IRELAND HAS ONE of the highest per capita debt burdens in the world.
Per capita debt is a measure of how much debt a government has per citizen in its jurisdiction.
Ireland’s public debt increase to €226 billion at the end of last year; this figure was €203 billion just before the onset of the Covid-19 pandemic.
This equates to around €44,250 for every person in the country, an estimated 86% of national income.
It means the burden of public debt for each person in Ireland was around €8,000 higher than the euro area average in 2022.
The figures were published today in the Department of Finance’s sixth annual assessment of public indebtedness, the Annual Report on Public Debt in Ireland 2022.
The Department said the “key message from the report is that the level of indebtedness remains high”.
The Department added that this is “despite the return of the debt-income ratio to a downward trajectory”.
The report notes that while Ireland’s debt-income ratio was once among the highest in the European Union, it is now among the lowest and has been on a downward trajectory since 2013.
The report also points to “significant risks to the public finances, with both immediate and medium-term challenges pressuring the state’s fiscal position.”
It also acknowledges “clear vulnerabilities relating to our dependence on corporation tax receipts, which the Department said “underlines the need to manage the national debt in a prudent manner”.
The report states €1 in every €4 of all tax collected is now sources from corporation tax payments alone.
It adds that “the concentration of these receipts within a small subset of firms, in an even smaller number of sectors, adds to the concentration risk”.
Over half of corporate tax receipts in 2021 were paid by ten large payers, primarily in the pharmaceutical, ICT, and financial sectors.
Commenting on the analysis set out in the Report, Finance Minister Michael McGrath said it “highlights the risks now facing our public finances, following the unavoidable increase in public indebtedness during the pandemic”.
He added: “The war in Ukraine and the associated energy price shock have induced a cost-of-living crisis, placing renewed pressure on the State’s fiscal position.
“Several structural features of Ireland’s debt, with the majority of debt locked in at fixed prices and relatively long maturities, insulate us somewhat from the changing interest rate environment brought about by these shocks.”
Minister McGrath added that the government is “aware of the major challenges on the horizon”, including the need to finance an “ambitious infrastructural plan”, as well as transitioning economic activity to carbon-neutrality.
He also warned that Ireland’s public finances are “vulnerable to a shock to corporation tax receipts or to the multinational sector, which could potentially result in a very large deficit.”
However, McGrath said the government is “committed to cultivating a dynamic and sustainable economy, while ensuring our ability to meet the fiscal challenges that lay before and ahead of us”.
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