Sunday 25 September 2016

Skewed growth figures require pinch of salt

Published 13/07/2016 | 02:30

The economist Paul Krugman explains the eye-watering growth rate as being due to the billions in multinational assets transferred here because of our low tax rates. Photo by Neilson Barnard/Getty Images
The economist Paul Krugman explains the eye-watering growth rate as being due to the billions in multinational assets transferred here because of our low tax rates. Photo by Neilson Barnard/Getty Images

The good news is that growth has reached 26pc. The bad news is that this was achieved by dint of "leprechaun economics". The economist Paul Krugman explains the eye-watering growth rate as being due to the billions in multinational assets transferred here because of our low tax rates.

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The point being that if it all looks too good to be true a second appraisal might be advisable.

Exports that never actually hit our soil can show up on our balance sheet.

This explains how they have grown by 102pc in a single year. There is also a one-off in that a major aircraft leasing company has located its multi-billion assets here.

So is it all a fairytale? No, our economy has not actually swallowed a massive dose of dangerous steroids and grown by a quarter in 12 months. The expansion can be explained by a series of exceptional circumstances. Nonetheless, this unprecedented run will raise some quizzical eyebrows internationally.

That is why a note of cautious realism must be attached if we are not to become a global laughing stock. Pots of gold and leprechauns are found at the end of rainbows. These as we also know, only appear on rainy days of which we have had plenty, and are sure to have plenty more.

It is not fool's gold but figures like these are a one-off. The chill winds from Brexit will bite. So all those policy makers need to take note and not have their heads turned by a series of freak factors. These extraordinary growth numbers are a chimera, they should not be seen a Klondyke for giveaway budgets or a fulcrum for massive pay claims.

Michael Noonan should pay someone to follow him around the Department of Finance, repeating these words: "our fundamentals are sound."

Irish Independent

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