9 Apr 2019, 16.24
The Houses of the Oireachtas Parliamentary Budget Office has published its Quarterly Economic and Fiscal Commentary Q1 2019. The PBO’s flagship Quarterly Commentary updates Members on key economic and fiscal developments and explores significant areas of interest. The commentary addresses issues facing the Irish economy under two sections (Macroeconomic Developments and Risks, and Fiscal Developments), and introduces a new PBO infographic - the Macro-Fiscal Risk Network.
The Irish economy continues to experience strong economic growth, but is vulnerable to growing global economic and geopolitical risks. Revenue receipts are slightly above profile, while central Government expenditure is below what was projected for the first three months of the year.
Ireland’s GDP in 2018 grew by 6.7%, marking the ninth consecutive year of economic growth. This growth was broad based, driven by net exports and the domestic economy. Unemployment reached its lowest quarterly rate since Q3 2008, although skills shortages are appearing in key employment sectors (ICT) which are increasingly reliant on inward migration flows to fill these skill gaps. Economic growth is currently forecast to continue throughout 2019 and 2020.
However, economic uncertainty and external risks (most notably Brexit, but extending to the global economy) have heightened, leading to greater uncertainty surrounding future economic growth estimates.
The network of risks and linkages in the economy are explored in detail in the PBO’s Macro-Fiscal Risk Network, a new quarterly infographic. This aims to show the PBO’s assessment in respect of the core macroeconomic and fiscal risks facing the economy and their probability of occurring.
Up to end-March 2019, overall revenue is €130 million above expectations, at €16,018 million. This is largely due, yet again, to the above profile revenue from Corporation Tax, which continues to disguise the underperformance of other, more sustainable revenue streams such as VAT and Income Tax. Overall, revenue is up €1,003 million or 6.7% year-on-year.
Central Government expenditure for the first quarter equalled €18,178 million. This is €331 million below profile, but €1,132 million (6.6%) higher than at the same point last year. Gross Voted Expenditure of €15,039 million is 1.6% below profile, broadly the same as Q1 2018. In light of the similarities with the expenditure patterns in Q1 2018, particularly in the Health Group Vote, the PBO suggests that careful monitoring of Voted current expenditure in particular may be required as the year progresses.
Other topics addressed in the Quarterly include boxes on tax revenue volatility and forecast errors, green bonds, double-counting of €74 million in Social Insurance Fund (SIF) expenditure within the multiannual ceilings, and a volatility minimising tax portfolio.
Director of the PBO, Annette Connolly, said that “The continued strong performance of the economy means that Ireland continues to be the fastest growing economy in the EU. However, growing economic uncertainty in light of Brexit and the slowing of the global economy poses significant economic risks for Ireland. With the PBO’s new Macro-Fiscal Risk Network infographic, we hope to help highlight these interlinkages to Members and Committees of the Houses of the Oireachtas. For example, the stability of our tax base, and in particular our continued reliance on volatile Corporation Tax remains a cause for concern in the face of a deteriorating global economy and a changing international tax environment”.
The PBO Quarterly Economic and Fiscal Commentary Q1 2019 is available here.
Alan Neary, Press Officer, Houses of the Oireachtas, Kildare Street, Dublin 2, Ireland
Landline: 01-6184743, Mobile: 0860107500
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