Strong finish to 2012 for Ireland’s public finances

Exchequer Returns data released this evening by the Department of Finance revealed a strong performance by the public finances in December. While the Budget on December 5 had projected a €210m taxation shortfall for last year, better than anticipated corporation (“specifically from two particular large players, as well as lower than expected repayments”), excise and income tax receipts last month all helped to produce an outcome for 2012 that was €271m or 0.7% ahead of expectations. Total tax receipts were +5.3% y/y on an underlying basis.

Voted expenditure for the year was €350m less than had been projected (€45.3bn) in the Budget. Of the 16 voted expenditure headings, 12 came in under budget. Of the other 4, the overspend in Transport (€6m) and Public Expenditure (€14m) was clearly quite modest, however, a more pressing concern remains the overshoot in the big-spending areas of Social Protection (€546m above profile) and Health (€255m above profile).

Bringing all of this together, the Exchequer Balance for 2012 came in at -€14.9bn. This was €10bn better than the outturn for 2011 and over €800m better than the -€15.7bn projected in the Budget. Unsurprisingly, Finance Minister Michael Noonan is quoted this evening by Bloomberg as having stated that the General Government Deficit for 2012 “may be 7.8% or 7.9% of GDP”, ahead of the 8.2% previously forecast by the Department of Finance. At first glance, this looks reasonable to us.

In all, this is a good outturn for 2012, with the government’s fiscal performance surprising on the upside. For this year, we anticipate a further narrowing of the jaws between government revenue and expenditure due to a combination of fiscal consolidation measures and the ongoing improvement in the Irish economy.

Philip O’Sullivan, Chief Economist