Quarterly Financial Accounts

The Quarterly Financial Accounts (QFA) present a complete and consistent set of quarterly financial data for all sectors of the Irish economy. They provide comprehensive information on the financial and investment activities of households, non-financial corporations, financial corporations, government and the rest of the world. The whom-to-whom tables provide information on the interactions between these sectors.

Key Points – Q2 2021

Publication date: 11 November 2021

• Gross household savings declined by €0.9bn in Q2 2021, but remain elevated compared to pre-pandemic levels.
• Increasing deposits and housing assets has led to household net worth reaching a high of €935bn in Q2 2021. It should be noted that this may not reflect the underlying experiences of all households, or the distribution of wealth.
• Government debt hit an all-time high of €259bn in Q2 2021.

Chart 1: Household Net Worth

Household net worth rose by 3.6 per cent, or €32bn (Chart 1), to a series high of €935bn in Q2 2021. This equates to €186,589 per capita. The rise in household net worth was driven by a combination of growth in financial assets (€13bn) and housing assets (€19bn). For financial assets, growth was primarily due to increases in currency and deposits and a rise in the value of insurance and pension schemes.

It is worth noting that the rise in aggregate household wealth does not capture the wealth distribution effects across the sector, and the underlying experiences of individual households may vary. In particular, the COVID-19 pandemic is likely to have had varying effects on the wealth of different household groups.

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Chart 2: Household Financial Assets by Counterpart Sector

Looking in more detail at the financial assets of households, chart 2 shows the stock of financial assets held vis-à-vis relevant counterpart sectors. At the end of Q2 2021, households’ financial assets were mainly liabilities of financial intermediaries such as monetary financial institutions (MFIs) (28% of households’ financial assets), pension funds (28%), insurance corporations (19%), rest of the world (RoW) (13%), general government (8%), investment funds (<1%), and other financial institutions (<1%).

Irish households’ exposure to RoW (i.e. to non-residents companies) is primarily through their holdings of currency and deposits. Equally, households’ financial asset exposures to the general government include deposits held with An Post and state savings schemes. Finally, direct holdings of financial assets issued by non-financial corporations (NFCs) (4%) are mainly in the form of listed shares and debt securities, and represent a much lower proportion of households’ financial assets.

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Chart 3: Household Savings

Gross household savings declined by €0.9bn in Q2 2021, to stand at €7.8bn for the quarter (Chart 3). However, it is worth noting this is still high when compared to pre-pandemic levels. The decline in savings reflects increased consumer spending in Q2 2021, following the lifting of some COVID-19 public health restrictions between April and June this year.  The increase in financial assets of €5.1bn in Q2 2021, was primarily driven by investment in currency and deposits of €4.1bn. Additionally, investment in housing and other valuables  has remained steady at €1.6bn.

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Chart 4: Private Sector Debt-to-GDP

Private sector debt as a proportion of GDP declined by 8.4 percentage points to stand at 204 per cent in Q2 2021 (Chart 4). However, private sector debt remained stable, as an increase in NFC debt of €1bn was offset by a corresponding €1bn decrease in household debt.

Consequently, the decrease in private sector debt as a proportion of GDP is due to strong growth in annualised GDP. This amounted to €15.8bn over the quarter.  Private sector debt in Ireland is significantly influenced by the presence of large multinational corporations (MNCs) and restructuring by these entities has resulted in extremely large movements in Irish private sector debt, particularly from 2014 onwards.

Private sector indebtedness forms part of the European Union (EU) Commission’s scoreboard of macroeconomic imbalances. The Commission sets an indicative threshold of 160 per cent of GDP for private sector debt sustainability. However, this threshold does not take account of the large MNC sector in Ireland.

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Chart 5: Government Debt

In response to the Covid-19 pandemic, the government introduced measures to increase the capacity of the health sector and provide supports to businesses and households. These measures were established in March 2020 and have remained in place up to and including Q2 2021.

Government debt increased by €2.2bn during Q2 2021 to stand at €259bn, a series high (Chart 5). This increase was driven by growth in long term debt securities and deposit liabilities, of €4.6bn and €368m over the quarter. Government financial assets increased by €1.7bn to stand at €109bn, driven primarily by a rise in deposits of €2.9bn. Government net financial worth  increased by €1bn. Chart 7 also shows that Quarterly Government Debt (QGD), which is based on the Excessive Deficit Procedure (EDP) measure of debt, increased by €4.1bn in Q2 2021 to stand at a series high of €235bn.

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Chart 6: Net Lending/Borrowing

The domestic economy continued to be a net lender in Q2 2021, for the second consecutive quarter. Net lending stood at €12.5bn, an increase of €4.4bn compared to the previous quarter (Chart 6). This increase was driven by growth in NFC lending of €3.6bn over the quarter. The other sectors in the domestic economy have remained relatively stable in Q2 2021. The government sector continued to be a net borrower, decreasing by €0.5bn to stand at a €3bn. Households’ net lending position decreased by €1bn to stand at €4.9bn. Irish households have been net lenders since 2009.

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