Full year deficit could shrink to €5 billion, 1% of GDP
The deficit in 2021 now looks set to fall to as low as €5 billion to €6 billion – only 1-1.5% of GDP – according to an economist.
Conall MacCoille, chief economist at Davy, said that would amount to one of the smallest deficits in the OECD.
His outlook is based on the latest exchequer returns published by the Department of Finance yesterday.
The exchequer deficit for the 12 months to November was €4.8 billion compared with the Budget 2022 forecast for €12 billion in 2021 and general government balance of €13.3 billion.
“We conservatively forecast the government deficit in 2021 will be €5 to 6 billion, or 1-1.5% of GDP. This is an extraordinary performance given the strong level of Covid-19 fiscal support for households and firms and is one of the smallest deficits in the OECD in 2021,” Mr MacCoille said in a note.
“The clear message from the public finance data is that the Irish economy is exceptionally buoyant. The multinational and export sectors are clearly still performing well,” he added.
He noted that Irish employment was already above pre-pandemic levels, accompanied by 5.4% pay growth.
“The recovery in domestic activity is also helping to reduce government spending, with Pandemic Unemployment Payment (PUP) claimants falling to 55,000 at end-November – down from over 100,000 in September,” he said.
Yesterday’s exchequer returns showed tax revenues to November were €62 billion, up 22% on 2020 and ahead of the €55 billion in 2019, with growth broad based across corporate, income taxes, VAT, capital gains and capital acquisitions.