Economy set to beat China for growth with 7pc rise
THE economy looks set to expand by around 7pc this year in GDP terms, after official data showed it recorded a surge in growth in the first nine months in the year.
Gross domestic product (GDP) was up a huge 4.2pc over the summer months compared with the previous quarter, and increased 10.5pc yearon-year.
The Central Statistics Office (CSO) said that in the nine months to the end of September, growth was estimated at 7.4pc year-on-year.
“Even if quarterly growth were flat in the fourth quarter… this would imply a full-year GDP increase of 6.5pc year-on-year, well ahead of our current 4.8pc forecast,” said Philip O’Sullivan, economist with specialist bank Investec. “Sure, these data are flattered by the multinational sector, but a deep dive confirms a strong underlying growth profile,” he added.
“With high frequency data such as the Exchequer Returns and Investec Manufacturing PMI suggesting a strong Q4 performance for the economy, we think Ireland should see its GDP increase by a remarkable 7pc in 2017.”
To put that in context, China’s economy is targeted to grow by 6.5pc this year.
The quarterly growth was driven by a 4.4pc increase in exports, which when combined with an import decrease of 10.9pc, meant overall net exports for the quarter increased by 63.1pc.
But there was also signs of strong growth in the domestic economy. Personal spending, which accounts for more than half of domestic demand in the quarter, rose by 1.9pc.
In year-on-year terms, personal spending was up 2.7pc, the best performance since the second quarter of last year. Dermot O’Leary of Goodbody Stockbrokers said the combination of strong employment growth, rising earnings and very low inflation should support higher consumer spending. But he was wary of placing too much emphasis on the headline GDP numbers, arguing that they once again reflect the peculiar aspects of the Irish economy and the impact of multinationals. The relevance of using GDP as an accurate measure of the Irish economy was called into question last year when 2015 growth figures were adjusted up to 26pc after a massive revision to the stock of capital assets related to Ireland’s large multinational sector.
It was dismissed by economists and home and abroad, earning the title “Leprechaun economics”.
“Today’s National Accounts for Ireland are once again remarkable for their volatility,” Mr O’Leary said.
“This volatility is caused by the presence of large multinationals in Ireland, bringing about issues such as intellectual property imports and exports, royalties and contract manufacturing.
“All are a feature of today’s data, making the identification of underlying trends quite difficult.”
It comes as data from the Revenue Commissioners shows that finance and insurance activities accounted for the largest portion of net corporation tax payments made last year, representing 28pc of the overall share. Next was manufacturing at 25.5pc of the share.
Net receipts received from the 10 largest payers in 2016 are €43m, or 1.5pc lower than payments by the 2015 top 10 companies at €2.76bn.
Having increased to over two-fifths of the total corporation tax receipts in 2015, the proportion of corporation tax paid by the top 10 dropped 4 percentage points to 37pc in 2016, the same share as in 2014.