Government deficit of €21bn forecast for this year

Government deficit of €21bn forecast for this year

Minister for Finance, Paschal Donohoe, and Minister for Public Expenditure and Reform, Michael McGrath, have their hands full managing a tough financial situation. Picture Leah Farrell/

A general government deficit of €21 billion is now being forecast for this year, but this is before any budget day decisions are factored in.

However, it will be higher if stricter lockdown restrictions in Level 4 or 5 of the Government's 'Living with Covid' plan are imposed before the New Year.

Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath held a press conference to mark the publication of the pre-Budget White Paper which says the fall in economic activity this year will amount to about 6% of national income.

Earlier estimates predicted a shortfall of up to €30 billion.

As things stand for 2021, the Government is predicting a deficit of €14.5bn if there are no policy changes announced in the Budget, which is equivalent to 4% of GDP.

Mr Donohoe said the Government's pre-budget White Paper, which is due to be published later tonight, is based on the assumptions of economic decisions that have been made up to now and the current level of public health guidance.

Were either to change, the deficit figures would go beyond those indicated today, he said.

Mr McGrath said the revised estimates for 2020 published last December, allowed for gross voted government expenditure totalling €70.4 billion, and net voted expenditure of €57 billion for 2020. This was before Covid-19 impacted so severely on the economy.

Now, he said, it's currently estimated that the expenditure outturn for the year would be of the order of €86.5billion, driven by additional funding of around €16 billion provided to respond to the Covid-19 crisis.

No decision has yet been taken in relation to the payment of the Christmas Bonus

He said next year there will again be a significant impact on expenditure from the Covid-19 crisis.

“We are finalising the assessments in this regard. But at this stage, in the region of €8bn-€8.5bn would be required on a no policy change basis, across areas including health, social protection, education, transforms to meet ongoing costs arising from the pandemic,” Mr McGrath said.

This funding has enabled the introduction of a wide series of measures to support key public services, and to cushion as best we can the impact of the pandemic on households and businesses, he said.

“We will have allocated over €30 billion to the Department of Employment Affairs and Social Protection to provide particular for the pandemic unemployment payment,” he said.

“Our key priority is to have a budget for next year that sets aside resources in recovery funds that can be used to support the economy in response to the challenges of Brexit and Covid-19. This is to ensure we continue to deliver incremental improvements in our core expenditure programmes, while continuing with a very substantial public capital programme that puts in place the building blocks for the delivery of meaningful improvements where we can in key priorities,” he said.

He said no decision has yet been taken in relation to the payment of the Christmas Bonus.

Mr McGrath has said it could cost up to €400m to pay the Christmas Bonus to welfare recipients including those on the PUP. He said ministers will "weigh up all of the different considerations" in the coming days.

Mr Donohoe said there are no plans to buy any private hospitals despite the potential need for additional bed capacity during the winter to cope with the demand.


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