Pearse Doherty
Question:128. Deputy Pearse Doherty asked the Minister for Finance the effects of a longer period of very low inflation on debt profile; and if he will make a statement on the matter. [16840/16]
View answerTuesday, 21 June 2016
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The debt profile, the ratio of general government debt to GDP, is driven by developments in the stock of general government debt and nominal, or current prices, GDP. Nominal GDP, in turn, is determined by both real economic activity and the GDP deflator - which measures price changes in the economy as whole. All else being equal, a lower than expected pace of inflation will lower the GDP deflator which, for any given level of debt, will mechanically increase the debt-to-GDP ratio relative to baseline i.e. compared to what it would have been otherwise.
My Department's macroeconomic and fiscal forecasts, as published in the Stability Programme Update (SPU) in April of this year, show overall nominal GDP growth of 7.6 per cent this year and 4 ¾ per cent over the medium term, with the GDP deflator increasing by 2.6 per cent and 1¼ per cent, respectively, over the same period. This is consistent with continued improvements in the debt-to-GDP ratio over the forecast period.