Economy’s bumper growth rate ‘fails to represent reality’
CSO figures ‘distorted’ by large multinationals
CSO figures showing an astonishing 10.5% growth in the economy over the past 12 months are distorted by multinationals based in Ireland, experts have warned.
The bumper figures have drawn comparison to the comments of one eminent economist who famously branded the report for 2015 – which showed a GDP growth of 26% – ‘leprechaun economics’.
A KBC spokesman said: ‘While conditions in the Irish economy are improving at a robust rate, these national accounts growth metrics are unrepresentative of the circumstances facing the majority of businesses and households.’
The new figures show growth of 7.4% for the first nine months of 2017. However, without the value added by multinationals, the homegrown economy grew by just 5.7%.
While employers’ group Ibec welcomed the figures, the KBC spokesman said: ‘The Expansion: Gerard Brady figures should not be seen as signalling anything approaching a return to “boom” conditions. These numbers are heavily coloured by the scale of multinational activities connected to the Irish economy and the size and unpredictability of swings in various aspects of these activities.
‘We reckon that the underlying growth rate is probably in the region of 4% in 2017, a strong but less spectacular performance than implied by today’s GDP numbers.
‘Such an outturn would also be broadly consistent with the pace of employment growth which was 2.9% in the first half of the year.’
Michael Connolly, CSO spokesman, insisted their figures were correct, and had been in the past, despite international derision from economists such as Paul Krugman, who dubbed 2015’s report of 26% growth ‘leprechaun economics’ based on figures that included multinational companies.
He said: ‘Following 2015, Eurostat validated our numbers and they are still the numbers used for Ireland for that year; 26.3% is still the figure given on our website.
‘A lot of your readers work for multinationals and produce products sold both internationally and in the Irish markets. Multinationals shouldn’t be excluded.
‘Analysts who came to our press conference thought growth would be around 5%; based on those numbers, it was 7%.
‘This is based mainly on two things: increased personal expenditure, which is the spending you and I do on a daily basis, and an increased level of export by companies based in Ireland.’
Ibec yesterday welcomed the CSO announcement and said that, unlike the boom of the 2000s, this time around, our economic growth is ‘sustainable’.
Gerard Brady, Ibec’s head of tax and fiscal policy, said: ‘Ireland is now in a period of economic expansion which is among the most impressive in its history.
‘Whilst previous periods of rapid growth were driven by once-off increases in the labour force in the 1990s and unsustainable credit flows in the 2000s, the current phase of growth is exceptional in that it is clearly driven by sustainable and impressive expansion in both private sector employment and business investment.
‘The data released yesterday show that, excluding aircraft leasing, Irish business continues to invest almost €1billion per month in plant, machinery and capital equipment.
‘This will underpin sustainable growth in future years.’
He added: ‘In addition, the consumer economy is picking up. We expect employment has increased by almost 55,000 in 2017 and recent figures showed that real wages for Irish workers are growing at 1.8%, the fastest of any EU15 country and four times the EU average.’
Economists at Ulster Bank however agree that, while the economy is performing well, the new figures are distorted.
A spokesman said: ‘Exceptionally strong GDP growth of 10.5% (and 7.4% to end of Q3) is painting an overly flattering picture of the economy’s recent performance.’
‘Leprechaun economics’ This is no return to ‘boom’