Spending growth has returned to the Irish public finances according the latest Exchequer returns published yesterday. Government spending grew by 9% yoy in the first two months of the year.

Goodbody Stockbrokers say a large part of this growth, however, is due to a substantial increase in Ireland’s EU contribution, which doubled relative to the same period of the previous year (some of which is simply a timing issue).

The figures show voted current spending, expenditure over which the government has direct control, rose by 4.9% yoy in the opening two months. Surprisingly, capital spending fell by 2% yoy. Despite the growth in spending overall, it came in €167m (1.6%) below expectations for the first two months.

Furthermore, tax revenues continued to be robust at the start of 2017. On a like-for-like basis, tax revenues grew by 3% yoy in the first two months. Income tax grew at a robust pace, up by 7% yoy, pointing to an ongoing robust performance from the labour market. Most categories of tax were in line with expectations over the first two months, with the notable exception being VAT, which fell by 2%, and was €78m below expectations. Revenue overall was €110m below expectations.

According to Goodbody Stockbrokers, "It is very early in the year to identify trends, but the early evidence points to trends that are largely in line with government expectations. For 2018 overall, the government is expecting a budget that is very close to balance. We concur with this expectation."

Source: www.businessworld.ie