Department of Finance publishes research on Irish private sector debt
Published on
Last updated on
Published on
Last updated on
The Department of Finance has today published a new economic research paper, Analysis of private sector debt in Ireland . This complements the Department’s annual report on public debt.
Despite a near decade of deleveraging by households and firms, Ireland's stock of private sector debt, as measured by the private sector debt-to-GDP ratio, remains high and is consistently flagged as a macroeconomic risk. However, in light of the large FDI footprint in Ireland, not all of this debt represents a genuine macroeconomic risk to the economy. This paper analyses the components and dynamics of Ireland’s private debt ratio to better understand the macroeconomic risks related to the current level of debt held by households and firms.
The paper’s key findings include:
Commenting on the publication, Minister for Finance and Public Expenditure and Reform, Paschal Donohoe T.D., said:
“I welcome the publication of this paper, which fills an important gap in our understanding of the debt burden of the private sector in Ireland, and offers a far more nuanced perspective on our debt position than what is generally reported.
The high level of private debt in Ireland has continually been highlighted as an economic risk, including on the European Commission’s Scoreboard of Macroeconomic Imbalances. Understanding how much of this debt relates to the domestic economy and how much is attributable to the activities of multinationals is crucial to allow us to formulate appropriate economic policy.
While the paper finds that household debt levels are not out of line with fundamental economic drivers, the fact that Ireland’s households remain among the most indebted in the EU highlights the continued need for the Government to closely monitor trends in household debt, including regarding mortgage arrears.
We are actively engaging with our colleagues in the EU as part of the European Semester process, to ensure we continue to unwind any harmful macroeconomic imbalances that developed during the crisis and avoid the build-up of any new imbalances.”
ENDS
Notes to Editors
Further Detail: