Multiple fiscal watchdogs including the ESRI, the Central Bank, and the Irish Fiscal Advisory Council warn that a proposed €9.4bn package of extra spending and tax cuts risks overheating the Irish economy. Evidence indicates the economy is performing at or above potential output, making additional stimulus unnecessary and pro-cyclical. Overheating can feed inflation and create capacity constraints that hinder delivery of the National Development Plan and housing targets. Advisers recommend moving toward underlying surpluses and counter-cyclical policy. Temporary cost-of-living measures previously helped vulnerable households, but their phasing out will create affordability pressures for older people and those with disabilities.
"Ireland's fiscal policy looks pro-cyclical right now, which creates immediate risks such as overheating, and longer term risks such as the need to continue with a pro-cyclical fiscal stance in any downturn, thereby magnifying the downturn,"
"We see merit in moving to a situation where underlying surpluses are achieved."
"The economy does not need that level of fiscal support,"
Read at Irish Independent
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