Wednesday 18 October 2017

Gap widens between Irish output and income as tech effect grows

Brendan Keenan

Brendan Keenan

THE huge impact of software and computer services firms based in Ireland played havoc with the national economic statistics and widened the gap between output and the income available to Ireland, latest data shows.

As Google Ireland reported a 55pc rise in exports to €10bn, full details of the latest figures from the Central Statistics Office -- accidentally released for a time on Wednesday -- showed sharp upward revisions in the export of products such as Google's.

Full income and expenditure figures for last year showed a 12pc rise in exports from software and communications sector.

This increase on estimates made just three months ago was the main factor in putting the value of the country's output of goods and services (GDP) almost €3bn higher than had been thought.

Even when price changes are excluded, the real growth was 1.4pc -- double the previous estimate and in line with eurozone performance in 2011. The figures were also helped by Irish people spending less on holidays and other trips abroad.

Simon Barry, chief economist at Ulster Bank, said the 2.1pc quarterly decline in consumer spending was consistent with the large falls recorded in the monthly retail sales figures.

"The spending bounce of 1.8pc at the end of last year was more than fully reversed -- presumably reflecting payback for spending which had been brought forward to avoid the 2pc VAT hike," he said.

However, while firms like Google Ireland are exporting more, they are also paying more in royalties to the parent companies which own the patents on their systems. This meant there was no change to the figure for national income (GNP), which was still seen as declining by 2.4pc last year.

GDP is the measure used in Ireland's bailout targets, so the 2011 upgrade helped that process. The critical debt/GDP ratio fell by 1.7 percentage points from previous estimates and was calculated at 106.5pc of GDP by the statisticians.

GDP also contributes to tax revenues, but GNP indicates that Irish living standards are still falling.

"The increase in exports went out again in outflows," said CSO Senior Statistician Michael Connolly.

"The trend shows GDP essentially flat, with GNP still declining. We get a truer picture of where we are going from GNP, so you could say the economy is still declining."

That appeared to be the picture from figures for the first three months of the year, which showed similar falls of over 1pc in both measures. But the huge surges in multi-national sales mean the figures could just as easily have rebounded in the last three months.

There were some encouraging signs in the figures. Activity in the domestic economy grew for the first time in almost two years, although much of this was due to purchases of aircraft by leasing firms and airlines, and the biggest rise in government spending on goods and services since the crash.

Data also showed that Ireland's financial position with the rest of the world was stronger than had been thought. The balance of payments surplus for last year was increased more than ten fold to €1.8bn, while the 2010 figure more than doubled.

These surpluses of more than 1pc of GDP are in marked contrast to the other stressed eurozone countries, all of which are running large external deficits. They imply that the borrowing by the public sector is being matched by savings in the private sector.

Irish Independent

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