Economy crippled by an 'unknown' level of debt
...and nobody knows how big a problem it is, claims economist
Northern Ireland's economy won't recover unless it uncovers the level of personal debt and mortgage arrears and can accurately assess the flow of credit from banks, stockbrokers Davy Ireland has said.
Its chief economist Conall Mac Coille said a lack of 'tangible' data makes it difficult to assesss the full extent of property debt here while the relatively complicated banking system also makes figuring out how much money is being lent by banks difficult.
"The four main operating banks – First Active, Bank of Ireland, Danske and Ulster Bank – do not disclose the extent of arrears and non-performing loans in Northern Ireland," he said at a breakfast event in Belfast.
"Unlike the Republic of Ireland, there are no aggregate statistics for bank lending or mortgage arrears in Northern Ireland.
"In the Republic, the Central Bank has implemented targets for commercial banks to put in place sustainable loan adjustments on mortgages in arrears. Targets for restructuring delinquent SME debts are expected in the near future.
"While the efficacy of these efforts remains the subject of debate, there seems little similar discussion in Northern Ireland."
Mr Mac Coille also said the confidentiality of regional lending data given to the Economic Advisory Group (EAG), a body charged with providing the Executive with advice on how to remove barriers to growth in the economy, and a lack of steer from the EAG on lending trends in Northern Ireland, is also inhibitive.
"This means it is not possible to independently assess the flow of bank lending in the Northern Ireland economy."
Efforts by the Bank of England, where Mr Mac Coille has worked, to get credit flowing again are not as effective as elsewhere in the UK given the "presence of foreign-owned banks in Northern Ireland, specifically those from the Republic with deleveraging targets set out under the programme of EU/IMF support".
The economist said policy makers and independent policy makers here would be able to make more informed decisions were more data known about both debt levels and credit flow and he called for greater clarity.
"The evidence suggests that those economies that emerge best from property market corrections are those that properly restructure their debts and their banking system quickly. In the Republic of Ireland, this process is a clear focus of government and the Central Bank of Ireland.
"However, there appears to have been little focus in the UK to date on the especially large property market correction in Northern Ireland and its implications for the region's economic prospects.
"As an independent forecaster, we would welcome greater transparency."