Finance Minister Paschal Donohoe has said the cost of the Covid-19 pandemic will most likely top €8bn as the government struggles to contain the crisis.
Speaking as he published stark economic figures showing the impact of the crisis on the public finances, Mr Donohoe and his top officials said that government spending and borrowing will increase to meet the costs of the crisis.
The Exchequer returns as published showed that tax revenues in March were nearly €1 billion lower than March last year, a decline of over 20%.
Vat receipts were half the level they were last year, down about €800 million, which the department described as an unprecedented fall and an indication of the difficulties businesses are currently facing.
As a result, an Exchequer deficit of €2.5 billion was recorded to end-March 2020, compared to a deficit of €966 million in the same period last year.
Speaking to reporters, Mr Donohoe said that while the Government was previously expecting a budget surplus in 2020, we are “now heading for a considerable deficit” because of the pandemic's impact.
The €1,569 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted current and capital expenditure.
Tax receipts for the month of March amounted to €3,704 million, significantly under the monthly target by 22.5% or €1,073 million.
This is primarily attributable to a steep decline in VAT receipts as a result of non-payment arising from the Covid-19 crisis, officials said.
Cumulative tax receipts of €12,933 million at the end of the quarter represented modest growth year-on-year of 1.1%, or €318 million, as strong performances in January and February compensated for the March shortfall. Total net expenditure to end-March was €13,600 million.
This represents a 13.5% or €1,614 million increase on 2019 and is €959 million, or 7.6% ahead of profile. The increase in expenditure is again attributable to Covid-19 related spending.
Mr Donohoe said: “Tax revenues are set to decline steeply over the coming months. On the expenditure side, the Government has put in place significant resources to help fight this virus. Combined with the fall in tax revenues, these measures will result in a large fiscal deficit this year.”
“It is entirely appropriate that the Government cushions the effect of the crisis in this way,” he said.
Mr Donohoe, when asked about the likely deficit as a result of the crisis, said it was too early to say but that he will endeavour to give such an update later this month when Ireland has to outline its budgetary estimates to the European Commisison by way of the Stability Programme Update (SPU).
Asked about ongoing government formation talks, Mr Donohoe said that there was a good engagement with Fianna Fáil yesterday and that he expects such talks to escalate next week.
He said there has been no discussion as to who will be Taoiseach but said that Fine Gael has insisted there be parity of recognition, suggesting an equal number of cabinet seats in the final shakeup.