Economy to bounce back this year, says Noonan
BUOYANT Christmas sales sent the VAT collected by the State soaring €225m higher in January than the same period last year.
The first set of Exchequer Returns for 2015 backs up separate data suggesting December saw the strongest Christmas trading season since 2007.
The returns came on the same day that the Central Bank upped its growth forecast for this year due to strengthening domestic demand. And Finance Minister Michael Noonan said economy activity will return to pre-crash levels this year. Officials now believe the economy will grow by 3.7pc this year - up 0.3 percentage points since their last forecast.
Speaking last night in the Dail, Mr Noonan said: "It is worth pointing out that this year, the level of GDP in Ireland will likely return to its pre-crisis peak; however it will be more balanced than during the bubble years, not relying too heavily on any one particular sector."
Mr Noonan rejected claims that Ireland's debt is unsustainable. He said that the Government is hoping to recoup as much as €30bn from the bailed out banks, given the improving state of the economy.
"I am confident that with ongoing economic recovery we will recover at a minimum the €18 billion that this Government invested and up to the €30 billion invested in the pillar banks and PTSB," he said..
In further good news, the National Treasury Management Agency (NTMA) yesterday raised €4bn after its first 30-year-bond sale, which drew strong demand from international investors despite record low interest rates.
Experts said the Exchequer data suggested the public finances have started off the year in a strong position.
"January is a particularly important month for VAT receipts - reflecting the Christmas trading season through November and December," said Conall MacCoille of Davy Stockbrokers.
Exchequer data shows the tax take last month was in the order of €4.19bn, up 12.3pc or €460m on January last year.
VAT receipts were €1.97bn in the month, up 12.9pc year-on-year, while income tax receipts were up 4pc or €58m in the month to €1.5bn, compared with the same month last year.
Net spending at €3.9bn in the month was down 5pc or €206m.
Net current spending was down 6.3pc year-on-year to €3.75bn, driven primarily by a year-on-year reduction in social protection spending.
The Central Bank has revised up its growth forecast for this year saying domestic demand is going to make more of a contribution to the recovery than anticipated. But it warned that risks remained, including the elevated levels of debt.
Chief economist Gabriel Fagan said fiscal consolidation of around 0.5pc would be needed over coming years to meet an EU target of a balanced budget.
But he said this could be achieved by strong growth, and no further austerity measures.
Specialist bank Investec said the Exchequer data reinforced the story of rising tax revenues linked to the economic recovery.
Peter Vale of Grant Thornton said the figures for the rest of the year will be equally robust.