The 2015 National Income and Expenditure data published last week by the CSO revised Ireland's 2015 GDP level upwards significantly. This has resulted in a mechanical improvement in the general government debt-to-GDP ratio. In April the CSO estimated the end-2015 debt-to-GDP ratio at 94%. Following the recent revisions to GDP figures, it is now estimated at 79%.
Notwithstanding the potential distortionary impact of these statistical revisions, more concrete indicators of the underlying levels of economic activity such as consumer spending, tax trends and labour market developments all corroborate that Ireland's economic fundamentals remain strong and point to a continuation of a now firmly-rooted recovery. In turn, these developments underpin the sustainability of our public debt dynamics.
The most important consideration for Ireland's debt sustainability is whether its debt servicing capacity is improving. Based on how the IMF analyses debt dynamics, on any measure of activity GDP, GNP, domestic demand or Net National Income Ireland's economy is growing faster than the average rate of interest on its debt while it continues to run a primary budget surplus. Since the GDP revisions, the rating agencies Fitch and Moody's have stated that Ireland's debt sustainability continues to improve across a range of metrics.
Investors and rating agencies use a number of other ratios that are unaffected by last week's GDP revisions, including general government interest to general government revenue and general government gross or net debt to general government revenue.
My Department also analyse these developments. For instance, the ratio of general government interest to revenue is on a firm downward trajectory and stood at around 9.5% last year, down from almost 12.5% in 2013, meaning a reducing proportion of the State's resources are now required to service the debt. This ratio is expected to continue to decline over the medium term.
The gross general government debt to revenue ratio is another appropriate indicator and this ratio has also improved significantly in recent years, dropping to 286% in 2015 from over 355% in 2012.
The State also holds significant cash and other assets, meaning that net debt is well below the headline gross debt figure.
In summary, while I welcome the continued decline in the debt-to-GDP ratio, I am conscious of the need for in-depth consideration of all the factors that affect our debt sustainability. My Department continually monitors these factors.
