Saturday 17 February 2018

We're not immune to shocks, warns NTMA as debt still at €200bn

Conor O’Kelly. Photo: Chris Bellew / Copyright Fennell Photography
Conor O’Kelly. Photo: Chris Bellew / Copyright Fennell Photography
Colm Kelpie

Colm Kelpie

Ireland's debt pile remains high at over €200bn and the Brexit vote shows the country is not immune to shocks, the head of the State's debt management agency has warned.

Conor O'Kelly, the head of the National Treasury Management Agency (NTMA), said there would be financial and economic implications from last month's vote in the UK.

The NTMA believes there would be a bigger hit to the Irish economy than the estimates from the Department of Finance suggest. Mr O'Kelly also said his staff had been in contact with international investors in the wake of the Irish economic growth figures released this week which experts dismissed as "meaningless" and a "farce".

"While our debt dynamics are currently favourable, we do face challenges," Mr O'Kelly said.

"As I have said before, our debt is over €200bn and the UK referendum outcome is a reminder that Ireland is not immune to domestic or external shocks."

At the launch of the NTMA's annual report, Mr O'Kelly said that if there was a 1pc fall in UK growth as a result of the Brexit vote, that could mean a 0.8pc or 0.9pc hit to Irish GDP.

Mr O'Kelly also revealed that his staff had been in contact with investors in the wake of the release from the Central Statistics Office of data showing that Irish GDP grew by a massive 26.3pc last year.

Economists said that while growth is strong, the official figure is dramatically overinflated because it is driven primarily by the activities of Ireland's multinational and aircraft-leasing sectors.

Mr O'Kelly said there had been no reaction from investors, as they are aware of the open nature of the Irish economy. However, he admitted the figures were problematical.

"We've been actively talking to investors as you would imagine over the last 24 hours and when you're explaining you're losing, and it's not where you want to be, but I wouldn't get too excited from an investor point of view," Mr O'Kelly said. "It does dilute GDP and some of the ratios in terms of its value … and therefore they're not going to be as useful as they were in the past."

Mr Noonan referred to the fall in the debt-to-GDP ratio, which is now under 80pc as a result of the 26pc GDP surge last year, compared with a peak of more than 123pc.

But he said the Government would remain prudent, and stressed that the massive GDP figure was driven primarily by the activities of multinationals.

"A lot of the add ons were activities that wouldn't generate a lot of activity in the Irish market. So in terms of the Budget, we're sticking to the figures in the summer statement and we continue to base the Budget on 5pc growth this year, and about 4pc next year, allowing next year for a reduction of about 0.5pc because of Brexit."

Meanwhile, the NTMA said the interest on the national debt fell last year to just below €7bn - the first year-on-year decline since 2008.

Irish Independent

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