Economics: Latest Irish Exchequer Returns to show another strong surplus at the end of September

This afternoon the Department of Finance will release the official Exchequer returns up to end of September. The figures will be very important as they are the last official set of numbers on the public finances ahead of the White Paper on Receipts and Expenditure for 2018 and the Budget itself for next year, which is due to be unveiled by the Minister for Finance Paschal Donohoe on October 10.

An Exchequer surplus of €1,818m was recorded to end-August. This compared to a deficit of €329m in the same period last year. This year-on-year improvement of €2,147m was primarily due to the recent sale of over 28% of the State’s shareholding in AIB. There was also a significant one-off transaction (c. €1.6bn from AIB Cocos) in the comparable period in 2016.

Excluding these one-off transactions, the underlying Exchequer position showed a year-on-year improvement of €314m, driven by increased tax revenue and reduced interest costs. This was somewhat offset by increased voted expenditure.

Tax revenues for the month of August closed the month 0.8% or €21m above target. As a result, cumulative tax revenue was just 0.7% or €209m below profile, which represented a solid year-on-year increase of 4.9% or €1,431m and a slight improvement on the position at end-July. Overall, total net voted expenditure to end-August, at €29,153m, was 0.8% or €233m below target, but up 5.2% or €1,440m in year-on-year terms.

The Government will be reasonably happy with the Exchequer position at the end of August, and remains broadly on course to deliver on its underlying budget deficit target of 0.4% of GDP in 2017. However, the shortfall in tax receipts will limit the scope for significant give-aways in the forthcoming Budget.

At end-September, we are projecting an Exchequer surplus of €2,150m as against a deficit of €25m in the same period last year, with tax receipts running just under €200m below target.

Alan McQuaid
Economist