The Irish Central Statistics office has just revised Ireland’s GDP for 2015 up from €215 to €255n Billion. GDP growth for 2015 has been revised upwards from an already high 7.8% to 26.3% with the GNP growth rate coming in at 18.7%. Ireland is a small, open economy and the actions of a few gigantic multinationals can throw the national accounts into total disarray. Apparently:
Crazy growth figures bear scant relationship to reality
A handful of companies in the tech sector relocated their IP assets or patents here last year amid the global clampdown on multinational tax avoidance.
This had the affect of transferring billions in capital assets to Ireland inc and boosting the measured level of investment.
These companies are also involved in contract manufacturing, whereby they engage third-party companies abroad to manufacture products on their behalf.
However, the exports which never touch down here are reflected in our trade balance. Hence the 102 per cent growth in net exports last year.
Another reason for the inflated figures relates to an aircraft leasing company, which redomicilled its entire multibillion euro balance sheet to Ireland in 2015.
Consumer expenditure rose by a much more modest 4.5% in 2015 and employment has been rising by c. 2 to 3% p.a. over the past few years with unemployment falling from a peak of 15.1% in 2012 to 7.8% now. In other words, there has been a real and sustained improvement in the Irish economy over the past few years, but nothing close to the scale that some official figures might seem to indicate. That does not mean, however that such stratospheric growth rates don’t have some real world consequences:
Crazy growth figures bear scant relationship to reality
A definite positive stemming from the 26 per cent explosion in GDP is the Government’s debt to GDP ratio, which is now below 80 per cent. It had been up at 123 per cent at the height of the financial crisis.
The new metric has extremely positive implications for Government’s sovereign debt rating and its compliance with EU fiscal rules.
The grossly inflated growth figures may thus provide the Irish Government with more room to maneuver in seeking to counter Brexit’s estimated drag on the Irish economy of c. 1.2 per cent of GDP. However they also have the effect of increasing Ireland’s net contribution to the EU above what would have been required under more realistic growth rates. Thus the financial engineering by which global companies move more assets into Ireland also has some real negative consequences for the Irish exchequer. Crazy stuff, indeed, but if you encourage crazy financial engineering like this, you also have to live with the crazy consequences..
