An Exchequer surplus of €5 billion was recorded to end of July. This compares to a deficit of €5.7 billion recorded at the same time last year, an improvement of €10.7 billion. The increase reflects strong growth in tax revenues and a decline in voted current expenditure due to the unwinding of Covid-19 supports. On a 12-month rolling basis, a better indicator of the trend is the Exchequer surplus which stands at €3.4 billion. The Department of Finance estimates are struggling to keep up with the strength of the domestic economy. Last month, in its Summer Economic Statement, the Government revised upwards the General Government Balance (GGB) forecasts for a second time in three months. A modest surplus of up to €2 billion was estimated for 2022. The continuing strong upward-trend in the Exchequer numbers suggest that the GGB for 2022 will again be revised higher, further into surplus, in the October budget.

The NTMA has already cancelled one bond auction this year due to high cash balances and is scheduled to hold a regular bond auction in September. Having not accessed markets since last May, it is likely that the September auction will proceed but the trends in cash receipts question the need for how much issuance will be required in Q4. At the end of Q3, the NTMA will have raised an estimated €7 billion in bond funding. It is getting increasingly difficult to see a scenario where the NTMA will need to issue, even to the bottom end, of its stated €10-€14 billion range.

Tax revenue to end of July stood at €43.5 billion, which was 23.5% ahead of the same period last year. The increase is driven by very strong growth in corporation tax, income tax and VAT. On a cumulative basis, income tax receipts stand at €16.7 billion, which is almost 17% ahead of the same period in 2021. Corporation tax receipts for the first seven months of the year now stand at €9 billion, which is over €3 billion ahead of the same period last year, and are driven by significant increases in profitability in the multinational sector. Cumulative VAT receipts stand at €11.9 billion, an increase of 23% on the same period in 2021. Total expenditure to end of July was €53.2 billion. Of this, gross voted expenditure stood at €45.3 billion, which was €1.8 billion below the same period in 2021.

Ryan McGrath is Head of Fixed Income Strategy and Sales at Cantor Fitzgerald Ireland.