Thomas Lyons 
The Irish Government has released its Stability Update Programme, which includes updated figures for economic growth. The report forecasts a €10bn surplus this year, followed by a more than €16bn surplus next year, driven by soaring corporation tax receipts. The Irish economy has proven to be remarkably resilient, despite challenges related to the Russian invasion of Ukraine, increasing cost of living, and rising interest rates. The report highlights that the rate of unemployment is close to historic lows, and the number of people at work is at its highest ever level.
The report projects that headline inflation for this year is expected to be 4.9%, further moderating next year to 2.5%. This is due to energy prices reversing more rapidly than previously assumed, resulting in a downward trajectory for headline inflation. The easing of headline inflation from the second quarter of this year will support real disposable income, which is assumed to strengthen as the year progresses.
The Government is projecting a general government surplus of €10bn this year and €16.2bn next year. Excluding corporation tax, an underlying general government deficit of €1.8bn is projected for this year. For next year, an underlying general government surplus of €4.4bn is projected, again if corporation tax is excluded. The report also notes that the headline surplus this year is heavily dependent on volatile ‘windfall’ corporate tax receipts. Excluding the impact of these receipts, an underlying deficit of €1.8bn is projected for this year, which is a better metric for assessing the resilience of public finances.
Minister for Finance, Michael McGrath, said: “We are projecting a surplus of €10bn for this year, the equivalent of 3.5% of national income. This is based on the assumption of tax revenue amounting to almost €89bn, a growth rate of almost 7%. While this is, of course, very much welcome, the headline surplus this year is heavily dependent on volatile ‘windfall’ corporate tax receipts. Excluding the impact of these receipts, estimated at almost €12bn this year, an underlying deficit of €1.8bn is projected for this year. This is a better metric for assessing the resilience of our public finances.”
The report also projects that strong employment is expected to continue in the near term, with the number of people in jobs growing by 1.6% this year and by 1.4% next year. In the absence of any shock to the economy, the unemployment rate is likely to remain at around 4½%, consistent with any reasonable measure of ‘full employment’. Consumer spending is expected to increase by 3.9% this year and by another 3.8% next year.
Modified Domestic Demand (MDD), which more accurately reflects the activities in the domestic economy, is expected to grow by 2.1% this year and by 2.5% next year. MDD grew by 8.2% in 2022 but slowed down during the latter half of the year. In GDP terms, the country is expected to grow by 5.6% this year and by 4.1% next year. The country’s public debt stands at €224bn.
Earlier today, the Central Statistics Office (CSO) revised Ireland’s surplus for last year to €8bn, which is 1.6% of Gross Domestic Product (GDP). The publication of the revised CSO figures was due to be published yesterday but was delayed following clarification from the European statistics agency, Eurostat. It advises the CSO that funds for the Defective Concrete Blocks Grant Scheme, or MICA redress scheme, should be moved from upfront expenditure and should instead be recorded as money is paid out.
In conclusion, the Irish economy has shown remarkable resilience despite various challenges. The report projects a surplus for this year and next year, driven by soaring corporation tax receipts. The report also highlights the strong employment growth and consumer spending, which is expected to continue in the near term. However, the report also notes that the headline surplus is heavily dependent on volatile ‘windfall’ corporate tax receipts, and excluding the impact of these receipts, an underlying deficit is projected for this year. Overall, the report provides an optimistic outlook for the Irish economy.
