Ireland’s External Debt: Economic and Statistical Realities

Conn Creedon, Trevor Fitzpatrick and Edward Gaffney
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Conn Creedon: Central Bank of Ireland
Edward Gaffney: Central Bank of Ireland

No 12/EL/12, Economic Letters from Central Bank of Ireland

Abstract: This letter considers Ireland’s external debt by sector and compares Ireland to other euro area member states. External debt measures are important for assessing financial stability risks, but Irish headline external debt includes the internationally-traded financial services sector, which leads to a somewhat misleadingly high gross external debt to GDP ratio of over 1,000 per cent. Excluding IFSC entities, gross external debt was approximately 300 per cent of GDP in Q2 2012. Multinational corporations outside the IFSC contribute to this high external debt figure. Among domestic sectors, banks had large gross external debts before the crisis, while official sectors increased external borrowing after 2008. Excluding the IFSC, in Q2 2012, Ireland’s net international investment position, the broadest measure of the net external balance based on financial assets as well as liabilities, represented a liability of 98 per cent of GDP, while net external debt, a narrower measure, was 95 per cent of GDP. This is sigificantly below the gross figure, but exceeds the average for comparable euro area member states.

Date: 2012-12
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