Thursday 27 October 2016

CSO won't change how it makes up economic growth

Published 17/07/2016 | 02:30

Paul Krugman was dismissive of the CSO figures
Paul Krugman was dismissive of the CSO figures

Gross Domestic Product (GDP) and Gross National Product (GNP), as they are presently calculated, will remain the Central Statistics Office's primary measurements for economic growth.

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GDP and GNP as measurements of economic growth came under fierce criticism last week after the CSO reported revised findings that 2015 GDP had risen by 26pc, dramatically outpacing gains in employment and household spending.

The figures suggested Ireland's economy expanded in size by almost €63bn in nominal terms during the year. Critics said the measurement did not provide an accurate picture, with famed economist Paul Krugman referring to the findings as "leprechaun economics".

The CSO said last week that a "high-level cross-sector consultative group" will be put together following the negative reaction to the figures, to look at how the organisation can better serve those who use its data.

High-level users including representatives from the Department of Finance, the Central Bank and academia have been invited to take part. The deadline for forming the group is July 29.

But a senior CSO official told the Sunday Independent that GDP and GNP, and the methodology used to reach them, are required by EU legislation and will remain the headline indicators of economic growth produced by the CSO.

"A large proportion of our outputs are driven by EU rules. We legally have to produce them," said the CSO's Jennifer Banim.

"The methodology and data behind these figures is sound. But we do acknowledge the difficulty that the jump [in GDP] has caused some users of the data."

The Department of Finance has said it will not raise its growth forecasts and policy plans based on the findings.

"The Department will continue to plan the Budget based on 5pc growth this year and about 4pc next year," a spokesperson said.

"The Minister has clarified also that in terms of the Budget we will continue to base our plans on the figures in the Summer Economic Statement."

Minister Noonan has given his support to the CSO's approach. "The Minister for Finance made it clear that he is not critical of the CSO's approach," the spokesperson added.

"He also clarified that the inclusion by the CSO of additional activities in the calculation of GDP to bring it to a level of growth at 26pc for 2015 were all legitimate from the CSO's point of view. They were in accordance with best international practice and would be fully endorsed by Eurostat."

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