Department of Finance Annual Report on Public Debt in Ireland 2017

A key strategic goal of the Department of Finance is the achievement of a “sustainable macro-economic environment and sound public finances”.  Given the importance of sound public finances, the motivation for this document – which will be updated annually – is to report on public debt developments in Ireland, and to monitor progress towards debt targets.

Taken at face value, the debt-to-GDP ratio has declined significantly in recent years.  However, while compiled in line with international standards, the level of GDP in Ireland overstates the underlying level of true economic activity in Ireland due to inter alia the on-shoring of high income-generating assets such as intellectual property in recent years.  An important side effect of this is that the debt-to-GDP ratio paints an excessively benign picture of public indebtedness in Ireland.  A range of other metrics clearly show that public debt remains high both by historical and international standards.  A key policy priority, therefore, must be to reduce the debt burden to safer levels in order to minimise the interest burden and reduce the economy’s vulnerability to shocks.

This report is structured as follows.

To put the current situation in context, a backward-looking perspective is outlined in section 2 where the evolution of debt since the mid-1990s is presented.

In section 3, recent debt dynamics in Ireland are contrasted with those elsewhere in the European Union while,

in section 4, key structural features of Irish public debt are highlighted.

in section 5. Reflecting the limitations of GDP as a measure of underlying economic activity in an Irish context, the burden of debt is assessed using alternative metrics

In Section 6 A forward-looking perspective is provided where a debt sustainability analysis is also presented.

Finally, some policy-relevant conclusions are outlined in section 7.  Additional variables which are routinely monitored by the Department of Finance from a debt sustainability perspective are set out in the appendix.


Tuesday 6 May 2017

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