The Government expects to run a budget deficit of €19 billion for 2020 as pandemic-related spending soars and tax revenue contracts, according to the latest exchequer returns.
The figures show the exchequer generated a deficit – the difference between spending and tax receipts – of €12.3 billion last year compared to a surplus of €647 million for the previous year, marking a year-on-year deterioration of €13 billion.
The exchequer deficit is estimated to contribute to an overall general government deficit of €19 billion for 2020, or around 5.5 per cent of gross domestic product (GDP).
The year-end figure is, however, significantly smaller than the Government had feared, reflecting stronger-than-expected income tax and corporation tax receipts.
At the time of the budget in October, the Government had forecast an exchequer deficit of €16.7 billion.
The €19 billion deficit figure means that Ireland is likely to have the smallest government budget deficit of any euro area country in 2020.
The latest exchequer returns, published by the Department of Finance, show the Government took in €57.1 billion in taxes in the year to the end of December. This was 3.6 per cent or €2.1 billion down on the previous year.
Corporation tax was the only major tax head to record an increase in 2020, ending the year €945 million higher than 2019, as sectors such as pharma, ICT and financial services coped well with economic conditions.
Income taxes similarly held up well, ending the year down €224 million, or 1 per cent on 2019.
“ The sector specific nature of the majority of job losses combined with the progressivity of the income tax system served to protect income tax receipts in 2020,” the department said.
The combined year-on-year fall in VAT and excise receipts was €3.2 billion, as personal consumption – particularly of services – was heavily impacted by the public health restrictions.
Total spending was €67.8 billion in 2020, up €13.7 or 25 per ent in year-on-year terms.
The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection.
“The end-year exchequer returns show the scale of Government intervention during this pandemic,” Minister for Finance Paschal Donohoe said.
“From an expected surplus of around €2.5 billion before the pandemic struck, to an estimated deficit of €19 billion, the strength and depth of the Government’s response is unprecedented in our country’s history,” he said.
“Although we once again enter a difficult period of tough but necessary restrictions, today’s figures point to some positive underlying trends in the economy,” he said.
“ The Government will continue to use the resources of the State to protect the most vulnerable, support businesses and sustain incomes until our country emerges from this pandemic even stronger than before,” Mr Donohoe said.