Nominal Irish budget deficit may be just as high in 2021, PM says

FILE PHOTO: Ireland's Prime Minister Micheal Martin speaks to the media as he arrives for the second face-to-face European Union summit since the coronavirus disease (COVID-19) outbreak, in Brussels, Belgium October 1, 2020. Francisco Seco/Pool via REUTERS/File Photo

DUBLIN (Reuters) - The difference between what Ireland will collect next year in state revenue and what it spends will be similar to the deficit it is likely to run this year because of the COVID-19 crisis, Prime Minister Micheal Martin said on Tuesday.

The government will announce its budget for 2021 on Tuesday with a shallower recession and more resilient tax take than originally forecast, giving ministers room for more generous stimulus measures.

Public Expenditure Minister Michael McGrath said on Sunday the deficit for 2020 could come in at the lower end of a 25 billion to 30 billion euros forecast. Finance Minister Pashcal Donohoe has said that if no additional budget measures were introduced, the deficit would be cut to 14 billion to 19 billion euros in 2021.

“Already we’re looking at a very substantial deficit of well over 20-odd billion. We’re actually projecting similar figures for 2021,” Martin told parliament.

Ireland’s finance ministry has forecast that a shortfall of 14 billion to 19 billion euros combined with gradual economic recovery in 2021 would equate to a budget deficit of between 4.5% and 5.5% of gross domestic product.

In estimates published on Tuesday, Ireland’s Central Bank forecast that the deficit would total 7.5% of GDP this year or 25.5 billion euros in nominal terms.

The government also approved the full drawdown of its contingency reserve or “rainy day fund” on Tuesday, adding 1.5 billion euros to meet the state’s day-to-day needs in a move that was already allowed for in the budget forecasts.

Reporting by Padraic Halpin, editing by Larry King