Thursday, March 07, 2024

Ireland's GDP per capita in 2023 at €30,000 - Denmark at €69,000

ECB: (European Central Bank): Intangible assets of multinational enterprises in Ireland and their impact on euro area GDP

The 20-country Euro Area has a population of about 348,000,000 and the EU is at 448,000,000.

The Irish population in December 2023 is estimated to have been 5,330,000.

Denmark in 2023 had a euro income per capita of €69,100. It is the most prosperous country in Europe (absen shenanigans) with a population close to 6mn.

A phantom Contract Manufacturing /Goods for processing was to be among MNC (multinational) deductions made in 2017. It was to be deleted from the headline GDP to produce a Modified General National Income (GNI*).

However, it got worse every year between 2017-2023 (see the chart above).

Irish Government may have nixed a key remedy for 'Leprechaun economics'

GDP (Gross domestic product) was falsely boosted in 2022 by €143bn and €115bn in 2023.

I deducted €115bn from the GNI* and the Irish income per capita was about €30,000 in 2023.

The notion that Ireland is among the richest in the world, would earn a Piseóg (an Irish curse) from many Irish people.

Denmark ranked 9th among the 132 economies featured in the Global Innovation Index 2023. Ireland has a small innovation base.

In 2023 Denmark's flagship drug firm Novo Nordisk, became Europe's most valuable company. In early March 2024, Novo Nordisk was the 12th most valuable company in the world, with a market cap of $604bn.

Competition for obesity drugs will bring down current high valuations enjoyed by Novo Nordisk and Eli Lilly. However, Denmark has been a pioneer in developing commercial wind power since the 1970s and Denmark is the world's fifth-largest maritime shipping nation.

It's 39 years since the birth of a significant multinational in Ireland: Ryanair the largest airline in Europe both in terms of fleet size (527 aircraft) and routes served (1,831).

Ireland once had a significant pharmaceutical company, at the turn of the century. It was founded by an American in 1969 and in the late 1990s, its value on the Irish Stock Exchange reached over €20bn. In 2001 Élan Corporation was the world's 20th-largest drug company.

In January 1984, Élan became the first Irish company to secure a public listing in America, floating on the NASDAQ. In 1990 Élan became the first Irish company to list on the New York Stock Exchange.

In 2002 a corrupt plan by executives was revealed. They had agreed on complex joint-venture agreements with 55 companies. By keeping the company’s stake in each of these vehicles below 20%, Élan was able to keep their poor results off the corporation’s income statements. There were problems with products and by 2013 several units had been sold and the company was acquired by an American firm. The price was €6.5bn.

Global Finance magazine has the 10 richest countries in the world in 2024 with Luxembourg, Ireland, and Singapore in the lead. Switzerland has a 6th ranking and Norway is at 9th. The United States is 10th.

Denmark with a population of 5,911,000 has an 11th position at $75,000 or €69,100.

GDP-PPP (Purchasing power parity) per capita ($): Luxembourg $143,304; Ireland $137,638 and Singapore is at $133,108.

Both Ireland and Luxembourg are anomalies.

About 75% of Luxembourg's workforce comprises immigrant workers or cross-border commuters. The share of cross-border workers has increased from 3% in 1961 to 47% in 2023; nearly one in two cross-border workers comes from France.

This was produced by the International Monetary Fund (IMF)

In July 2016 Paul Krugman, New York Times columnist and winner of the economics Nobel, called the 2015 Irish national accounts, 'Leprechaun economics.'

Ireland reported an annual growth of 26.3%!

Eight years later 'Leprechaun economics' endures.

Ireland's national statistics office CSO (Central Statistics Office) on March 1, 2024, published a provisional detail on the economic outcome of year 2023.

GDP shrank by 3.2% in 2023 driven by a contraction in the multinational industry sector, while Modified Domestic Demand grew by 0.5%.

The final economic data for 2023 will be published by July 2024.

Eddie Casey of the Irish Fiscal Council says "Modified domestic demand has become a key indicator of focus for understanding what is happening to Ireland’s domestic economy. This is good in the sense that it strips out some of the major distortions arising from foreign-owned multinational enterprises, including aircraft leasing and contract manufacturing. However, users should remain cautious in interpreting the measure

The outsized role of multinational enterprises in very specific areas can still distort modified domestic demand through their effect on modified investment. And by ignoring the trade side entirely, these investments are not offset by imports in the modified domestic demand measure.

We show how imports of machinery and equipment to develop semiconductors may have distorted modified domestic demand growth in 2022. We explore Ireland’s modified investment closely and propose some avenues to better understand it, including through a focus on selected areas of domestic machinery and equipment investment."

The CSO says that "Ireland’s trade balance at €22bn, all goods and services exports less all goods and services imports, fell by €26bn in the fourth quarter of 2023 over the same period in 2022, mainly due to a decrease in contract manufacturing exports."

Contract manufacturing or Goods for processing, and Merchanting (net exports) are mainly fiction (for example Apple merchandise being exported from Ireland to China!).

Just look at the chart Tabe 2.1 — the imports are tiny compared with the exports.

It's a tax dodge by Apple and other big US companies.

There is a benefit from corporation tax receipts but adding most of the net into Irish national accounts is a fraud.

We have to wait for the data until July for the deductions of multinational from GDP of €504.6bn.

See the minuses in the Department Of Finance chart on top (F, G and H).

For Modified Gross National Income* (GNI*) net of MNCs distortions, the net was €273bn.

Let's say it is €265bn in 2023.

In 2022 the deduction from the GNI* was omitted from the net figure and the Contract Manufacturing/Goods for Processing, a total value of €143bn in 2022 and €115bn in 2033.

The key issue again is that these net processing funds remain outside Ireland.

'Measuring Ireland's Progress 2022' from the CSO is misleading.

In late 2021 economists at the Central Bank of Ireland noted: "Further increases in exports due to contract manufacturing and merchanting will continue to distort Ireland’s trade performance and inflate GDP in the National Accounts."

Treat the 52,700 per capita GNI* in 2022 as misleading. The correct figure was €26,000.

The Modified net GDP in 2023 is €150bn at current prices.

The per capita income with an estimated population of 5,330,000 in December 2023, results in just over €30,000.

Individual Consumption vs GDP

Individual consumption (AIC) consists of the goods and services consumed by individuals, irrespective of whether these goods and services are purchased and paid for by households, government, or non-profit institutions serving households.

Ireland has the second-highest headline GDP per capita in the EU while AIC consumption per capita in 2022 was 6% below the EU average.

Source dataset: prc_ppp_ind 

It's a delusion that Ireland is among the richest countries in the world, with high levels of GDP per capita.

Ignore Luxembourg (as 47% of its workforce live in other countries) and ignore Ireland as the high level of GDP per capita is explained by the presence of large multinational companies holding intellectual property and being Irish for tax purposes (e.g. Medtronic, the American firm, became Irish in 2016: It's market cap is about $113bn in US compared with the total market value of the Irish Stock Exchange of €93bn/$101bn). Providing employment is a plus.

Denmark (36% above the EU average), the Netherlands (30%), Austria (25%), Belgium (21%), Sweden (19%) and Germany (17%).

In contrast, Bulgaria (41% below the EU average), Slovakia (33%) and Greece (32%) registered the lowest GDP per capita.

Once 1) Retained earnings from re-domiciled firms (Irish for tax purposes) 2) Deprecation of IP (Intellectual Property) 3) Deprecation of thousands of leased aircraft and 4) Virtual (fake) Contract for Manufacturing, are purged from the National Accounts, the reality will be seen.  

In GDP per capita, Ireland is under the EU average and is in a group with Italy; Cyprus; Czechia; the Baltic countries, and Spain.