Ireland expects smaller budget gaps as bailout exit nears
By Laura Noonan
LONDON (Reuters) - Ireland expects to beat its budget-deficit targets this year and next as tax revenues exceed forecasts, Finance Minister Michael Noonan said on Friday.
The economy is slowly gathering momentum, helping to make Ireland the first euro zone state to complete a bailout this month. Budget deficits below the targets would give investors more confidence after Dublin decided to forego a precautionary credit line.
"We built our budget on the expectation that we wouldn't absolutely achieve our tax estimates for the year for 2013, but it's quite clear now that (we) are going to significantly exceed them," Noonan said in a speech in London.
The country's budget deficit will come in below the forecast 7.5 percent of gross domestic product, he said, probably around "seven-ish," and it would also beat a 4.8 percent target for 2014, he said.
At the end of November, Irish tax revenue was 0.6 percent ahead of its 2013 goal, with last month's revenue particularly strong. In addition, government spending is 1.3 percent below budget so far this year.
With the Irish economy forecast to grow by about 2 percent next year, the banks which drove Ireland to seek help from the European Union and International Monetary Fund are taking centre stage again.
A central bank assessment of bank balance sheets this week showed capital adequacy ratios at Bank of Ireland , the only bank not fully owned by the state, dropped more than expected.
European banking stress test next year will expose Ireland to further risks. The Irish balance-sheet assessments will be part of that pan-European process, Noonan said.
The European Central Bank said the Irish banks would go through its balance-sheet assessment the same way as all others tested.
While the state sold 1.8 billion euros of Bank of Ireland preference shares this week, it owns 99 percent of Allied Irish Banks and permanent TSB. It is likely to be the only port of call if either needs to raise more capital.
"Two months ago, I got agreement with (ECB head) Mario Draghi that we would be the first to do the asset-quality review ... but that we wouldn't have to do it a second time. This would be taken as part of the European round of asset quality reviews," Noonan said.
Noonan added that he did not envisage an early sale of the 14 percent equity stake the state holds in Bank of Ireland.
(Writing by Sam Cage; Additional reporting by Sakari Suoninen and Annika Breidthardt in Frankfurt; Editing by Larry King)
