Wednesday 21 February 2018

Household debt versus disposable income falling

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Colm Kelpie

Colm Kelpie

Household debt as a proportion of disposable income is now at its lowest level in 13 years, data from the Central Bank shows.

Household debt versus disposable income is falling at the fastest rate in the European Union, at 10.2 percentage points over the last year.

Debt as a proportion of disposable income now stands at 145.2pc, its lowest level since the three months to the end of September, 2004.

And yet, Irish households remain the fourth-most indebted in the European Union.

Private sector debt as a proportion of GDP fell by 17.4 percentage points over the quarter to 281.3pc. This was its lowest level since the beginning of the financial crisis.

"The fall in private sector debt reflected reductions in the stock of debt owed by both NFCs (non financial cooperates) and households, as well as an increase in annualised GDP," the Central Bank said.

NFC debt decreased by €34bn, while household debt fell by €1.1bn in the first three months of this year.

NFC debt remains high when viewed in an international context.

The debt-to-GDP ratio of Ireland's NFCs was 126.2 percentage points above the eurozone average of 104.2pc in the first three months of this year.

This ranks Ireland as the second most indebted amongst EU countries.

Luxembourg and Cyprus, both of which also have very large MNCs relative to the size of their economies, were the most indebted and third most indebted.

The net worth of households rose by €12.1bn during the year. This reflected increases in property values, worth about €6bn, financial assets of about €5.5bn, and to a lesser extent, decreasing liabilities of around €500m.

Government debt rose by €5.1bn, or 2.2pc, to €235.4bn in the first three months.

Government net financial wealth decreased slightly from -€157.8bn to -€158bn in the period, as the increase in government debt was largely offset by an increase of €4.7bn in the stock of financial assets held by government.

Irish Independent

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