Home > Uncategorized > Irish growth: one anomaly solved?

Irish growth: one anomaly solved?


Blue: total credit

Green: nominal GDP

Red: real expenditure (equals real GDP)

In a previous post about the remarkable pattern of recent Irish growth I stated pointed to the factthat that domestic credit decreased while nominal GDP increases at a double digit rate and I suggested that the Irish might be borrowing abroad. In the comments, Marko links to the ‘Fred’ graph above, which (based on data from BIS, the Bank of International Settlements) shows that total credit to the private sector, including foreign credit, indeed is increasing. Which means that the Irish are, on the micro level, becoming indebted to foreign banks. Which, even when Ireland would not be a net international debtor on the macro level (which it however is), can spell trouble in case of any kind of a ‘sudden stop’ of the flow of credit. Anyway – looking at total credit shows a more ‘logical’ pattern than just looking at domestic credit (the very high increases of credit before 2010 were caused by the house price boom, money is not just used for ‘GDP’ purchases, i.e. new services and goods, but also for purchases of existing assets, i.e. houses and when house prices increase total lending can be quite a bit higher than the increase of nominal GDP). Aside – the graph also shows the deflation of the Irish economy in 2008-2010.

  1. December 12, 2015 at 10:01 pm

    Loans housing was one of the reasons for the collapse of the economy in 2008 , I hope that the Irish , especially the government has an eye on these changes in the domestic economy and external bank loans, so they do not lead to new surprise

    • Mike Hall
      December 13, 2015 at 3:09 pm

      The mainstream political parties in Ireland all comprise members who are invested in property and land development and speculation. The ‘Golden Circle’ of property developers, bankers, economists and media continues in Ireland unreformed. Greatly assisted by their fellow Capital owning class in the EU and EZ.

  2. Marko
    December 13, 2015 at 7:30 am


    FYI , here’s the page at the BIS that has links to the debt stats and supporting docs:


    This pdf ( linked at page above ) , which is updated quarterly , is a handy reference :


    It shows recent years’ data on debt for total nonfinancial , private nonfinancial , household , corporate , and gov’t , for many of the major economies , both as a % of gdp and in U.S. dollars.

    One warning when using this data in FRED : I’ve found that for many countries ( but not for the U.S. data – perhaps not surprising ), the data doesn’t seem to aggregate properly when using absolute debt values ( i.e. , in billions of euros , etc. ). However , this shouldn’t create a problem when using ” % change from a year ago” as in the graph shown in your post , above.

    You can see a demonstration of a way to correct for the aggregation problem in my comment to a post at econoblog101 ( Dirk Ehnts’ blog ) , here :


    Dirk uses data directly from the ECB website and I found that it matched the BIS data pretty well , after the correction.

    BTW , Steve Keen uses the BIS private debt data and seems to think it’s among the more reliable sources.

  3. Mike Hall
    December 13, 2015 at 1:17 pm

    Besides the issue of the huge foreign MNC sector greatly distorting Irish domestic growth reality, you might care to know that in the last year or two Irish property prices have been increasing much faster than general price inflation.

    It’s very likely we’re seeing a repeat of that ‘non-GDP’ credit rise before the bust, simply inflating existing asset prices. And what real growth there is also likely very unevenly distributed.

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