Ireland sticking to forecast for budget deficit this year -minister

DUBLIN (Reuters) - Ireland still expects the public finances to remain in deficit this year with the precarious global outlook counteracting a buoyant start to the year, Public Expenditure Minister Michael McGrath said on Friday.

Data on Thursday showed that a 27% year-on-year jump in tax revenue during the first five months of the year pushed the exchequer into a small surplus for the first time since the COVID-19 pandemic threw it into deficit.

That prompted some economists to suggest the budget could finish the year in surplus or at least in a lower deficit than the 0.8% of gross national income the finance ministry forecast in April.

"Overall we're going in a positive direction, the taxation returns for the first five months are undoubtedly strong. From the point of view of the outturn for the year, it is too early to change the forecast we made," McGrath told Reuters in an interview.

"We're cognisant of the changing global economic landscape and that will have an impact on Ireland. The buoyancy that we have seen in the first five months, I think it would be unwise to assume that that will continue right through this year."

McGrath said the government also had to remain cautious of the possibility of further significant spending to deal with any re-emergence of COVID-19. The unwinding of economic supports helped push government spending to the end of May down 3.5% year-on-year.

McGrath introduced a new expenditure rule last year seeking to tie government expenditure growth to the nominal growth rate of the economy. With inflation now at 8.2%, McGrath said his officials were assessing the appropriate stance for next year and would announce the outcome early next month.

"In the medium-term fiscal strategy last year, we linked growth in expenditure to the underlying trend growth rates in the economy at about 5%, that would have been predicated on underlying inflation of about 2% and real growth of 3%. Clearly, we're in a different space now on the inflationary front," he said.

(Reporting by Padraic Halpin in Dublin; Editing by Matthew Lewis)