By Padraic Halpin
DUBLIN (Reuters) – Ireland will deliver a fully balanced budget next year rather than the deficit of 0.1 percent of gross domestic product (GDP) previously targeted, moving closer to the surplus that the central bank says should already be running.
Ireland’s deficit, which ballooned into double figures in 2009 and led to a three-year international bailout, narrowed to 0.2 percent at the end of 2017, revised figures showed on Friday, as the difference between what the state spends and takes in shrank to 700 million euros.
The government has forecast a deficit of 0.2 percent for this year but is now targeting a better outcome for next year due to better than expected economic growth, Irish Finance Minister said on Friday.
“I am now aiming and will deliver a fully balanced budget for 2019… and beyond that then looking to move our national finances into surplus,” Donohoe told reporters, ahead of the budget for 2019 which he will present on Tuesday.
Irish Central Bank Governor Philip Lane advised the government in July to aim for more ambitious fiscal surplus targets for 2019-2021 and said it should be running a surplus now given the strongly performing economy.
On Tuesday, Donohoe’s department increased its forecast for GDP growth this year to 7.4 percent, from a previous estimate of 5.6 percent, after a series of distortions related to Ireland’s large multinational sector inflated growth again this year.
Quirks associated with multinational firms are also set to inflate Ireland’s corporate tax take this year, Donohoe said, with receipts expected to come in as much as 1 billion euros or 12 percent ahead of expectations for 2018.
Years of similar outperformance has seen Ireland’s corporate tax take more than double since 2012, although Donohoe said he had been advised that 700 million euros of that would not recur next year or be included in his budget projections.
Technical changes in global accounting standards regarding the allocation and timing of corporate tax receipts were mainly responsible for the one-off increase, Donohoe said, adding that he could not say if that related to one or more companies.
He also said that government expenditure for 2018 is now forecast to be around 650 million euros or just over 1 percent above budget, driven again by health spending.
The head of Ireland’s independent fiscal watchdog said this week that large, unplanned increases in government spending could put the country’s public finances and economy at risk
Donohoe plans to introduce 800 million euros of spending increases and income tax cuts in Tuesday’s budget, with anything on top of that dependent on how much can be raised from increasing taxes elsewhere.
(Additional reporting by Graham Fahy; Editing by Kirsten Donovan)