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Trading our way out of the deficit

Absolutely right: we need something to cheer us up. So how about this? Our trade surplus this year - the difference between the goods we sell to foreigners and what we buy - will be almost a quarter of national income.

The best ever. And Irish families were €25bn better off last year than in 2008.

Is that good or what? Well, it's interesting anyway.

But what it really does is illuminate a side of the economy which we guys don't mention very often, but which has been the focus of much attention in other countries.

Over there, it is part of the great debate about whether governments should keep on borrowing, or cut their deficits before the national debt gets any bigger.

Those who say borrow point to the fact that government deficits, in many cases, are merely offsetting the extra savings being done in the private sector.

Simple, really. Let's say companies and households, shocked by the recession, are saving an extra 10% of the country's output (GDP). So, the government borrows 10% of GDP, and things are just the same.

What matters, according to this argument, is the overall position. This is recorded in a country's balance of payments.

The country as a whole is borrowing if this is in deficit. It is saving when the balance is in surplus.

On this basis, Ireland is now doing rather well in comparison with those countries with which it has been bracketed in the unfortunate PIGS group. Even in the PIIGS groups, when Italy is added to Portugal, Ireland, Greece and Spain.

The point was highlighted in the recent quarterly commentary from the ESRI (Economic and Social Research Institute). That huge 23% trade surplus - up from 18% of income (GNP) in 2008, and still rising - will help achieve an estimated balance of payments surplus of €300m next year.

This will be the first surplus since all the madness began in 2003. Far from becoming more indebted, the country as a whole will be saving more than it is spending.