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State’s €187bn liabilities highest ever
By Vincent Ryan
The Government’s liabilities have ballooned to €186.7bn — their highest level ever as Moody’s says Ireland is not worthy of a rating above junk.
“Ireland is rightly positioned at the Ba1 rating level,” said Dietmar Hornung, a Moody’s credit analyst.“Ba1 is a non-investment grade rating, and the negative outlook reflects that we see the risks skewed to the downside.”
Risks included Government liabilities which continued to increase during Q1 2012 reaching €186.7bn, according to the Central Bank’s Quarterly Financial Accounts for Ireland.
“The increase in Government liabilities over the period partly reflected the receipt of further funding from the EU/IMF programme of €8.7bn. At Q1 2012, loans from the EU/IMF programme stood at €42.9bn, or 23%, of total liabilities. The promissory note issued to IBRC, also classified as loans in Government accounts, stood at €28.1bn, or 15.1% of total liabilities,” the Central Bank said.
The Government’s debt position is set to increase to 2014 to over €200bn before it falls, a spokesperson for the Department of Finance said.
Ireland returned to the markets in July, selling €4.2bn of bonds. Mr Hornung said the debt sale was “reassuring,” but the country’s economic outlook had since deteriorated. “Economic growth has been below expectations,” said Mr Hornung.
The net worth of Irish households continued to fall in the first quarter, according to the Central Bank. It reported that household net worth fell by 1.4%. Overall, household net worth has fallen by 38.2% from its peak at Q2 2007. The decline in net worth has largely been as a result of declining housing asset values.
More positive news was that household debt continued to decline during Q1 2012. Liabilities per head of capita fell by 1.6% over the course of the first three months of the year to reach €42,030 per person.
Since their peak in the last quarter of 2008, household liabilities have decreased by 11.8% from €213.6bn to €188.5bn.
Further positive news was that the ratio of household debt to disposable income, which is used as a key indicator to predict the sustainability of household debt, continued to decline.
This was the third consecutive quarterly decline in the ratio, said the Central Bank. In the first quarter of 2012 debt to disposable income stood at 211.3%. This figure was down significantly on the 223.9% that was recorded in the last quarter of 2009. The economic marker has been declining since the last quarter of 2011.
“The decline in debt to disposable income over the quarter reflected both the continued decline in household indebtedness, as well as a further increase in household disposable income,” the Central Bank said.
There was also an increase in the value of savings held by Irish households. The Central Bank reported that for the third consecutive quarter household savings increased.
“The increase in savings was largely as a result of increased debt reduction during the quarter, as well as a further recovery in investment in financial assets,” the Central Bank said.
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