Another form of measurement used when accessing the healthiness and prosperity of a country is the state of its citizens. In this case, a national indicator of household welfare is known as “actual individual consumption” or AIC. This measurement is also a part of the GDP, where it takes into account the consumption of households on services such as healthcare, education, and housing. What AIC does not take into account is the collective government spending such as defence, policing, debt services etc…
Internationally, AIC includes about 2/3 of all GDP. AIC seems to be the best fit measurement of current living standards of households, which can also e adjusted for price differentials across different countries. Ireland currently ranks less high on this measure than compared to others. Ireland’s AIC rank in the European Union has jumped around quite a bit. At 11th place in the 1990’s up to 6th in 20078. But then afterwards it fell to 14th place in 2009 and returned up to 12th place by 2019. Using this measurement, Ireland actually falls behind all six of the original founds of the EEC. Also, Ireland’s AIC is currently only at 95% of Europe’s average, showing that Ireland is in fact lagging behind in this aspect.
But also in light of the COVID pandemic, many factors have indeed diverted some of the national economic recoveries away from household consumption. Many of the reduction factors reflect how the government borrowing has been limited, and government net savings have been boosted by a sizable amount in light of the increased taxation many States are implementing. Household savings are currently higher than they have been since before the national global crisis of 2008. And of course, theses savings are expected to be used after the pandemic regulations are lifted.
Yet, even so, Irish prices before the pandemic in 2019 were only about 10% higher than those in the UK. While the AIC of the two countries is vastly different. Will Irish prices soon resume their acceleration relative to other European powers and claim the peak they were seen in 2019 or will after the pandemic Ireland lag behind other countries in an attempt to regain economic stability?
As just another measurement of overall wealth in a country, AIC is once again not all-encompassing and only one factor we can look at when determining which country is more powerful internationally.
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.