Government debt rose to 105 per cent of national income last year as the State borrowed heavily to cope with the fallout from coronavirus.
Finance statistics published by the Central Statistics Office (CSO) show gross government debt climbed to €217.9 billion in 2020.
This equated to 104.7 per cent of GNI* (modified gross national income), the Central Statistics Office’s bespoke measure of national income, which weeds out distorting multinational data. This was up from 94.6 per cent the previous year.
The State’s debt to GDP (gross domestic product) ratio was put at 58.4 per cent, up from 57.2 per cent in 2019.
The figures confirm the Government ran a budget deficit of €18.4 billion (4.9 per cent of GDP/8.8 per cent of GNI*) in 2020.
They also show revenue decreased by €4.5 billion (5.1 per cent) while expenditure increased by €15.7 billion (18.2 per cent)
This resulted in a reduction of €20.2 billion over the 2019 pre-pandemic surplus.
Tuesday’s budget will provide the Government’s revised spending and deficit targets for this year, next year and over the medium term.
The budget deficit for 2021 is expected to be in region of €13 billion, down from the €20 billion originally forecast by the Department of Finance at the start of the year.
The better-than-expected result is down to strong tax receipts, a reflection of the rapid lift in spending since the lifting of restrictions in May and buoyant corporation tax receipts.
Capital spending has also been less than expected because of the hiatus in construction earlier in the year, while current spending is down on forecasts because more people are working, meaning the Government is spending less on supports.
Growth
With growth set to remain strong going into 2022, the deficit for next year is expected to be just over €6.5 billion. This is below the €14.4 billion predicted in the Summer Economic Statement as the outturn for next year. Budget measures already planned – and announcements on the day – will add to the 2022 figure, but it is still significantly lower than expected.
While most of Ireland’s debt is long-dated and therefore insulated from the immediacy of an upturn in interest rates, the country’s high debt level is a major concern if rates begin to rise sharply on account of the current rise in inflation.
Even with the ultra-low interest rate, servicing it has cost the exchequer €60 billion over the last decade.
