Irish economic growth for early 2022 is far weaker than initially thought

Ireland’s economy grew at a much slower pace than originally thought in the first quarter of this year as multinationals sent home more profits.

The Central Statistics Office (CSO) cut original estimates for first-quarter growth by more than four points, just a day after the EU issued a warning of volatile Irish data.

Gross domestic product (GDP) grew 6.3 percent in the first three months of 2022 from the end of 2021, the CSO said, up from the 10.8 percent originally estimated.

The revision stems from what the CSO calls “factor income outflows,” a technical term for foreign-owned companies shifting net profits back to their parent companies.

The revision should significantly reduce headline growth in the EU and eurozone for the quarter when updated later this month.

Eurostat was forced to revise its GDP estimates for the bloc upwards by half a percentage point earlier this year after Irish growth was revised upwards to 10.8 per cent.

Yesterday the European Commission warned in its summer forecast of the “great volatility” in Ireland’s GDP figures, saying it had “increased significantly” over the past decade as multinationals expanded their presence here.

The EU executive said the issue distorted both Irish and EU data.

“Ireland is not the only EU member state hosting foreign companies [multinationals]but their weight is so great in Ireland that it affects ‘standard’ national accounts aggregates for both the Irish economy and the EU economy as a whole,” the Commission said.

The figures also show the differences between domestic and foreign ownership.

Modified domestic demand, which excludes volatile aircraft leasing and patent transactions, contracted 1 percent sequentially in the first quarter.

And in 2021, the multinational sector grew more than twice as fast as the domestic economy.

CSO figures confirm that gross domestic product grew 13.6 percent in 2021, while modified domestic demand grew 5.8 percent.

Multinational-dominated sectors grew 20.7 percent last year, while other sectors grew 4.8 percent, the CSO said in its national accounts.

Exports increased by 14.1 percent in 2021.

However, due to lower imports of intellectual property assets – patents and copyrights – imports fell by 8.3 percent.

The European Commission attributes the fluctuations in Ireland’s GDP data to lags between the inclusion of multinational exports and imports in Ireland’s national accounts.

Fewer Covid restrictions over the past year meant the domestic economy recovered somewhat, with personal consumption of goods and services up 4.6 percent, the CSO said.

The current account balance — a measure of economic activity and the inflows and outflows of wealth — posted a surplus of $60.7 billion last year.

The balance was negative in 2020.

The modified current account balance – which excludes the impact of relocations, patents and aircraft leasing – recorded a surplus of 26 billion euros last year.

Multinational net outflows for 2021 were €86.6 billion, up €14.2 billion from 2020. Irish economic growth for early 2022 is far weaker than initially thought

Fry Electronics Team

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