At budget time, over four months ago at this stage, my Department projected that the economy would expand by 1.3% this year, which was in line with the prevailing consensus at the time. The Irish Fiscal Advisory Council, in its recent report, outlines that the macroeconomic forecasts underpinning the budget were appropriate at the time. However, the council also outlines that the recent data, both Irish and international, mean that this projection is now on the high side and points out that other forecasters have recently revised downwards their projections for growth in the Irish economy this year. The council also acknowledges there is a high degree of uncertainty regarding prospects for the Irish economy.
In terms of the macro forecasts, I broadly share the view of the council, that is to say, the forecasts were appropriate at the time of the budget but developments since then have been a little disappointing. Officials in my Department are assessing all available information with a view to publishing revised forecasts at the end of this month in the stability programme update.
Turning to the public finances, this year's general Government deficit must not exceed 8.6% of GDP. Budget 2012 forecast the 2012 deficit at 8.6% of GDP. It is worth noting that the troika's forecast is also for a deficit of 8.6% this year, but based on a lower estimate of GDP than my Department projected at budget time.
The end-March Exchequer returns show that taxes have made a good start to the year, performing better than expected in the first quarter and close to 4.5% ahead of profile on an underlying basis. This is a welcome development as we strive to reduce further the deficit in our public finances. While voted expenditure showed some pressures, I am confident it will be actively managed within agreed limits and I know the Minister for Public Expenditure and Reform will be stressing upon colleagues the importance of adhering to the 2012 spending targets, as was done in 2011. As I stated at the time of publication of the first quarter returns, the figures illustrate that we are on track to meet our deficit target this year.