TAOISEACH BERTIE Ahern has called for a calm approach to the economy and warned against "short-term, knee-jerk reactions" which, he said, would cause unnecessary damage to long-term prospects.
At a press conference after the Brussels summit of European leaders, he played down the significance of the latest forecast for the Irish economy from the Economic and Social Research Institute (ESRI) on the basis that it was only one of a range of different assessments available.
"The ESRI is forecasting a GDP growth of 1.8 per cent, 1.6 per cent GNP. That's the most pessimistic that we've seen on the Irish economy so far," Mr Ahern said.
"Economic forecasting, as we all know, is an uncertain exercise and, for a small, globally-integrated economy such as us, the uncertainties that are out there at the moment are magnified. There's no doubt about that and this is apparent from a whole range of forecasts currently available.
"But they are all very different. I'm not getting into the business of which one is right. NCB (stockbrokers) this week published a forecast of 3.5 per cent of GDP growth for the year so here you see, in the one week, [ forecasts] that are going from 1.8 to 3.5."
He pointed out that the Department of Finance's budget day forecast of GNP growth of 2.8 per cent for this year, 3 per cent for GDP growth, had not been changed.
"In terms of the public finances, the Tánaiste is providing for a modest deficit this year. That's appropriate at this stage of the economic cycle. We examine these things in the late autumn and early winter." Ireland was once again running a current budget surplus. "We're borrowing modestly to invest ambitiously. We have to keep on doing that."
He added: "All sectors of construction are going very well this year with the exception of the one that we know, the residential side." Although the Government was "upfront" about economic and fiscal risks, Mr Ahern stressed that, "at this stage it's important that we remain calm and avoid taking short-term, knee-jerk reactions that would damage long-term prospects and there's no need for that".
The Government would emphasise the need to retain flexibility and continue to raise productivity. "If we do this, it will protect and enhance competitiveness and employment levels."
Another policy priority was slowing the rate of increase in public spending: "We have to control public spending and we've set that out in our book of estimates and in the budget process."
It was also important to restore confidence in the housing market, "through the stamp duty changes, increasing the ceiling for mortgage interest relief". From a policy perspective, there were international economic developments over which Ireland did not have control, "but they do highlight the importance of improving competitiveness".
He added: "We can do that; we can work hard as we've done several times over the last 20 years to improve competitiveness when we needed to do so. We have to address that through putting money into education, into skills, investing in infrastructure - well over 5 per cent of GDP in the National Development Plan - maintaining stability in the public finances, which we're going to have to do this year and we're going to have to do that strictly, and maintaining a low burden of tax on profits and wages.
"These are the issues that we have to manage. It's a more difficult year, it's more difficult internationally. It's a global situation but, if we keep our nerve and manage ourselves through as we've done successfully now for 20 years, we'll come outside of the downturn in a strong position."
