Irish Government Debt and Implied Debt Dynamics: 2011-2015

Abstract

This article examines the debt dynamics facing the Irish State over the period 2011 to 2015. The analysis takes account of the reduction in interest rates on EU borrowing agreed at the EU Council meeting in July 2011 and it makes very conservative assumptions on the interest rate available after 2013. The base case estimates suggest that the net debt to GDP ratio will peak at between 100 and 105 per cent of GDP in 2013 and that it could fall back to 98 per cent by 2015. The related gross debt to GDP ratio would peak in 2012 at between 110 and 115 per cent of GDP before falling back to between 105 and 110 per cent of GDP by 2015. This is much lower than had been assumed in official figures earlier this year, partly because the cost of bank recapitalisation was lower than anticipated and also because of the reduction in EU interest rates.