Exchequer deficit pegged at €8.9bn in November lockdown 'shows strength of Covid-hit economy'

Government on target to meet its deficit target of around €22bn this year

Minister for Public Expenditure and Reform Michael McGrath. Picture: Stephen Collins/Collins Photos

Tax revenues of over €8.5bn collected in November show the resilience of the Irish economy during the Covid crisis and the Government looks set not to bust its budget deficit target, despite the additional costs of November's lockdown, leading economists have said.     

Dermot O'Leary, chief economist at Goodbody, said that the Government was on target to meet its deficit target of around €22bn this year, despite the cost of further business supports and the level 5 restrictions that led to an exchequer deficit of €8.9bn in the month.                  

The latest exchequer figures showed that the €8.5bn collected in tax revenues in the month was down by only €1.4bn from a year earlier, despite the additional toll of the level 5 restrictions on the Government's finances.

Three of the four major tax sources, including income tax, Vat, and corporation tax revenues were down in the latest month from a year earlier, while revenues from excise duties were up.

But the figures were distorted by a Revenue repayment and by the extension in a deadline for paying self-employed taxes, the Department of Finance said.

A budget deficit of €8.9bn in the month means that the Government will likely reach its target of capping the deficit at around €22bn this year, Mr O'Leary said. 

And the finances were "in better shape than could have been imagined in April or May when we would have been talking of a deficit of €30bn", he said. 

Austin Hughes, chief economist at KBC Bank Ireland, said that while "in absolute terms the figures are horrendous", the toll has been much less than once feared. 

"The difference from the financial crisis is that the numbers reflect the Government's restrictions and show the strength of income and corporation tax revenues," Mr Hughes said.       

At €2.5bn, income tax revenues in the month were down by €1bn from a year earlier; Vat revenues, reflecting the effects of the lockdown were down by €215m to just over €2bn; while corporation tax revenues at €3bn were little changed from November 2019.

 At €51.1bn, tax revenues over the full 11 months were down by €3.7bn, or 7%, from 2019.

"Overall gross voted expenditure of €73.5bn is up by €13.8bn versus the same period last year," Public Expenditure Minister Michael McGrath said. 

"This indicates the unprecedented level of support that Government continues to provide to businesses, to workers, and to our key public services," he said.

The Department of Finance said that this month's figures were distorted by the Revenue extending the pay and file deadline for self-employed taxpayers, the Revenue having returned €430m to the exchequer linked to monies under the Covid Restrictions Support Scheme.