Paschal Donohoe focuses on risks in opening to Budget 2023 dialogue



Finance Minister Paschal Donohoe has hinted at risks to economic growth as the Government wrestles with next year’s budget.

So many of the risks that we identified as being potential a number of months ago are now the ones that are happening and that we are going to have to deal with,” Mr Donohoe told the National Economic Dialogue in Dublin Castle on Monday.

In April the Government predicted that the domestic economy would growth by 4.2pc this year (and 3.9pc in 2023), while gross domestic product – including multinationals – would expand by 6.4pc this year and 4.4pc in 2023.

In May, the European Commission forecast Irish GDP would expand by 5.4pc in 2022 and 4.4pc in 2023, while the OECD predicts GDP growth of 4.8pc this year while slashing its forecast to 2.7pc for next year.

The International Monetary Fund is still forecasting Irish GDP growth of between 5pc and 6pc over the next two years.

While Mr Donohoe said the Government would “not be standing passively by as these kinds of risks develop” he insisted that spending would have to be reined in to maintain the country’s creditworthiness as borrowing costs start to rise.

“We can help but we can’t confront and insulate ourselves from all of change the change that is underway, and we do have constraints and we do have limits in the decisions we need to make.

“The era of Covid, in which we could borrow so much for so little, that has now come to an end.

“That need to ensure that our reputation for being a country that can borrow at an affordable rate is going to be so important in the time ahead.”

The Taoiseach also dampened expectations of a giveaway budget, insisting that the Government will not chase inflation “on a month to month basis”.

Micheál Martin insisted the upcoming budget will be a “cost of living budget” and that fuel security would be a top priority for Government as Russia threatens gas supplies to Europe.

“We’ve got to accept that the winter period could be the most significantly difficult period of this crisis so far,” he said of Russia’s moves to use energy as “leverage” to “pressure” the EU.

“Our resources, though, are not limitless, nor is our capacity as a small country,” he told the National Economic Dialogue, a key step in the budget-making process.

“We need to prioritise and manage carefully our resources while ensuring we protect those most vulnerable.

“While we can, must and will continue to help, we cannot mitigate the entire burden of inflation.

“Our priority will be to balance addressing the rising cost of living against the risk of exacerbating these same inflationary pressures.”

He brushed off questions about putting corporate tax receipts in a rainy day fund, saying the “immediate priority of this year’s budget will be the cost of living”.

The National Economic Dialogue in continues all day.



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