Risk of attaining deficit target are 'weighed to downside'

later12

The Irish Fiscal Advisory Council, which has some form in this area, has again warned that given the macroeconomic outlook, a larger adjustment may be required for the Budget, or Ireland runs the risk of missing a fiscal target of getting the General Government Deficit to 8.6%

http://www.rte.ie/news/2012/0403/fiscalreport.pdf

The Government’s plan to reduce the General Government deficit from approximately 10 per cent of GDP in 2011 to 8.6 per cent of GDP in 2012 was based on a real growth rate of 1.3 per cent in 2012. However, some deterioration in growth prospects since the Budget announcement raises a question mark as to whether this deficit target can be attained with currently planned consolidation measures. Given the continuing fragile nature of Ireland’s creditworthiness (despite some recent improvement), it is important that, if necessary, measures be taken to ensure that the General Government deficit target of 8.6 per cent of GDP is adhered to..

The IFAC has undertaken a fiscal feedback model and have taken the view that, ceteris paribus, a budget deficit of 8.8% is likely (as opposed to 8.6%). Therefore...

the Council continues to believe, on balance, that there is a strong argument for greater consolidation than currently envisaged by the Government. This assessment takes into account factors such as the deterioration in the growth outlook, some improvement in Ireland’s creditworthiness and the Government’s choice of a less ambitious budgetary target for 2012 than that underlying the Council’s October 2011 analysis. An alternative adjustment path could involve cumulative additional budgetary adjustments of the order of €2.8 billion compared with those currently envisaged by the Government.

However, the IFAC do qualify their suggestions by remarking that funding costs may turn out to be lower than expected, and the margin of error in their simulation may diminish the requirement for a larger fiscal ajdustment than had been anticipated in Budget 2012.

One thing that really stands out is a rather alarming graphic simulating the effects on Debd:GDP of the nominal GDP growth being 1% stronger/ weaker than forecasted.



and the adjustments that would be required in each case



Overall, however, the council takes the view that the consolidation path is still quite reasonable, but needs to be re-adressed in light of the poorer than expected economic outlook.

beeftotheheels

Did they take into account the better than expected PMIs? UK as much as our own, and the US data given we're a leveraged play on US growth.

later12

AFAIK the only external assumptions captured in a model like that are EU/ USA/ G20 GDP growth, then oil and foreign exchange on the technical side. The report doesn't actually seem to say what it is capturing.

It certainly isn't a perfect forecast; as the authors say, there is a margin of error in these sort of simulations.

I actually think it's not a particularly depressing read. Which is always a welcome change whenever a report has the word Fiscal in its title.

Godge

First the scary bad news about what might happen and then the good (but not very confident) good news about what is happening.

http://www.rte.ie/news/2012/0403/irelands-budget-deficit-falls-sharply-in-march.html


"According to Exchequer figures for March from the Department of Finance, the Government's deficit last month was €4.26bn compared to €7.07bn last year."

"In the first three months of this year, the Government took in €8.7bn in tax, that is just over 16% more than in the same three months of 2011, and 10% ahead of target for the year to date."

All good, but the reason for not being over-confident comes next:

"Some of this increase can be put down to a late processing of Corporation Tax, which was due in December, but received in January.
The income tax receipts were almost 10% ahead of targets, but this was because of a reclassification of receipts from employers that were previously returned as PRSI. If this had not happened income tax receipts would have been 3.5% ahead of targets.
Government spending was 2.5% ahead of targets, and Finance Minister Michael Noonan said he will be stressing to his Cabinet colleagues the importance of adhering to the 2012 spending targets "as we did in 2011"."


Health and Social Protection were the areas that over-spent, keep an eye on rent allowance cuts and supplementary welfare allowance as those are the discretionary bits that could be cut further in the social welfare bill and on hospitals complaining that they are running out of money.

Still with taxation 3.5% ahead of target and expenditure only 2.5% ahead of target, overall still ahead of target.