The budget may succeed in turning a fiscal position that impresses everybody into a policy announcement pleasing no one.
The country is on track to achieve one of the only surpluses in any eurozone member this year and next, driving competing calls on Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe to spend big.
That pressure, forcing tough choices between pre-election giveaways and much-needed investment, is intensifying before the budget is unveiled on Tuesday in Dublin as they confront a slowing economy that narrows room for manoeuvre.
The public finances boast a budget surplus of over €10bn thanks mostly to corporate tax receipts from the major multinationals.
The boon is such that the Government is setting up a sovereign wealth fund similar to the one Norway has to hoard its oil wealth.
But the country is also badly in need of investment in creaking infrastructure suffering from years of underfunding.
With reports of fraught discussions and a flurry of final negotiations, ministers are lobbying for additional funding for respective departments, while many voters are hoping for aid to help ease the burden of persistently high inflation.
“I think we are going to see a budget that is deemed to be a little generous — and probably leave many economists very annoyed — but equally will leave most in various factions who are asking for very significant increases equally disappointed,” said economist Austin Hughes.
Ireland stands out from its EU peers, most of whom are still nursing budget deficits as they cope with the lingering fiscal fallout from the pandemic.
Ireland’s debt as a percentage of gross domestic product is only 40% — a full 100 percentage points lower than Italy.
The Government is keen to use some of its extra cash to win support before an election in the next year or so, just as Sinn Féin consistently leads opinion polls.
The central bank has warned the Government risks keeping inflation higher for longer, while the the Irish Fiscal Advisory Council has urged ministers to avoid “past mistakes” and shirk from the temptation of spending increases or tax cuts.
Loretta O’Sullivan, EY Ireland’s chief economist, cautions that there is still a case to offer “one off” aid measures to citizens still confronting the inflation shock.
McGrath previously warned a meeting of his Fianna Fáil party that it will not be possible “to do everything” in the budget.
What’s not helping him is a slowing economy.
This week, the Economic and Social Research Institute forecast a contraction in the final months of this year, while exchequer figures showed a drop in corporation tax receipts.
Ms O’Sullivan is sanguine about that.
“We’ve had an exceptional performance,” she said.
The economy “is growing, but over the coming years, we expect the growth to be more moderate than we’ve had in the past couple of years”.
