At first glance the official figures for Government borrowing and the national debt last year show an encouraging picture. The budget was in strong surplus, according to the key EU measure, and the national debt burden is on the decline. This stands in contrast to many other EU countries, where the public finances are stretched.
There are, however, reasons for caution both in interpreting the figures published yesterday by the Central Statistics Office (CSO) and in the assumption that current trends will continue.
In terms of the figures published on Tuesday, the CSO says that the general government balance is in surplus to the tune of €23.2 billion, or 4.3 per cent of GDP. However, some €14 billion of this relates to the once-off payment from Apple following the decision of the European Court of Justice. This still leaves a decent underlying surplus, though if spending starts to increase ahead of revenue, for whatever reason, this surplus could quickly shrink.
The national debt, meanwhile, fell by €2.5 billion in cash terms in 2024 to reach €218.2 billion by the end of the year and is now a modest 40.9 per cent of GDP. However, while repayments are low, it is still a large cash figure and is a larger burden when measured against the domestic economy. In other words, it is not a constraint which can be ignored by policymakers and would limit the scope for future borrowings. On the other side of the national ledger there are substantial funds in cash and savings, which both offer some comfort.
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Ireland’s public finances have been strong in recent years, largely driven by the tax dividend from growth in multinational activity here. Now this faces new uncertainty due to the policies of Donald Trump. His tariff-driven announcements would deliver a “major negative shock” to the international economy, according to forecasts yesterday from the IMF.
This deteriorating outlook and the specific risks to multinational activity here mean that the prospects for the public finances are far riskier than the headline figures would suggest.
