Budget 2022 puts economy on ‘prudent path’ – IFAC
The Irish Fiscal Advisory Council (IFAC) said the Government has put the economy on a more “prudent path” after Budget 2022.
IFAC said that in following its spending rule “even as revenues have surprised on the upside, the Government has the economy on a more prudent path that will reduce borrowing and the debt ratio in the years ahead”.
In a preliminary analysis of Budget 2022, it described the spending rule as “a useful innovation” and one which it had recommended for a long time.
But it also said the level of capital investment was “high – both in an international context and historically”.
IFAC says that in the past 25 years, investment has only been higher twice.
It said while this should address shortfalls in the areas of housing and climate, there is “a greater need to ensure future investments generate value for money in the coming years”.
Commenting on Budget 2022, Davy Stockbrokers said it showed that political pressures to spend the unexpected strong performance of tax revenues in 2021 have been resisted.
Davy said the “limited” Budget measures were focused on addressing the rising cost of living.
It noted that tax bands and credits were raised, adding about 1% to disposable incomes close to the average wage. Pension, unemployment and other welfare payments were raised by €5 per week.
The Government announced that the wage subsidy scheme will be extended to April 2022, albeit with tapered rates from December. The Help-to-Buy scheme will be extended into 2022, with funding put in place for the equity loan scheme.
Meanwhile, Goodbody Stockbrokers said that Budget 2022 has laid the groundwork for a return to normality.
It noted that “temporary” supports will continue into 2022, but a rapid rebound in tax revenues is facilitating this while also allowing for a reduction in the budget deficit from 5.9% in 2021 to 3.4% of GNI* in 2022.
The stockbrokers said that Ireland has been one of the most aggressive in its fiscal response to Covid-19, with this tab set to grow further in 2022 due to ongoing health spend and an extension to the Employment Wage Subsidy Scheme (EWSS) in particular.