The Governor of the Central Bank is urging the Government to stick to its own rule limiting annual spending increases to 5% in the upcoming budget. Gabriel Makhlouf advised the new Minister for Finance to balance between avoiding overheating the economy and maintaining competitiveness.
In his annual pre-budget letter, Makhlouf highlighted the need to consider making temporary spending permanent to adhere to the spending rule. He noted the Irish economy’s resilience to external shocks and the shift towards strengthening its potential.
The Governor emphasized the importance of addressing capacity constraints in housing and infrastructure while maintaining a fiscal stance that does not disrupt monetary policy. He also pointed out structural vulnerabilities in the tax base, climate change, and an aging population.
Makhlouf warned against an expansionary fiscal stance over the next two years, citing risks of overheating and damaging competitiveness. He emphasized the need for credible choices in taxation and expenditure for sustainable growth.
The Governor’s letter comes ahead of the Summer Economic Statement, setting the stage for Budget 2025. His insights on fiscal policy and structural vulnerabilities provide valuable guidance for the Government’s budget decisions.
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