THE CENTRAL Bank has sharply lowered its economic growth forecast for 2012, citing slowing export growth and weak consumer spending, while figures released yesterday by the Department of Finance show the State collected €3.66 billion in tax during the first month of the year, up 17 per cent or €533 million on the same month last year.
The latest Central Bank predictions say gross domestic product (GDP) will rise by 0.5 per cent this year, and 2.1 per cent in 2013.
That compares with previous forecasts of 1.8 per cent growth that the bank made in October, and 2.1 per cent in July last year.
Gross national product (GNP), a measure of economic activity which excludes multinational firms, will fall by 0.7 per cent this year, and will rise by only 1 per cent in 2013. That reverses last quarter’s expectations that GNP would rise by 0.7 per cent for 2012.
“The slowdown in the external environment has occurred against the background of an intensification of the sovereign debt crisis, the effect of which has now broadened beyond the financial system to the wider economy,” the bank said in its quarterly bulletin.
Ireland’s recovery is at risk as growth among its trading partners slows, weighed down by the European debt crisis. With the domestic economy performing poorly and unlikely to exit recession this year, recovery is dependent on export growth.
The Central Bank forecasted that the jobless rate will average 14.6 per cent in the year, slightly higher than the 14 per cent previously expected.
Inflation is expected to remain “muted” this year, but the Central Bank warned of the “substantial” impact of Budget 2012, which added an estimated 0.8 points to inflation, with the rise in VAT flagged as a particular burden.
The Department of Finance said a “very significant” year-on-year increase in the tax take in January was partly due to the late payment of more than €250 million in corporation tax which had originally been due in December.
The figures were also boosted by a 27.7 per cent surge in income tax receipts which came in at €1.26 billion, reflecting the first full-year impact of the universal social charge.
While monthly tax receipts can be volatile, they remain the most accurate barometer of the economy’s health.
January’s VAT receipts, a key indicator of consumer spending during the busy pre-Christmas period, rose by 3 per cent year-on-year to €1.725 billion.
The figures did not cover the period since the introduction of a 2 per cent increase in VAT which came into effect on January 1st.
Nevertheless, the department said the two largest tax categories of income tax and VAT were broadly in line with expectations.
Ireland’s overall budget deficit stood at €394 million at the end of January, compared to €483 million at the same point last year.
