The latest returns from the exchequer (general government items only) ran a deficit of €1.2bn in the year to February, compared with a deficit of €701m during the same period in 2018.
This was still slightly ahead of government expectations. Goodbody Stockbrokers say the deterioration is a result of strong growth in both current (+8% yoy) and capital spending (+15% yoy) at the start of the year. Tax revenues (+4% yoy) grew at a respectable pace.
Voted current spending grew by 8% yoy in Jan/Feb. Among the main categories of spending, the strongest growth was in education and skills (+14% yoy), with current spending on health up by 6% yoy.
These are strong rates of growth but may have been influenced by changes instituted at the beginning of the year around pay. Current spending was modestly behind expectations. Voted capital spending rose by 15% yoy in the opening two months but was also lower than expectations.
Tax revenues were 1% lower than expectations in the first two months, despite growing by 4% yoy. The big underperformers were income tax (5% behind expectations, +4% yoy) and VAT (4% behind expectations, +5% yoy). This was offset by another outperformance from corporation tax.
According to Goodbody Stockbrokers, "It is too early in the year to be making firm conclusions on full-year outturn, but we do know that the government has become less fiscally prudent over recent years, allowing expenditure growth to tick up. The outcome of Brexit will of course play a major role in this year’s outcome. Ireland would be in a much better position to implement counter-cyclical policies if more prudence was exercised in recent years."