Institutional Sector Accounts Post author By Philip Lane Post date December 21, 2010 The CSO has put out institutional sector accounts to end 2009: the release is here. Categories In Economic Performance Tags institutional sector accounts 3 Comments on Institutional Sector Accounts ← Assessing business schools and scholars (4) → Ajai Chopra: Conference Call 3 replies on “Institutional Sector Accounts” Philip, technical question. household assets do not include resi property but do the loans out to households include resi mortgages? @tullmacdoo An article in the Central Bank’s Q4’10 Quarterly Bulletin “Irish Households: Assessing the Impact of the Economic Crisis” migh be of interest to you….”Results show an increase of 83 per cent in net worth (i.e. household net worth – the difference between total assets and liabilities) between Q1 2002 and Q4 2006, reaching a value of €647 billion… From Q1 2007 onwards the upward trend was reversed as house prices declined. Stock market volatility from Q4 2007 onwards also contributed to a decline in financial asset values which further accelerated the downward trend in net worth. By Q1 2010 net worth had fallen to €453 billion, returning to Q4 2003 levels. This represented a fall in net worth of 30 per cent between Q4 2006 and Q1 2010..” @ Michael Crowley @ Tull BALANCE SHEET RECESSION That CB Q4 2010 analysis “Irish Households: Assessing the Impact of the Economic Crisis” is extremely interesting. It confirms that the ongoing destruction of equity on the Irish private sector balance sheet is one of the largest motors driving Irish economic phenomena. WEALTH DESTRUCTION IN IRELAND SINCE 2006 It should be noted that this analysis assumes that residential house prices dropped by only 30% from their Q4 2006 peak to Q1 2010. Had a 50% price drop been assumed, there would have been an additional wealth drop of circa €100 billion. That would have increased the wealth destruction from peak from circa €200b to circa €300b (approximately 2.5 times GNP). That €300b would amount to about 45% of Irish wealth at peak. CENTRAL BANK RELUCTANT TO FACE UP TO HARD FACTS It should also be noted how the CB still tip-toes around economic analysis with difficult implications. The abstract of the article omits to mention the article’s salient point: the quantification of private sector wealth during this depression. Just like its 2008 Financial Stability Report, this analysis features work of a high technical quality but lacks the moral courage to face up to what’s really happening. Last week’s IMF report was a breath of fresh air in that regard: it faced up squarely to the risks which may derail its baseline scenario. Comments are closed.