Ireland will 'only just avoid' recession in 2023, says McGrath
Micheal McGrath: 'We are not immune from the threat internationally but we can weather the storm.'
Ireland will only just avoid recession in 2023 amid significant “downside risks” to the economy, Finance Minister Michael McGrath has said.
With talk of the eurozone going into recession, Mr McGrath said uncertainty over the war in Ukraine, a weakening demand for Irish goods, and an EU-wide policy of dampening inflation present risks to Ireland.
However, his forecast is that the economy will grow by 1% in 2023.
“The risks are to the downside but in the round, the overall forecast for Ireland is that we will grow this year. But we are not immune from the effect internationally. But the Irish economy is in a good position to weather the storm,” he said.
An upswing of €12.4bn in the State’s finances saw the Government post a €5bn surplus in 2022, following the re-opening of the country after Covid-19 restrictions.
Turning a €7.5bn deficit into a significant surplus occurred even with the Government’s €11bn giveaway budget in late September, but was largely due to a massive windfall in corporation tax receipts.
The increase reflects strong growth in tax revenues and a decline in Covid-19 related expenditure, Mr McGrath said.
He said €10.5bn in corporation tax could potentially be at risk.
With those windfall corporation tax receipts stripped out, the government would have posted a deficit of about €5.25bn.
"This is a serious vulnerability in our public finances and the Government is acting to address this," he said.
Figures showed that gross revenue in 2022 stood at €106.7bn, an increase of €8.5bn or 8.7% compared to 2021.
Mr McGrath also said the Irish tax base is “extremely narrow” but despite this, total tax revenue in 2022 stood at €83.1bn, which was €14.7bn or 21.5% ahead of the same period last year.
The increase is driven by strong growth in income tax, Vat, and in particular, corporation tax.
Total expenditure for the year was €101.7bn.
Of this, gross voted expenditure stood at €88.8bn, which was €1.2bn ahead of the same period in 2021. Non-voted expenditure accounted for €12.9bn, €5.1bn below the same period in 2021.
Tax revenues of €5.6bn were collected in December, down by €0.5bn.
Income tax receipts of €2.5bn were recorded in December, €0.3bn, or 11.5% ahead of December 2021, reflecting continued increases in earnings.
Corporation tax receipts amounted to €1.5bn in December, down by almost €0.3bn on an annual basis. Annual corporation tax receipts amounted to €22.6bn, which is €7.3bn ahead of the same period last year.
It has comfortably overtaken Vat to become the State’s second-largest source of revenue this year. However, some of these receipts are expected to be once-off in nature.
Excise duty receipts of €449m were collected in December, down by 22% or €126m on the same month last year.
Responding to the results, Sinn Féin's finance spokesman Pearse Doherty said that the performance of the public finances painted a mixed picture of strong tax receipts and poor Government delivery.
He said the figures show a strong growth in tax revenue, driven by income tax, Vat, and corporation tax, reflecting the continued and welcome recovery of the economy since the pandemic.
But he said they reveal how this Government has squandered economic growth with the housing sector and health service now in a state of perpetual crisis.
“It is revealing that the Department of Housing and Minister Ryan’s department underspent last year by a combined €546m," he said.
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