Friday 6 December 2019

Spending power suffers as Irish household debt is cut by €36bn

John Mulligan

John Mulligan

IRISH households have reduced their debt levels by €36bn since 2009 but still have the second highest ratio of debts to disposable income in Europe, according to figures from an NCB economic monitor. The figures, compiled by NCB using Central Bank data, shows that Irish household debt as a percentage of disposable income stands at over 200pc.

Only households in the Netherlands fare worse, where the figure is closer to 250pc.

In the UK, the ratio is closer to 150pc and even in beleaguered Spain the figure is only around 125pc. Irish households also have to use close to 5pc of their disposable incomes to fund gross interest repayments.

That's also the second highest in Europe, again after the Netherlands, where the figure is nearer to 5.5pc.

Italian households are among those that fare the best, with less than 1pc of their disposable incomes going to fund gross interest payments. NCB said yesterday that the consequence of Ireland's high rates is deleveraging.

"As the IMF pointed out . . . recoveries following financial and property crashes are painful and slow as deleveraging takes place. This is exacerbated when the problem is global in nature as the trade effect for recovery is less pronounced."

It said that with the Irish savings rate still high and households paying down debt, consumption remains subdued. However, yesterday's consumer sentiment index from KBC Bank and the ESRI noted that shoppers were more optimistic in April -- the fourth month in a row that the gauge has risen.

KBC said that spending power "is still severely constrained", however. NCB noted that non-financial corporations have reduced their combined debt levels by €21bn in the past three years. Still, non-financial corporations have the second highest ratio of debt to GDP in Europe, at 175pc, just pipped by Belgium.

The interest burden among Irish businesses is amongst the lowest in Europe, however.

Irish Independent

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