State’s chief economist warns on public finances ahead of budget

The Government will be forced to walk a fine line in next month’s budget with debt levels spiralling and the prospect of a no-deal Brexit looming, the Department of Finance’s chief economist has warned.

In a presentation given to senior officials in recent days, John McCarthy said Ireland’s public debt was already “among the highest in the developed world” before the Covid-19 pandemic. And it is now set to rise again as the Government borrows to pay for wage supports and additional health spending.

This could mean the State’s gross debt rises to about €250 billion or 125 per cent of national income, he warned. That would equate to more than €45,000 for every man, woman and child in the State or €90,000 for every worker in the economy.

In his presentation, published alongside several papers from the Government’s Tax Strategy Group, Mr McCarthy said the economy is in a “finely balanced position” and that budgetary policy would have “to walk a fine line” between supporting the economy and ensuring fiscal sustainability.

The State’s national debt would have to be refinanced in the coming years potentially at higher borrowing rates, he said, while market sentiment towards Ireland, which remains positive, could change rapidly.


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