Exchequer returns surge by over 9% to €14bn

Buoyant exchequer returns published yesterday will give any new minority government significant fiscal headroom, but there may be clouds on the horizon, analysts have said.

The tax figures, which cover the first four months of the year, show the exchequer continues to take in more in taxes than it anticipated just six months ago.

Tax revenues surged by more than €1.1bn, up over 9% from a year earlier, to reach over €14bn at the end of April. Despite the health budget again going into the red, spending by all other government departments was under control.

The €14bn in tax revenues was 3.5% higher than the amount the exchequer had anticipated it would have at this stage of the year.

The underlying figures were “healthy”, said a Department of Finance spokesman, though timing issues had led to “stronger than expected” outcomes for income and corporation receipts, which were unlikely to be repeated in the coming months.

Philip O’Sullivan, chief economist at Investec Ireland, said the tax receipts had “all the hallmarks” of strong economic growth. “The department is having another year of under promising and over-delivering,” he said. That means the country will easily exceed its fiscal targets — as long as there is no outside shock to the economy later in the year, he said.

Last week, the Government increased its GDP growth forecast but stuck to its October budget projection that it would raise €47.2bn in tax revenues for 2016.

Conall Mac Coille, chief economist at Davy Stockbrokers, said the exchequer will hit its fiscal forecasts this year.

A note of caution, however, was struck by latest CSO figures that showed a marked slowdown in manufacturing output, suggesting the era of strong Irish export growth is on the wane.

Industrial production in March posted a 12.4% annual drop, as pharmaceutical and technology output fell.

The CSO said pricing and production patterns had affected the figures.

Analysts said the recent strengthening of the euro against sterling and the overall weakness in global manufacturing could now be in play.

Alan McQuaid, chief economist at Merrion Capital, said manufacturing will continue to grow but at a much slower pace than in 2015.

“The stellar growth seen in previous years now appears to be slowing, ”said Mr Mac Coille at Davy.

John Whelan — a leading expert on Irish and International trade — said fears about the UK voting to leave the EU next month, as well as tepid economic growth across the eurozone, may be weighing on Irish factories.

While technology and pharmaceutical exporters can look to the US for export sales, the agri-food sector could face a tough year, Mr Whelan said.


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