DUBLIN (Reuters) -Ireland’s national debt could more than double to 148% of gross national income by 2065 and the budget deficit could hit 7.9% without reforms over the next decade to soften the impact of an ageing population, the finance ministry warned on Tuesday.
Ireland’s old age dependency ratio – those aged over 65 per 100 working-age people – is set to jump to 55.2% by 2065 from 23% in 2022, straining public finances, stagnating the labour force and suppressing economic growth, the ministry said.
Its modelling, contained in a 240-page report examining the long-term sustainability of current policies, also projects that booming but volatile corporation tax receipts would start to decline significantly, back towards historical norms, between 2030 and 2040.
Increased taxation, reduced public expenditure, boosts to public sector productivity – or all three – might be required to avoid the fiscal decline that would considerably hinder the delivery of public services and investment, the paper concluded.
“The next 10 years will be crucial for implementing reforms before fiscal flexibility diminishes,” the ministry said, noting that ageing and climate costs, healthcare pressures and housing demands will weigh heavily on expenditure from the mid-2030s.
Age-related expenditure on healthcare, long-term care and pensions alone will account for 46% of all day-to-day public expenditure by 2065, it estimated.
The fiscal pressures are expected to occur even with the availability of additional funds from 2041 onwards from Ireland’s new sovereign wealth fund.
The modelling projected that economic growth – currently forecast to rise by 3% a year to 2030 – would decelerate toward 0.5% by the mid-2060s, while continued inward migration will be vital to delaying a decline in the labour force to 2047.
Highlighting just how much Ireland has tied its fortunes to corporate tax receipts mainly paid by a small number of foreign firms, the ministry projected that national debt would fall to 33% of national income by 2065 if the receipts stayed elevated.
While this is still possible, a reduction is more likely, it said.
Corporate receipts make up around 30% of all tax collected following a seven-fold increase since 2014, handing Ireland one of the few budget surpluses in Europe.
(Reporting by Padraic Halpin;Editing by Alison Williams)
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