DUBLIN (Reuters) - Ireland is better placed than most countries, and than it was in the past, to withstand the effects of high oil prices but still needs to maintain a prudent fiscal policy, Finance Minister Brian Cowen will say this week.
Cowen will discuss the economy -- and its implications for his December budget -- at a meeting of the ruling Fianna Fail party after the price of oil breached $70 a barrel last week in the wake of Hurricane Katrina, which disrupted U.S. production.
But he is not expected to revise forecasts for economic growth given at the end of last month, a spokesman said, after a Sunday newspaper suggested Cowen would warn that soaring oil prices cut one percent or more off annual growth.
Ireland raised its forecast for 2005 gross national product growth to 5 percent in its annual Economic Review and Outlook in August but left its estimate for gross domestic product unchanged at 5.1 percent because of weak trade numbers.
Advertisement starts
Advertisement ends
"I’m not aware of any revision to those figures at this stage," the ministry spokesman said.
"We’re starting from a position where our economy is strong and so we are better placed than most others to successfully deal with the challenge posed by higher oil prices," he added, outlining what Cowen was likely to tell colleagues next week.
"Over the coming months we must build on that strength by developing prudent policies particularly in relation to public spending and pay, taking on board the challenges posed by higher oil prices," the spokesman said.
In his maiden budget last December, Cowen balanced prudence with his government’s search for a more caring image by reducing tax for the poor and cautiously raising spending.
An upbeat outlook for the Irish economy -- which is growing at twice the rate of most of its European peers and enjoys almost full employment -- gave the minister room for manoeuvre.
But the recent surge in oil prices has raised concerns that Ireland’s economy, heavily reliant on exports, would lose its competitiveness and that this could spark job losses.
"However, this a new challenge and not a threat with the type of consequences we saw in earlier periods," the spokesman said, noting that Ireland’s dependence on oil was much less than in previous years.
In the 1970s, every 100 euros of economic output in Ireland required six or seven euros of oil, compared to two euros at present, he noted.
