The Minister for Finance, Brian Lenihan told the Dáil last night that he expected the overall economic contraction to be somewhere in the region of 3% to 4%. Two months ago on Budget Day, he forecast 1%. It's now clear that the October 14 forecasts were massaged for political purposes.
Credible economists had suggested at the time of the Budget that the forecasts were massaged to improve the outlook and it has been suggested that official forecasts should be made by the Economic and social Research Institute, to avoid manipulation.
In the same week as the Budget in October, Goodbody economist Dermot O'Leary, forecast a 4% contraction in 2009 and today, he said that he had revised his forecast up to 4.2%.
Finfacts Report Oct 17, 2008: Irish Economy: Goodbody says GDP will plunge 4% in 2009; Budget forecasts too optimistic; Number of years before trend growth is achieved again
"Acceptance of the severity of this recession is the first step in coming up with proposals to attempt to address it, so this announcement should be seen as a positive. The next step is to take the necessary action in relation to current spending in the public sector and to put forward a plan for economic recovery in the medium-term," Dermot O'Leary said today.
Lenihan told the Dáil that "the fall in the 2008 revenue take alone would push the 2009 general deficit up by approximately €1.5 billion to 7.25% of GNP," compared with the Budget target of 6.5%.