Irish household debt falls but still among highest in Europe

Irish still the fourth most indebted in the EU despite posting largest reduction in union

Irish household debt as a proportion of disposable income fell 10.2 per cent in the 12 months to the first quarter of 2017. Photograph: Bryan O’Brien

Irish household debt as a proportion of disposable income fell 10.2 per cent in the 12 months to the first quarter of 2017. Photograph: Bryan O’Brien

 

Irish households are reducing debt at a rapid rate, but still remain one of the most indebted in Europe.

New figures from the Central Bank show debt as a proportion of disposable income fell 10.2 per cent in the 12 months to the first quarter of 2017, the largest decline of any EU country.

Nonetheless, household debt still stood at €142.7 billion or €30,421 per capita which equated to 145.2 per cent of disposable income. This made Irish households the fourth most indebted in the EU behind Sweden, Denmark and the Netherlands.

The figures show household net worth rose €12.1 billion during the first quarter of 2017. This comprised housing assets (€6 billion), financial assets (€5.5 billion) and to a lesser extent decreasing liabilities (€0.5 billion) over the quarter. By end of the first quarter , net worth stood at €670.3 billion, the equivalent of €142,914 per capita.

The Central Bank numbers suggest household net worth has risen 55.9 per cent since its lowest level of €430 billion in the second quarter of 2012, when the economy was in the height of a recession.

At €670 billion, household net worth is now just 6.7 per cent lower than its peak of €718.5 billion in the second quarter of 2007.

Private sector debt

Private sector debt as a proportion of gross domestic product (GDP) fell 17.4 per cent over the quarter to 281.3 per cent, which was the lowest level since the beginning of the financial crisis.

The Central Bank said the fall in private sector debt reflected both reductions in the stock of debt owed by both firms – excluding banks and other financial companies – and households, and an increase in annualised GDP, which has jumped significantly in recent years.

Year on year, private sector debt as a proportion of GDP fell 34.2 per cent. However, the bank noted that private sector debt in Ireland was significantly influenced by multinationals and that restructuring by these entities has resulted in extremely large movements in Irish private sector debt, particularly from 2014 onwards.

The clampdown on multinational tax under the OECD’s Beps (base erosion and profit-shifting) process has resulted the relocation of multinational assets here.