Tuesday, September 08, 2020

Irish economy grew by a mere 1.5% in 2019

The Irish economy grew a mere 1.5% in 2019 according to data released by the Central Statistics Office (CSO) based on Modified GNI* (Gross National Income) at constant prices, rising by €3bn to €202bn in the year.

Following the 2015 year of Leprechaun Economics when Irish GDP (Gross Domestic Product) surged over 26%, the CSO (Irish Central Statistics Office) has used a Modified GNI* (Gross National Income) metric which strips out the impact of multinational firm transactions in respect of 1) aviation leasing 2) depreciation of multinational phantom intellectual capital [IP] and 3) transactions of foreign firms, typically American, that become Irish for tax purposes (redomiciled firms).

It's important to recognise that there are still significant distortions that are reflected in changes in net-exports — in Dec 2019 Ireland was the 4th biggest holder of US Treasury bonds after China, Japan and UK. The value was $282bn reflecting US holding companies based in Ireland.

In 2019 total Irish exports were valued at about €440bn and that includes almost €40bn in indigenous exports — Enterprise Ireland estimated that indigenous tradable exports were valued at €26.5bn and the remainder relates to inward tourism and transport.

Even though the tradeable indigenous export level is low, in 2019 there were 192,000 full-time jobs in Irish-owned exporting enterprises compared with 235,000 in the foreign-owned exporting firms.

An estimated half of the €400bn exports by foreign firms are effectively fake and the end of the Double Irish tax dodge this year will result in falls in the value of exports from 2021.

GNI* 1995-2019

Total modified gross national income (GNI*) at constant market prices, referenced to 2018, (see CSO chart below) rose 117% to €202bn in the period 1995-2019.

In a Twitter post yesterday David McWilliams, a social economics commentator of The Irish Times, claimed that the GNI* rose by 192% on a per capita basis in 1995-2018.

McWilliams wasn't using constant prices.

For comparative purposes, economic output rises should be compared on a per capita basis in the period.

GNI* per capita rose 54% in Ireland from 1995 when the population was at 3.6m, to 2019 when the population was about 5m.

I compare this with per head GDP data for 1995-2019 from the OECD using 2015 constant prices adjusted for price differences (PPP).

Latvia rose by 225%; Poland 161%; Korea 136%; Chile 89%; Czech Republic 79%; Finland 55%; Sweden 53%; New Zealand 48%; Germany 36%; Denmark 34%; France 30%; US 45%; Australia 43%; UK 42%; Spain 41%; Euro Area 34%; Japan 22%; Greece 19% and Italy 8%.

Indigenous Irish tradeable exports to the 18-country Euro Area of 300m people were only valued at €5.6bn in 2019 compared with €7.9bn to the UK — 31% of the total.

It's stupid of McWilliams to dismiss the UK market and total exports account for more than his cited 11% as he is including €200bn of magical exports in the denominator.


Irish national accounts are still not reliable as the timing of movement of funds can impact the economic growth rate.

There was an apparent record trade surplus in 2018 while in 2019 there was a rise in fund transfers possibly in advance of the end of the Double Irish.

The allocation of intellectual property to Ireland results in net exports of at least €50bn annually. For example, some of the Chinese output of iPhones are booked in Ireland as exports.

A proxy for per capita Irish material standard of living based on household consumption of public and private goods and services, released by Eurostat last June shows that in 2019 Ireland again trailed Italy and was 3% below the EU-27 average.

A crosscheck with Organisation of Economic Cooperation and Development (OECD) data issued in 2019 show that Ireland's average household net adjusted disposable income per capita was at 19th rank of 40 countries (36 OECD countries + 4 others) and 21/40 for household net wealth

Better Life Index data 2019

Irish material standard of living per capita below EU-27 average in 2019


Ireland's record trade surplus of €107 billion in 2018 — an illusion?