The State's finance watchdog has warned that the Government has no credible plan for the economy over the medium term.

The latest assessment report from the Irish Fiscal Advisory Council has warned that the economy is facing a range of threats in coming years.

The report notes that the initial efforts to address the large budget deficit following the financial crash were “successful” – but warns that little progress has been made in the last four years, with Ireland still burdened with the fifth highest debt ratio in the OECD.

Corporation tax

It warns that potentially temporary factors, including a surge in corporation tax receipts, have led much of the headline improvement in the economy.

Up to 65% of Ireland’s corporation tax income last year could be considered above conventional levels, according to the report.

IFAC has criticised overspending in several government departments and is warning the Finance Minister against continued unsustainable spending.

Economic risks

The body’s Chairman Seamus Coffey said the Irish economy has recovered from a deep crisis – but warned that the economic outlook is unusually uncertain.

“We have a Brexit scenario that is quite difficult to predict; there is the possibility for increased tensions in the international trading environment and you are just looking at maybe a general cyclical slowdown in the global economy that could have a disproportionate impact on Ireland,” he said.

Rainy day

He said the Government should be putting more money aside while the economy is doing well.

“We think that the minister should stick to the plans that have been set out,” he said.

“They would appear to be in line with a management of the public finances that might give us some capacity to deal shocks that will hit the economy over the coming years.

“So again our advice the Minister is to stick to the plans as set out and not allow short-term issues veer us off the path of sustainable public finances.”

Spending

IFAC is warning that there should be no spending increases this year without measures to offset them in the budget.

It said the given the promises the Government has already mad, there is “minimal” room for any new tax or spending measures in the upcoming budget.

It said that if any discretionary measures are taken they must be offset by Tax increases or spending cut-backs.

It also warns that a potential ‘no-deal’ Brexit poses profound risks to the economy.