Ireland’s budget package for 2023 can be increased to help combat rising inflation, the finance ministry said on Monday, after projecting a modest budget surplus rather than a deficit this year.
Ministers now have 6.7 billion euros ($7 billion) available for expenditure hikes and tax cuts next year, up from 4.5 billion euros earlier, but over half of that has already been assigned to spending plans.
As a result, a new regulation implemented last year linking core government expenditure growth to nominal GDP growth will be temporarily suspended, with day-to-day spending expected to expand by 6.5 percent next year rather than the 5 percent predicted a year ago.
In April, the finance ministry predicted that modified domestic demand, its preferred gauge of economic activity, would rise by 3.9 percent in 2023. Inflation, on the other hand, reached a nearly 40-year high of 9.6 percent in June, according to Eurostat last week.
Finance Minister Paschal Donohoe stated that the administration is sure that the spending limit would be reinstated, but that inflation must first return to about 2-3 percent.
“There is now mounting evidence that the economic momentum that we have seen in recent times is slowing,” Donohoe said at a press conference, adding that he believes the spending plans strike the correct mix between aiding people and adding to inflation.
When the expanded budgetary package is taken into account, Donohoe’s department stated on Monday that it may run a budget surplus of up to 0.5 percent of GDP in 2022 and between 0.25 percent and 0.75 percent of GDP in 2023.
The 6.7 billion euro package includes 3 billion euros for present service levels, investment plans, and demographic expenses, as well as 1.05 billion euros for income tax reduction.
The unallocated balance set aside for future spending must also fund any new public sector pay arrangement reached between trade unions and the government. Negotiations between the two parties stalled last month and have yet to resume.
On top of the 6.7 billion euro plan, further one-time measures to assist consumers with increased energy costs will be implemented.
Ministers have also moved the budget release from mid-October to September 27, saying it might contain reduction in childcare and university fees, an extension of temporarily lower public transportation rates, and a range of welfare measures for disadvantaged people.
($1 = 0.9568 euros)