Wednesday 29 March 2017

Q&A: Can we trust Irish debt stats?

Colm Kelpie

Colm Kelpie

Q: Do the debts of Irish businesses and households add up to three times the value of the economy?

A: On paper, yes, but economists argue the data is heavily distorted.

Once again, its a question of trying to disentangle the money owed by large multinationals claiming an Irish headquarters from the underlying debts owed by the actual Irish ecnomy. Trying and failing.

Last year was a case in point. In much the same way GDP data was so heavily distorted in 2015 (remember the massive 26.3pc growth figure announced in the summer), debt has now been revised. It turns out the "growth" brought a corrosponding increase in borrowing.

Its not even that multinationals borrowed more, they just registered more of their debts here.

Q: So the data on debt provided by the CSO is as meaningless as the data produced on GDP?

A: In terms of the debt data, one can't simply accept the headline figure. You have to dig a little deeper. When the CSO announced the 26pc GDP figure in July, Ireland received much criticism. But the CSO has pointed out that the accuracy of the figures produced have not been called into question, despite being scrutinised by international organisations including the IMF, OECD and Eurostat. It is just the nature of Ireland's economy.

Q: OK, but do these skewed statistics have an impact, could this cost us?

A: There are no direct repercussions. But it obviously makes it harder to understand the Irish economy if the numbers are in doubt.

It also makes standard economic health measures that look at the things like the ratio of debt-to-GDP meaningless. The European Union's debt rules, known as the Macroeconomic Imbalance Procedure (MIP) sets a threshold for private debt of no more than 133pc of GDP.

In our case both debt and GDP figures are questionable

But in fairness, Europe has recognised the distortions caused by multinationals here, effectively giving us a free pass to miss targets that don't reflect our economy.

Irish Independent

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