Q1 Exchequer Returns highlight first impact of Covid-19 crisis on public finances
• Today’s Exchequer returns show the first impact of the Covid-19 pandemic on the public finances
• Tax revenues in March were nearly €1 billion lower than March last year, a decline of over 20 per cent
• Vat receipts were half the level they were last year, an unprecedented fall and an indication of the difficulties business face
• An Exchequer deficit of €2.5 billion was recorded to end-March 2020
Fiscal Monitor March 2020
An Exchequer deficit of €2,535 million was recorded to end-March 2020. This compares to a deficit of €966 million in the same period last year. The €1,569 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted current and capital expenditure.
Tax receipts for the month of March amounted to €3,704 million, significantly under the monthly target by 22.5% or €1,073 million. This is primarily attributable to a steep decline in VAT receipts as a result of non-payment arising from the Covid-19 crisis.
Cumulative tax receipts of €12,933 million at the end of the quarter represented modest growth year-on-year of 1.1%, or €318 million, as strong performances in January and February compensated for the March shortfall. Total net expenditure to end-March was €13,600 million. This represents a 13.5% or €1,614 million increase on 2019 and is €959 million, or 7.6% ahead of profile. The increase in expenditure is again attributable to Covid-19 related spending.
Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, said:
Today’s figures give the first indication of how the Covid-19 pandemic will impact the public finances, with tax revenues set to decline steeply over the coming months. On the expenditure side, the Government has put in place significant resources to help fight this virus. Combined with the fall in tax revenues, these measures will result in a large fiscal deficit this year. It is entirely appropriate that the Government cushions the effect of the crisis in this way. Thanks to appropriate budgetary policy over recent years, we meet this challenge from a position of strength – a budget surplus, cash reserves and significant progress in lowering our debt. Let there be no doubt that the Government will continue to play its part in meeting this extraordinary challenge.
Today also saw the publication of live register figures from the Central Statistics Office. When the number in receipt of pandemic payments is included, the total number of people in receipt of payments is over 500,000.
Minister Donohoe continued:
Today’s live register figures show an unprecedented number of people in receipt of unemployment-related transfers. This is not unexpected, given the massive short-term disruption to economic activity that is necessary to preserve livelihoods. The Government is making these income supports available to cushion the economic shock.
I think it is important to stress that the steep fall in economic activity is not due to imbalances such as credit growth; indeed, it is widely acknowledged that the economy was in good shape until immediately before the pandemic. Therefore, once the virus is under control, it is expected that the economy can and will recover quite rapidly. The Government is working to ensure that there will be minimum reduction to productive capacity, so that firms and workers can resume economic activity as soon as possible.