Ireland's debt ratios 'flattered' by its 'unusually' high GDP

Improvement in Ireland's GDP due to high corporation tax receipts from multinational companies, Parliamentary Budget Office says

Earlier this month, the Government announced details of Budget 2026 which increased spending by €9.4bn. Picture: Leah Farrell/ RollingNews.ie

Ireland’s debt ratios are well under the limits set by the EU but the figures are “flattered” by its “unusually high gross domestic product” (GDP), which is inflated by multinational activity, with more accurate measures showing a “heavier debt burden”, a Parliamentary Budget Office analysis shows.

Under EU rules, which aim to maintain discipline in government budgets, member states must seek to keep their debt ratio at 60% of GDP, while budget deficits must be at 3% of GDP. However, GDP is an unreliable metric for the Irish economy given the impact of the many multinational companies with operations here.

Modified gross national income (GNI*), which excludes the influence of intellectual property held in Ireland and aircraft leasing operations, is a more reliable metric for the Irish economy.

According to the PBO, Ireland’s debt is expected to fall as a percentage of both GDP and GNI* by 2026, and is low compared to the OECD.

“However, this improvement is largely due to high corporation tax receipts from multinational companies. If these 'windfall' taxes are excluded, the debt ratio would actually increase,” the PBO said.

The PBO said Ireland is under the EU fiscal thresholds but “these figures are flattered by Ireland’s unusually high GDP, which is inflated by multinational activity.

“A more accurate measure, GNI*, shows a heavier debt burden.”

Data from the PBO shows that so far this year Ireland’s debt-to-GDP ratio stands at 33%, but its debt-to-GNI* ratio stands at nearly 62%.

The PBO said Budget 2026 documents only had one year ahead forecasts and showed a sharp increase in Government spending, up 9% in 2025 and up 8% in 2026.

“This exceeds the previously stated 5% annual growth limit. Despite this, the debt-to-GDP ratio is still projected to fall again, largely due to strong corporation tax receipts,” the PBO said.

This comes as new data from the Central Statistics Office (CSO) shows gross debt increased slightly between April and June, by €1bn to €207.2bn. This was accounted for by increases in debt securities and loans.

Given the higher interest rate environment, gross government debt is expected to increase over the coming years as debt gets refinanced.

The data from the CSO shows the Government generated revenue of €34.8bn during the second quarter of this year, €1.3bn higher than the same period in 2024. General Government expenditure also increased year on year, reaching €32.8bn, which is €2.2bn higher.

The resulting general Government balance was €2bn for the second quarter.

The increase in revenue was driven primarily by an increase in taxes of €1.1bn, and a €400m increase in social contributions. The rise in expenditure was due to increases across a range of areas including pay, use of goods and services, social benefits, investment and capital transfers.

The market value of the State's assets in equity and investment fund shares stood at €31.4bn at the end of June, representing a fall of €1.75bn in the quarter. This drop in the value of equity holdings was due to net sales of €1.41bn, combined with net holding losses on these assets of €340m.

The net sales of equity assets during the quarter includes the sell-off of the remaining shares held by the State in AIB.