Ireland: Exit from Crisis
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Transcript Ireland: Exit from Crisis
Ireland: Debt Dynamics
John FitzGerald
Oireachtas Committee, 26th October 2011
www.esri.ie
Introduction
Origins of Crisis
Tackling the Crisis
Exit from the Crisis
Everything depends on solving Euro zone crisis
National Debt, Gross
Fiscal Action, € billion
Revenue
Expenditure
of which Capital
Total
Per cent of 2010 GDP
2008-2010
5.6
9.2
1.6
14.7
10%
2011
1.4
3.9
1.9
5.3
3%
2012
1.5
2.1
0.4
3.6
2%
2013
1.1
2.0
0.4
3.1
2%
2014
1.1
2.0
0.4
3.1
2%
How much to do in 2012? €3.6 billion or €4 billion?
2011-2014
5.1
10.0
3.1
15.1
10%
Exit from the Crisis
Permanent loss of output
Real depreciation through cutting costs
Exports had a “good” crisis.
Balance of Payments surplus – rising
Major changes in private sector balance sheet
When will private balance sheet be restored?
Consumption and investment eventually rise
Domestic demand is more employment intensive
Balance of Payments Surplus
General Government Deficit
Borrowing - FLOWS:
A. General Government deficit, €bn
% of GDP
Primary Balance , €bn*
% of GDP
Debt interest, €bn
% of GDP
B. Bank recapitalisation, €bn
C. Change in liquid assets €bn
cash balances
NPRF
Total New Borrowing €bn (A+B+C)
2010
2011
2012
2013
2014
2015
49.9
32.0
44.9
28.8
5.0
3.2
15.1
9.6
9.7
6.2
5.4
3.4
17.0
-8.8
1.2
-10.0
23.3
12.6
7.8
6.3
3.9
6.2
3.9
0.0
-2.3
-2.3
0.0
10.3
10.5
6.2
1.9
1.1
8.5
5.1
0.0
-4.3
-4.3
0.0
6.2
6.3
3.6
-2.9
-1.6
9.1
5.2
-3.0
0.0
0.0
0.0
3.3
3.2
1.7
-6.3
-3.4
9.5
5.2
0.0
0.0
0.0
0.0
3.2
Government Borrowing, % of GDP
2010
2011
2012
2013
2014
2015
Alternative
32.0
9.6
7.8
6.2
3.6
1.7
Dept. of Finance
32.0
10.0
8.6
7.2
4.6
2.8
Alternative assumes:
•
The reduction in the interest rates of July 2011
•
Lower than expected cost of bank recapitalisation
Debt /GDP Ratio
Preparing to Return to Markets
Funded till 2013
What are funding needs post 2013?
What will be the Euro area background?
Debt Repayment as of mid-2011
Conclusions
Risks
Everything depends on Euro zone stability
Strategy for Irish return to markets 2013?
To do on banks:
Wean off ECB
Deleverage
Sell the banks to reduce debt
Most important of all
Return to growth