Govt finally admits growth forecasts too high as public finance plans lose credibility – McGrath

Despite the fanfare, Govt predicting number of people with jobs will actually reduce in 2012

The Government has today finally accepted the mounting evidence that Department of Finance growth forecasts for 2012 and 2013 will be missed, according to Fianna Fáil Finance Spokesperson Michael McGrath.

Commenting on the publication of the Stability Programme Update, Deputy McGrath stated, “There has been growing evidence in recent months that the Government’s estimates for economic growth in 2012 were too optimistic. Of deep concern is the revised forecast of a contraction of 0.2% in GNP in 2012 following a steep 2.5% contraction in 2011. GNP is a more meaningful measure than GDP of the real economy and the Government is now forecasting a reduction of GNP for the fifth consecutive year.

“I also note that the Government has reduced its forecast for 2013 to 2.2% (GDP) and 1.4% (GNP). At this remove, it is difficult to have any confidence that these growth levels can be achieved in 2013. The question must also be asked on what basis can the Government forecast 3% GDP growth in 2014 and 2015? These estimates could not be described as conservative and raise serious questions about the Government’s public finance forecasts for 2013 and beyond. In particular, the forecast of the debt to GDP ratio peaking at 120.3% in 2013 before gradually declining does not seem credible at this time.

“Incredibly, the Government are also now accepting that the Labour market will remain very weak despite a number of well publicised initiatives, with employment contracting by 0.4%. Despite all the fanfare with various Jobs Plans, the Government seems to have little confidence in its own plans and now concedes that less people will have jobs in 2012 than in 2011.

“Overall, it is a very sobering picture of the state of the Irish economy and the outlook for the public finances and debt sustainability.  It highlights the need for the Government to impress upon our European partners that the burden of bank restructuring needs to be considerably reduced and that such an agreement is needed in the short rather than the long term.”