Rise in government borrowing and VAT fall drives Ireland's €3.3bn deficit-CSO

Government sale of bonds in response to Covid-19 led to the biggest rise in short term borrowing since 2009
Rise in government borrowing and VAT fall drives Ireland's €3.3bn deficit-CSO
The government recorded a deficit of €3.3bn in the first quarter of 2020; the equivalent of 3.7% of quarterly gross domestic product (GDP).

The government has recorded a deficit of €3.3bn in the first quarter of 2020 driven mainly by a fall in tax receipts for March, April and May. 

This is according to the latest data released by the Central Statistics Office (CSO).

A 41% decline in Value-Added Tax (VAT) receipts made up the majority of this decrease. 

The impact of the Covid-19 pandemic on the economy leading to a reduction in VAT generating activity was identified as the primary cause of this reduction. 

Vat receipts decreased by €1.8bn (41%) in the first quarter of 2020 when compared to the first quarter of 2019. 

Unpaid VAT that has been deferred by Revenue as a response measure to the Covid-19 pandemic will be later added to first-quarter statistics in a future update. 

The revised data is expected to be released later this year when more details on deferred VAT payments become available.

State borrowing in response to the outbreak of the coronavirus also led to an increase of 1.9% in Ireland's debt to GDP ratio. 

After the first quarter of 2020, general government gross debt stood at €213.8bn and 60.7% of GDP, an increase of €9.7bn from €204.1bn and 58.8% of GDP at the end of 2019. 

Government sale of short-term and long-term debt securities of €5.3 billion and €4.4 billion respectively, in response to Covid-19, led to the biggest rise in short term borrowing since the financial crisis in 2009.

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