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Concern at Govt plans to run deficit of almost 3%

The Chairman of the Irish Fiscal Advisory Council has expressed concern at the Government plans to run a deficit of almost 3%, which would result in a modest fall in the ratio of debt to national income from 110% to 106% by 2025.

Sebastian Barnes, who works at the OECD Economics Department, said Ireland has not run such a large deficit in the past 25 years outside of crisis periods.

This would leave Ireland more exposed to future risks to growth and interest rates, he claimed.

According to the summer economic statement published on Wednesday, the exchequer is expected to record a deficit of €20.3 billion this year.

The Department of Finance is forecasting that debt will be €64 billion higher than this year by 2025.

“A 3% deficit, which is very large by historical standards in Ireland, implies €20 billion additional borrowing compared to what the Government was originally planning, so it is a big change and that raises concerns,” Mr Barnes said on RTÉ’s Morning Ireland.

“Because the more debt we have, the more exposed we are to a rise in interest rates or a shortfall in growth or rather nasty surprises that might come down the line.

“So, the Government is definitely taking more risk with this plan and that’s why we’re concerned.”

Mr Barnes said that he knows that the Government “wants to invest a lot in areas like housing and climate where we know additional money is badly needed.”

“They are facing a very difficult balancing act between the opportunities and needs for investment, current spending needs they are going to have between fiscal sustainability and avoiding overheating of the economy,” he added.

“So, that’s a very delicate balance and it’s something that the Council is going to have to assess very carefully in the months and the weeks ahead.”

Article Source – Concerns at Govt plans to run deficit of almost 3% – RTE

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