Extremely weak domestic economy will be further damaged by property tax
Confirmation from the CSO this morning that overall economic output remained flat in the second quarter of 2012 calls into question the government’s economic forecasts, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath stated, “The government has based its budgetary projections on a real GDP growth forecast of 0.7% in the current year, 2.2% in 2013 and 3% in 2014. At this remove, the growth forecast for 2013 in particular is looking increasingly optimistic and an inevitable downgrade of this forecast will make December’s budget arithmetic more difficult.
“The CSO has attributed the unexpected spike in GNP to profit inflows from abroad and has urged caution interpreting the 4.3% increase. A more probing analysis of the economic data once again highlights the weakness of the domestic economy. The reality is that the government’s expectation of an economic recovery is not materialising. The economy has essentially remained flat for the past 15 months. In fact, on the back of a GDP reduction in Quarter 1, Ireland avoided officially slipping back into recession by a mere €3 million in Quarter 2.
“Today’s figures combined with yesterday’s grim unemployment numbers paint a dismal picture of the real economy. Worryingly, the number of self-employed people fell by 6,600 (2.2%) in the last year. These factors will need to be carefully considered in the construction of Budget 2013.
“The introduction of a property tax in 2013 will further damage the domestic economy and will kill off any prospect of a recovery in domestic demand. The government would be well advised to reconsider the introduction of this tax. The figures also highlight the importance of securing an overall deal on bank debt. Without such a deal, Ireland’s debt is on an unsustainable path and will drag down the overall economy.”