Friday 22 February 2019

Despite worrying negative trends, all is far from lost

Ireland's well-being is broadly back to where it was in 2004 and employment is starting to settle, says Marc Coleman

Like 'Swiss navy' or 'gourmet pizza', combining the words 'Ireland', 'progress' and '2009' in the same phrase sounds -- given the year we had last year -- ridiculous. The deranged product of some spin doctor working in Government Buildings? Not so. A report entitled Measuring Ireland's Progress, 2009 does actually exist, courtesy of the Central Statistics Office (CSO).

What's more, some of the things it says appear totally at odds with the country we're reading about in our papers and seeing on television.

Let's start with the seemingly incredulous fact that Ireland's GDP per capita last year was, despite an eight per cent plunge that year, still the second highest in the EU. It was also a staggering 31 per cent higher than the EU average. It's food for thought for anyone who believes the rubbish about the Celtic Tiger having been "blown" entirely. Between 1957 and 1987, it remained at 40 per cent below the EU average, and on this, albeit imperfect, measure, Ireland's well-being is broadly back where it was in 2004.

Remarkable also was another development reported by the CSO: despite predictions that our population would disappear down a plughole as the nation left on famine ships, the population rose last year and was still rising as of this spring. Net migration of 34,500 aside, record birth rates pushed our republic's headcount up by 11,400 in the 12-month period April 2009 to April 2010, to a new high of just under 4.5 million -- almost a million up on its 1996 level.

This explains much of the increase in private sector credit about which the nation has been agonising. A country growing in size and getting younger needs to borrow. This doesn't justify the delinquent practices of the likes of Anglo. But it does mean that most of our stock of private sector credit is justified by the fact that we are Europe's youngest and fastest-growing nation.

The net migration figure is also interesting: The figure of 34,500 is made up of 65,300 leaving the country and 30,800 immigrants. Of those that left, 27,700 were Irish citizens, ie less than the immigrant count. That number of Irish citizens leaving is also exceeded tenfold by the 276,500 non-Irish citizens in our workforce, 229,600 are working and 46,800 are out of work. That number of non-Irish citizens working here is, incidentally, just 17,200 less than the number of Irish people who are unemployed 246,800. Without blaming immigrants for our unemployment crisis -- a crisis created by ourselves alone -- we should nonetheless be able to ask why -- without having our motives impugned -- Irish citizens are leaving a country while tens of thousands of non-citizens are coming in and finding work.

But back to our GDP per capita. "So what," I hear you say, "if Ireland's GDP per capita is the second highest in Europe? It is distorted by multinational exports, and what comfort is a number like that to those in negative equity, or facing unemployment?"

It's true that GDP is larger than GNP in Ireland, and by a factor of about 18 per cent. But the reason for this is what makes GDP per capita so important -- the major difference between the two is accounted for by the huge net exports of our multinational sector which GDP includes but GNP excludes. If Ireland is tuned into the world recovery, the component of GDP that reflects our high exporting sector will give the first sign of it. As in the early Nineties, it is a leading indicator of what will happen to our domestic economy provided we complete the internal devaluation that certain commentators told us we couldn't contemplate but which is now under way.

But GDP per capita figures for 2009 aside, how is GDP doing in terms of recent growth? On the face of it, not too good. But a closer inspection of second-quarter growth figures out last Thursday shows both positive and negative messages.

First the positives. In the second quarter, GDP declined by about a percentage point. But this follows a first quarter in which it grew by about two percentage points, making for a first half-year rise of one per cent. Precisely because it is so influenced by multinational exports, quarterly growth figures for GDP tend to hop around like a little rubber ball, so year-on-year changes are more informative.

Compared to the second quarter of 2009, GDP in April to June of this year was down by 1.8 per cent. Growth it is not. But compared to the 7.6 per cent drop a year earlier, it confirms a pattern of stabilisation, and stabilisation at levels of GDP last seen in 2005.

That time period is highly significant because it marks the beginning of the uncontrolled surge in private sector credit and public sector spending that created the crisis we are now dealing with. So the fact that GDP is going back to a "pre-Inchidoney madness" base is healthy.

Thursday's Quarterly National Household Survey backs this up. Employment in the economy is, at 1,859,000, not only where the ESRI predicted it would settle, but it also appears to be settling at that level with each successive fall in employment becoming smaller and smaller. And that means it is also settling at the levels prevailing in 2005, levels that are over a quarter of a million higher than in the year 2000 and 700,000 higher than in 1993. Again, the argument that the fruits of the Celtic Tiger were all blown is rubbish. But there are negative and interrelated trends emerging that are worrying in a way that forces us to ask serious questions about how the economy is reported.

The first is the continuing decline in GNP. The second is the rise in long-term unemployment -- to 127,000 persons, or nearly six per cent of our workforce. In spite of encouraging signs of recovery in the Eurozone and the US and of Irish GDP levelling off, growth in our domestic economy -- which GNP captures -- is faltering.

This is directly related to the huge jump in the savings ratio in the last two years, from four to 11 per cent. And that is linked to the third trend: the crippling fear and lack of confidence in our economy, caused in no small part by a celebrity-driven narrative of fear and crisis.

I had been the only person making this point, but on Friday morning I was joined by Brendan Keenan of the Irish Independent, John Corrigan of the NTMA, economist Charlie Fell, Mark Fielding of Isme, Danny McCoy of Ibec, Austin Hughes of KBC bank, David McRedmond of TV3, David Murphy of RTE, Denis O'Brien of Digicel, Finance Minister Brian Lenihan, Padraig O Ceidigh of Aer Arann, and Senator Feargal Quinn. We all agreed that our country is still on a brink of sorts. But we also agreed on doing our best not to talk ourselves over it.

Marc Coleman is Economics Editor of Newstalk 106 to 108fm and presenter of 'Coleman at Large', 10pm Tuesday and Wednesday

Sunday Independent

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