Irish gross domestic product (GDP) figures have had a bad rep. And this is understandable. As GDP soared over recent years, particularly after 2015 when a new round of multinational restructuring led to the “Leprechaun economics” episode, it was clear that Irish economic data was becoming ever more messed up by the accounting practices of these big firms.
Now the statistical worm has turned and GDP is falling, with the Central Statisitics Office (CSO) estimating that it dropped 1.8 per cent in the most recent quarter, compared to the previous three months and was down 4.7 per cent year on year. As well as the usual GDP caveats, the Central Statisitics Office cautions that these figures are from a new “frontier” series allowing it to make earlier estimates, and thus need to be treated with caution.
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Clearly, the Irish economy in which we all live and work did not shrink by nearly 5 per cent over the past year. Employment growth has slowed, but the number of people in work in August was 2.5 per cent ahead of one year earlier, according to the latest CSO estimates. While living standards have been hit by inflation, retail spending has held up.
And still. While the runaway GDP growth was influenced by a range of factors with little linkage with Ireland’s real economy, there were positive spin-offs. The numbers employed in multinationals and their earnings rose — and corporate tax revenues soared. Much of the rise in recorded exports was “phantom” — in the sense that the goods were ordered from Ireland but manufactured elsewhere. But some of it was real.
The concern now is that the fall in gross domestic product might be a warning sign. If real exports are falling — as separate Central Statistics Office data suggest — then this will affect jobs, earnings and tax revenues.
Consumer confidence is already shaky, though the latest figures showing a fall in the inflation rate to 3.6 per cent might help. Ireland’s real economic growth — while well below GDP figures — has been very strong. Perhaps, as has long been forecast, we are finally seeing growth here return to more normal levels.
