(Reuters) - New EU rules on calculating economic output could boost Ireland's gross domestic product by over 1 percent and mean a little less austerity next year, Finance Minister Michael Noonan said on Wednesday.
The technical adjustment, due to be announced by the statistics office before the end of June, could slightly reduce the amount of tax hikes and spending cuts needed to meet an end-2015 deficit target of 3 percent of GDP, he said.
Ireland, which last year became the first euro zone country to complete an international bailout, is hopeful that its next budget will be the last to require such painful measures.
The government expects GDP growth in 2014 of 2.1 percent, following a contraction of 0.3 percent last year.
The new rules allow countries to include illegal drugs and prostitution in GDP calculations, but the more significant change for Ireland will be the fact that research and development expenditure will be counted as investment rather than a cost, Noonan said.
Ireland's large multinational sector, which employs over 100,000 of the country's 1.9 million workers, has significant research and development budgets.
"I would be confident that the technical adjustment will give us a plus in terms of GDP," Noonan said. "It could be significantly ahead of 1 percent."
Noonan said he expected the increase in GDP would slightly reduce the relative size of the deficit from a year-end level of 4.8 percent anticipated in the 2014 budget.
The total spending cuts and tax hikes needed in the 2015 budget to reach a 3 percent deficit target for 2015 would thus be less than the currently planned 2 billion euros ($2.7 billion).
"If the 4.8 was to go down to 4.7 as the result of a technical adjustment ... my rule of thumb is that every 0.1 percent is around 170 million" less to be shaved off the deficit, he said.
"If your year-end position is better than the budget position ... you have less correction do to in the subsequent budget."
Noonan said it was too early to say with certainty that the adjustment would be less than 2 billion euros, but that he was hopeful.
Other elements, such as tax receipts that are ahead of target, will be more significant in determining the size of the required adjustment, Noonan said.
"Don't make too much of it... But it's one of the elements that is moving in the right direction," he said.
reuters.com
The technical adjustment, due to be announced by the statistics office before the end of June, could slightly reduce the amount of tax hikes and spending cuts needed to meet an end-2015 deficit target of 3 percent of GDP, he said.
Ireland, which last year became the first euro zone country to complete an international bailout, is hopeful that its next budget will be the last to require such painful measures.
The government expects GDP growth in 2014 of 2.1 percent, following a contraction of 0.3 percent last year.
The new rules allow countries to include illegal drugs and prostitution in GDP calculations, but the more significant change for Ireland will be the fact that research and development expenditure will be counted as investment rather than a cost, Noonan said.
Ireland's large multinational sector, which employs over 100,000 of the country's 1.9 million workers, has significant research and development budgets.
"I would be confident that the technical adjustment will give us a plus in terms of GDP," Noonan said. "It could be significantly ahead of 1 percent."
Noonan said he expected the increase in GDP would slightly reduce the relative size of the deficit from a year-end level of 4.8 percent anticipated in the 2014 budget.
The total spending cuts and tax hikes needed in the 2015 budget to reach a 3 percent deficit target for 2015 would thus be less than the currently planned 2 billion euros ($2.7 billion).
"If the 4.8 was to go down to 4.7 as the result of a technical adjustment ... my rule of thumb is that every 0.1 percent is around 170 million" less to be shaved off the deficit, he said.
"If your year-end position is better than the budget position ... you have less correction do to in the subsequent budget."
Noonan said it was too early to say with certainty that the adjustment would be less than 2 billion euros, but that he was hopeful.
Other elements, such as tax receipts that are ahead of target, will be more significant in determining the size of the required adjustment, Noonan said.
"Don't make too much of it... But it's one of the elements that is moving in the right direction," he said.
reuters.com
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