Coronavirus punches €900 million hole in government finances

A sharp decline in tax revenue and an extraordinary increase in expenditure prompted by the COVID-19 pandemic have left a €900 million deficit in public finances.

The National Statistics Office said that in the first six months, revenue declined by €345.2 million, a 15.9% reduction, and expenditure increased by 17% or €228.1 million.

This contributed to a deficit in public finances of €895.6 million between January and June, an increase of more than €700 million when compared to last year’s six-month deficit of €156.2 million.

By the end of June, central government debt stood at €6.4 billion, an increase of €895.7 million over June 2019.

The NSO figures were released today with the agency noting that they were conditioned by the pandemic, which forced economic activity to almost grind to a halt between March and June.

The tourism industry is still to recover although operators believe this will take a couple of years.

Government has had to fork out millions to keep the economy afloat and save jobs through handouts, bank guarantees and wage supplements. It announced a stimulus package worth €900 million in June that included €100 vouchers for families, a fuel tax cut, and other measures to alleviate the financial burden on families and businesses.

The NSO data shows that government experienced a drop of €128.2 million in income tax receipts in the first six months. Income from VAT also decreased by €86.5 million.

Total expenditure amounted to €2.7 billion, fuelled by higher outlays on various government programmes and initiatives.

An additional €43.6 million were spent on medicines and surgical materials, while an extra €13.6 million were added to the social security bill as a result of COVID-19 benefits.

Capital expenditure topped €386.9 million that included €154 million spent on the COVID-19 wage supplement.