How much can Ireland borrow to get through this Covid-19 emergency?
Smart Money: It is different to the last crisis – but a huge debate lies ahead on public finances
Ireland’s national debt at the end of next year is expected to be almost €240 billion. Image: iStock
Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe announced the details of Budget 2021 on Tuesday. Photograph: Gareth Chaney/Collins
Ireland’s national debt at the end of next year is expected to be almost €240 billion, according to the latest forecasts in the budget, following two years of heavy borrowing to combat the pandemic. And there will be more to come beyond 2021 – even if it is on a lesser scale. But in direct contrast to the last crisis , we can borrow at extraordinary low interest rates. So is the bulging debt now a danger to the economy? Or are low interest rates giving us a free pass to keep on borrowing – and spending?
1. The key trends
Ireland’s national debt jumped after the last crisis – partly due to the banking crisis but also the massive gap which emerged between spending and borrowing. In cash terms it has stabilised since then, gradually falling as a percentage of GDP as recovery took hold after 2014.