Is Ireland a highly indebted country? This is one of the questions that the Economic and Social Research Institute (ESRI) is trying to answer in its latest quarterly report. As public debt quickly approaches 240 billion euros, you may be tempted to conclude that the answer is yes. But it depends on the size of the economy it carries.

While acknowledging the “difficulties associated with GDP” in the Irish context, the ESRI notes that the ratio of Ireland’s debt to GDP, commonly used in sovereign debt assessments, has reached a relatively low rate of 59% by 2020. When debt GNI * (Detailed GNI, Detailed Amount of the Central Statistical Office) is used, our ratio rises to 105 per cent.

However, the think tank says there are problems with both approaches: perhaps one gives the wrong benchmark because of the inherent fluctuations in GDP; Others are prohibited from comparing themselves with other countries.

Economic stability

Instead, he proposes to use an alternative measure of financial stability: the ratio of tax revenue to total government debt.

In 2019, Ireland’s debt-to-tax ratio was 2.6. In terms of eurozone comparison, it is not like Greece, Italy, Portugal or Spain, but – as ESRI points out – the top of the supply, indicating that Ireland is one of the most indebted countries in Europe.

“The main thing – [and] “I think he often gets lost in some comments about these types of indicators – you need to look at this trend,” said Kieran McQueen of the Institute. “A quick shot at one point doesn’t have to tell you much.

What is clear in the Irish context [is that] There has been a significant improvement in this ratio over the last seven or eight years, which is a huge improvement in the economic situation.

The ratio of tax revenue to public debt declined by 30% from 3.9 in 2011 to 2.6 in 2019. “This indicates that public finances are improving and debt is more stable,” McQueen said.