Ireland sought on Tuesday to further boost a strong economic recovery by cutting taxes and increasing spending by 1.3 billion euros in its budget for 2017, which included measures to "Brexit-proof" the economy.
Ireland's economy is set to grow faster than any other in the European Union for the third successive year but is the most vulnerable to Britain's decision to leave the EU, which has already led to a cut in Irish growth forecasts in 2016 and 2017.
Among the so-called "Brexit-proofing" measures, a lower VAT rate for the tourism sector was retained to help guard against a slowdown in British visitors, Ireland's biggest market. Farmers dependent on the UK export market will be offered lower cost loans and other tax relief to assist cashflow.
"The UK's decision to exit the European Union represents a real risk to our economy," Finance Minister Michael Noonan told parliament.
"The best and most immediate policy under our own control to mitigate this risk is to control the public finances. We must also put in place economic shock absorbers to reduce or eliminate the impact of future economic shocks."
With over two-thirds of the package going towards services still suffering from years of spending cuts during the financial crisis, Noonan introduced modest income tax cuts for low- and middle-income earners for the third year in a row.
He also unveiled details of a grant of up to 20,000 euros for first-time buyers of new homes struggling to save deposits required under new central bank lending rules, though some worry it will just boost house prices.
Even though gross domestic product ballooned by 26% in 2015 on a technical revision, improving Ireland's debt dynamics at the stroke of a pen, Noonan committed to cutting the national debt faster than required under EU rules.
He set a new target to reach a debt-to-GDP ratio of 45%, lower than the 60% EU limit, to be reached by the mid-2020s or later depending on economic growth.
The minority government made up of Noonan's Fine Gael and a group of independent lawmakers are reliant on an agreement with the main opposition party, Fianna Fail, to abstain on key votes to pass the budget, which will begin later on Tuesday and continue in the coming weeks.
Fianna Fail's finance spokesman Michael McGrath, whom Noonan negotiated with when framing the budget, told Reuters last week he was confident the budget would pass. (Reuters)
Source: www.businessworld.ie
