Fiscal Space inBrief

The parameters for Budget 2017 are set by the requirements of the preventive arm of the Stability and Growth Pact (SGP). The preventive arm is assessed under two main pillars. These are the Structural Balance Rule and the Expenditure Benchmark Rule.

 

Adherence to the fiscal rules limits the net fiscal space for new commitments to somewhere between €900 million and €1 billion in 2017. The net fiscal space available in 2018 ranges from €1.2 billion to €2.6 billion with the exact figure depending on underlying assumptions related to calculation of the economy’s output gap and structural deficit.

 

Based on current potential growth projections the net fiscal space available in each of 2019-2021 is close to €3 billion per annum. However, the Irish Fiscal Council estimates that demographic and inflation pressures on public spending just to ‘stand-still’ in terms of public service delivery and benefits will cost €6 billion extra public spending by 2021.

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