Ireland’s national debt has fallen slightly to €42,000 per person, in what is one of the highest gross public debt levels in the world.
The figures published on Wednesday indicate that public debt represented 76% of the modified gross national income last year.
Minister for Finance Michael McGrath said that Ireland’s debt of €223 billion was ‘very significant debt for a small, open economy’.
Ireland’s chief economist John McCarthy said there are only a handful of countries in the world that have a higher level of per capita debt, including Japan, Belgium and Italy.
McCarthy said that the decrease in public debt per person is both because the number of people in Ireland has increased and the amount of debt overall has fallen.
He said that the risks facing Irish public finances include an overreliance on corporation tax, as around 60% of overall receipts come from 10 firms and half of last year’s €23.8 billion in corporation tax revenue is windfall.
‘One shock, if the excess corporate tax was to evaporate overnight there will be a big hit on public debt: about 15 percentage points higher by 2035,’ he said.
From about 2030/2035 onwards, there are ‘less benign type of scenarios’ for public debt as ‘slow moving structural changes begin to really bite’.
McCarthy said that if there are no policy changes made, the ratio of workers to retired people will shift from four workers for every retiree currently, to two people working for every retiree in 2050.
He said that after 2030 the cost to maintain healthcare services will increase sharply due to a change in demographics.
McCarthy added: ‘So if you consider the fact that our baseline scenario is for budgetary surpluses for the next couple of years, under the baseline scenario if there’s no shock to the economy, as well as reasonably solid growth, that’s what’s driving the fall in debt to GNI* ratio over the next five to six years. But after that the impact of demographics really become severe.
‘By 2030, relative to just before the pandemic, just to maintain existing levels of service, the amount of healthcare costs, the amount of pension costs, and long-term costs will be higher by €8 billion per annum just because of demographic changes in the population.
‘That’s not to improve the health service or to improve healthcare or to improve long-term care, that’s just to maintain existing levels of service.’
McGrath said that Ireland’s sovereign debt is in ‘a very manageable period’ at the moment but warned the risks ‘can’t be ignored’.
‘The purpose of the report here is to identify the strengths and weaknesses and also to help promote fiscal discipline.
‘I think it is important to acknowledge progress, we are on reasonably solid ground. Gross public debt amounted to 76% of modified GNI at the end of last year, at its peak, which was in 2012, it stood at 166%.
‘So 166% in 2012, 76% at the end of last year, the gross debt has fallen from a peak of €236 billion at the end of 2021 to €223 billion at the end of last year.’
He said two funds announced as part of Budget 2024, the Future Ireland Fund and the Infrastructure, Climate & Nature Fund, would be ‘key’ to safeguarding against risks.
The Future Ireland Fund is designed to meet the costs of running the State in the future.
‘A total of 0.8% of Ireland’s GDP will be invested into the fund every year between 2024 and 2035, for an expected total of €100 billion.
A separate Infrastructure, Climate & Nature Fund is expected to grow by €2 billion for the next seven years.
By Grainne Ni Aodha
Press Association: News
source: PA
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