Joanna Tuffy (Dublin Mid West, Labour)
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Question 54: To ask the Minister for Finance the aggregate knock-on effect on economic growth and contraction he would expect as a result of deflating the economy, through Government revenue raising or expenditure reductions in the 7 April 2009 budget, by €1.5 billion, €2.5 billion, €3.5 billion, €4.5 billion and €5.5 billion over a nine-month period to end 2009; if he, his officials or external bodies at his or their request have; and if he will make a statement on the matter. [12324/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There are considerable uncertainties regarding the economic impact of any fiscal measures, given that it is unknown how economic agents will react to the various policy changes. In addition, the composition of the fiscal package would be important, as different policy measures would have different economic impacts.

Notwithstanding these uncertainties, the economic impact of fiscal measures can be estimated in broad terms.

A fiscal package designed to raise €4.5 billion in 2009 is the equivalent of about €6 billion in a full year and would amount to around 31⁄2% of GDP for 2009 as a whole. Taking account of a number of factors such as the potential for significant 'leakages' through imports and some impact on price rather than on the quantity of output it is estimated that GDP growth would be around 11⁄2% lower than would otherwise be the case on foot of these measures. Broadly similar pro rata rates apply to the other amounts.

However, there is potential for considerable variation on the macroeconomic impact depending on the exact nature of any fiscal package. Furthermore, account of the potential for enhanced consumer and investor confidence and greater future certainty that such a package may have would also have to be considered.