.9 per cent of gross domestic product, to 0.4 per cent in 2017 and give way to budget surpluses by 2019.
He said Ireland intends within the coming decade to reduce its debt-to-GDP ratio to 45 per cent, well below the eurozone’s much-violated goal of 60 per cent. Ireland’s national debt currently represents 76 per cent of GDP. The lower the ratio, the more willing investors will be to keep buying Irish debt securities even in times of crisis.
Unusually, Tuesday’s budget won backing from the main opposition party, Fianna Fail, which took credit for shaping its contents. That reflects the new political reality in Ireland following February’s inconclusive election. A hung parliament in May formed a weak minority government that requires Fianna Fail support in parliamentary votes.