Progress has stalled on Ireland’s budget deficit reduction for the first quarter of 2017, according to the latest figures. 
 
In general Government items, the deficit stood at €1.7bn in the first quarter 2017, up from €1.5bn a year ago. While revenues grew by 3.2% year on year in the first quarter, expenditure grew by 3.7% as the purse strings loosened owing to measures included in Budget 2017.
 
The figures show that expenditure was €533m (3%) below expectations in the opening quarter of the year. However, most (€391m) of this relates to a timing issue around payments to the EU, which will unwind in the coming months.  
 
Adjusting for this, spending was 1% below expectations but was 6.6% higher than a year ago. Within this, capital spending grew by 52% year on year, with the increased focus on housing being a major contributor. 
 
Current voted spending grew by 3.7% year on year, with year on year increases evident in eleven of the sixteen government departments. It is worth noting that most noting that most were inside budget. 
 
Goodbody Stockbrokers warn that this is a poor start to the year for government revenues which were €289m (2%) below expectations. Two categories – income (€180m behind) and corporation (€177m behind) tax – contributed to this performance they say.

Goodbody stress that the fact that income taxes grew by just 1.4% in the first quarter is inconsistent with broader labour market trends and may be corrected in the coming months while corporation taxes are more volatile and thus difficult to predict. VAT receipts grew strongly in the first quarter (+17% yoy, €151m ahead), offsetting some of this weakness. 
 
According to Goodbody Stockbrokers, "The Q1 figures provide somewhat of a warning signal to the government ahead of the publication of the Stability Programme Update next week. This document will provide updates on the fiscal and economic projections. While it is still early in the
year, these trends suggest a need for conservatism."

Source: www.businessworld.ie