Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank Deputy Durkan very much for his question regarding the public finance position within the current year. As the Deputy knows, on budget day we published our updated budgetary forecasts and also our updated macroeconomic forecasts for the next number of years. It is fair to say that we have witnessed a strong rebound in the Irish economy in recent months. That has resulted in very strong revenues across a number of different tax heads, in particular VAT and income tax and, of course, corporation tax receipts continue to be particularly strong. In addition, we have had some underspends in the system but it remains to be seen precisely what the year-end position will be in that regard.

In overall terms, the expenditure that we forecast on budget day for 2021 was of the order if €89.25 billion. We anticipate that we will come in below that figure; not by an enormous amount but by perhaps €3 million to €4 million. It depends how Departments complete their programmes between now and the end of the year, particularly on the capital side. The forecast deficit for this year is significantly reduced from budget day, however. I believe we estimated it would be of the order of €13 billion versus the figure of approximately €20 billion that was estimated earlier in the year. Similarly, for next year, there is a significant improvement in the forecast position. We are, therefore, working on the basis that the recovery of the economy will continue. If one looks at the forecasts in terms of growth, both modified domestic demand and GNI*, we are forecasting steady and sustained growth over the next number of years, which will result next year, for example, that we will only be borrowing for the public capital investment programme and not even for all of it. Some of it will be resourced by Revenue for collecting.

We estimate that we will be back to having a balanced budget position by 2024. Certainly, we are in a better position than we thought we would be several months ago, but we also acknowledge that there is a high degree of uncertainty. We are all witnessing that, including with the continuing challenge being posed by Covid-19 and the impact that inevitably has on the Irish economy. We remain optimistic regarding inflation. It is posing many challenges, not least for the people we represent and for businesses. Costs and household bills are increasing for the public, and that is a real challenge. The overall forecast is that inflation will peak this quarter and then begin to moderate. As the committee will be aware, we forecast on budget day that the average inflation rate across next year will be just over 2%, at 2.2%. The European Central Bank, ECB, believes that the underlying inflation position remains stable, and that it will moderate. It is confident that the rate of inflation will stay within what the committee members will know is the bank's overall objective of containing inflation to no more than 2% in future.

Overall, then, there are many challenges. From representatives of businesses, I am hearing about staff shortages, increasing costs, global supply challenges and rising energy bills. Those are the main issues that will present challenges for us in the short term. We are, however, seeing a strong recovery. Therefore, we are optimistic, but we must also acknowledge that there is a high degree of uncertainty. In addition, we also have the issue of Brexit to deal with. The threat we have heard in that regard from the UK Government concerning the triggering of Article 16 is another potential downside risk for the Irish economy, depending on how that plays out in the weeks and months ahead.