Today the Government will present a mini-Budget in order to reduce spending by €500m. This is due to lower tax revenue this year because of the slowdown in construction and consumer spending. However, it is not all doom and gloom and the economy is in a better state than the media would have you believe.
- The Government will have to borrow more money but this money is for investment and not for day-to-day spending.
- Current revenue is still higher than current expenditure. The Government will still have a current budget surplus in 2008.
- If the Irish economy was a company, we would not have enough debt. Debt is not a bad thing if it is used for investment in infrastructure which will increase the productive capacity of the economy in the future. Ireland has a Debt/GDP ratio of 25% which is lower than every other Eurozone country with the exception of Luxembourg. Our private sector debt is high but the Government can afford to borrow for capital expenditure.