Irish deficit to reach 7 pct/GDP as recession bites

By Andras Gergely

DUBLIN (Reuters) - Ireland expects its budget deficit to rise to 7 percent of gross domestic product next year from a projected 5.5 percent in 2008, around double EU limits, the finance ministry said in a pre-budget release on Saturday.

The exchequer deficit for this year is seen at 11.52 billion euros (9.2 billion pounds), the ministry said in its Estimates of Receipts and Expenditure published ahead of Tuesday's budget, which is being presented two months earlier than usual.

That compares with the 4.9 billion deficit predicted at the time of the 2008 budget presentation near the end of 2007, a year when Ireland still enjoyed growth of 6 percent before the decade-old 'Celtic Tiger' boom came to an abrupt halt.

The double hit of a sharp construction downturn at home and global financial turmoil made Ireland the first euro zone country this year to enter recession and has blown a multi-billion euro hole in its public finances.

As tax receipts fell increasingly behind planned revenues, pushing the budget deficit to triple what it was the same time last year, the government brought forward the publication of its 2009 budget by two months to reassure the public and investors.

Assuming there were to be no changes to tax or spending when Finance Minister Brian Lenihan presents his 2009 budget on October 14, the deficit for next year is seen rising to 14.79 billion euros, the finance ministry said.

The median forecast of Dublin-based economists polled by Reuters in late September showed they expected a 9.2 billion euro shortfall in government finances this year, rising to 10.9 billion in 2009.

The ministry said the general government balance, which includes the finances of other state bodies as well as the central exchequer, was expected to show a deficit of 5.5 percent of GDP this year.