Ireland expects 2024 budget surplus of 2.8% of national income

Ireland is set to deliver a budget surplus this year of 8.6 billion euros, or 2.8% of national income, in line with forecasts and allowing most excess cash to be invested in a new wealth fund, the finance ministry said on Tuesday. The finance ministry estimated that inflation would average 2.1% this year following a sustained slowdown and that the domestic economy would expand by 1.9% in 2024 versus the 2.2% it forecast six months ago.

Ireland is set to deliver a budget surplus this year of 8.6 billion euros, or 2.8% of national income, in line with forecasts and allowing most excess cash to be invested in a new wealth fund, the finance ministry said on Tuesday.

The finance ministry estimated that inflation would average 2.1% this year following a sustained slowdown and that the domestic economy would expand by 1.9% in 2024 versus the 2.2% it forecast six months ago. Ireland is one of the few European economies taking in more revenue than the government spends each year and it ran budget surpluses of 3.2% and 2.9% of modified gross national income in the last two years, primarily due to a surge in corporate tax paid by its large hub of foreign multinationals.

That spurred the government to set up a new sovereign wealth fund to help with future costs such as pensions. It hopes to grow the fund to around 100 billion euros by 2035 thanks to future expected surpluses. Ministers are due to transfer 4 billion euros of this year's surplus to the wealth fund, with another 2 billion euros committed to a smaller infrastructure and climate fund being set up to act as a buffer in any future downturn.

The finance ministry forecast a surplus of 9.7 billion euros, or 3% of modified gross national income, next year, assuming it reinstates its own budget rule of expenditure growth being capped at 5% a year. Similar surpluses are pencilled in for the following two years. The government broke the rule in each of its last two annual budgets to help ease the impact of higher inflation. Finance Minister Michael McGrath said the slowdown in inflation will allow a return to "more normal levels" of spending growth with the precise details to be agreed by July.

Irish inflation peaked at almost 10% in mid-2022 and has fallen steadily over the last 12 months to 1.7% last month. The finance ministry expects it to remain steady at an average rate of 2.1% next year and drop a touch to 2% in 2026. After modified domestic demand - the government's preferred measure of economic activity - slowed by more than expected to 0.5% last year, the ministry expects it to grow at an average annual rate of 2.25% over the second half of the decade.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)