Net Lending/Borrowing

This graph follows from a discussion to an earlier post on whether the Irish recession can be classified as a “demand-side recession”.  The graph is a replication of a slide in this presentation on the “balance sheet recession” that the Japanese economy experienced in the 1990s.

Here we use the data in the Institutional Sector Non-Financial Accounts to give the net lending/borrowing positions of different elements of the Irish economy since 2002.

The changes are fairly evident.  The government has gone from a surplus to a huge deficit.  The household sector has gone from borrowing 10% of GDP per annum to saving 5% of GDP per annum.  The changes in the other sectors are not noteworthy.