Quarterly National Accounts

The Q4 2011 Quarterly National Accounts have been published by the CSO.  The –1.9% seasonally adjusted drop in real GDP in Q3 has been revised to –1.1% and the first estimate for Q4 is a fall of 0.2%.  Although many will claim we never exited, Ireland is technically back in a recession for the first time since the end of 2009.  Real GNP fell 2.2% in the quarter.

Looking at the individual components in real terms there was a small rise in consumption and a jump of 14% in investment (though from a very low base).  Government consumption declined in all four quarters in 2011.  The final quarter also saw a 1.1% drop in export volumes.

The preliminary annual figures for 2011 show that real growth in the year is estimated to be 0.7%.  These figures are subject to revision (as was significantly seen with the 2009 figures) and it will be June before the final figures are available.

For all our Maastricht Criteria junkies nominal GDP for 2011 is estimated to be €156,438 million, a rise of 0.3%.  This is slightly above the budget day forecast of €155,250 million.  Nominal GNP fell 3.4% in the year and is estimated to be €123,879 million for the year, primarily because the outflow of net factor income rose to €32,559 million from €27,785 million in 2010.

The 2011 Balance of Payments has also been published.  As expected there is a small surplus on the current account.  This surplus of €127 million compares to a surplus of €761 million in 2010 but remains a marked improvement on the deficits of €10 billion recorded in 2007 and 2008.

Lots more detail in the releases to be discussed.

20 replies on “Quarterly National Accounts”

@ Seamus

GNP -7.1% y/y? Jaysus. At least we picked a good day to beef up the PN sob story.

Enough with the GNP line already.

Can someone please compare and contrast Swiss GNP with GDP? Can anyone explain why dividends to multiple foreign shareholders should not be deducted from GDP (FTSE anyone) while dividends to single foreign shareholders (FDI) should and this is relevant?

The GDP GNP debate is seriously overdone people.

They’re arbitrary numbers which have become generally accepted and both are flawed for almost all countries, be they open to FDI like us, or have a disproportionately large stock exchange like the UK.

Yet we’re the only ones who keep harping on about ignoring GDP and concentrating on GNP without mentioning that the Swiss divergence is worse than ours, or that GDP can mean nothing too.

Much (but not all) of the 2011 GNP contraction is due to fixed capital formation declining.
It could have been offset somewhat by engaging in the public transport projects planned but deferred for Dublin although these projects probally would stimulate the continental economy a bit more then our domestic when compared to road construction.

Anyway The lesson learned is that you don’t really save money from deferring rational projects – depreciation and decay takes its course.

Having said that we have a domestic demand crisis(personel consumption figures) in this country and many people would simply not have enough tokens to travel on even public transport despite the fact this has less of a long term effect on our balance of payments problems.

But it appears we are programmed to just build houses………

From the Irish Town planners blog
“Glanbia’s property arm has lobbed in a fresh planning application on a 15-acre site in Cork. The firm has watered down a scheme for the site that was rejected by An Bord Pleanala in 2010.

Glanbia had hoped to build 79 houses as well as commercial premises.

The latest application proposes 22 houses, a convenience…..”

The Plague of Houses will never end me thinks – our Idea of a recovery is more houses…………..

Take a walk around the centre of Cork City Girl……all those little shops closed and more closing.
I remember 1986 and it was nothing like this.

Those GNP numbers are more real then you can imagine.

@ Aisling
Ireland is not just ‘open to FDI’. It serves as a massive tax-arbitrage profit centre for MNCs, for which amenity it receives receives a consideration in the form of Corporation Tax. This merry dance goes on while the domestic economy crumbles.

The Swiss dynamics bear no resemblance to those at work here, and the UK will pay a very high price for allowing its economy to be so thoroughly financialised. See Exhibit E1 on the Page 2 of the Executive Summary here. Leveraged to death.


Money matters, but the real economy, and the society in which businesses operate, matters more.

@Paul I think you’ll find we’re not in it for CT, we’re in it for employment and thus income taxes and VAT. The CT paid by the MNCs is minuscule compared to the income taxes they generate and the knock on effect on the domestic economy.

Which is by the by. Switzerland also uses tax competition policy to attract FDI, and Swiss dynamics are almost identical to Ireland but for the fact that their banking system has not collapsed.

I’m not saying that it is not relevant that the domestic economy is struggling. I’m simply questioning our blind insistence that GDP is an appropriate measure for everyone else while GNP is the appropriate measure for us. It is like we’re trying to find the lead lining in every cloud.

GDP rather than GNP better reflects our tax net as it does every State. That we chose not to tax a lot of the difference is our choice. So to ignore GDP and concentrate wholly on GNP is mistaken.

If we discussed with US MNCs removing TCA s23A non residents and bringing them back within the tax net into the intangibles regime at 2.5% the US MNCs would still get a huge tax benefit from investing here, they’d be less prone to US electioneering around check the box. Their marginal tax rate would increase by 2.5% but that’s still a better deal than they can get almost anywhere else while offering them the protection that the US will not actually seek to alienate the Irish American vote by seeking to tax profits generated in the Irish tax net (at the moment these profits are in the Caribbean).

If we insist on pretending that only GNP is relevant that is no different from insisting that property prices can only go up.

The US MNCs might balk at any changes to s23A, but in a US election cycle we should at least have the conversation with them. Which requires us to acknowledge that GDP is a relevant indicator.

Ireland is a conduit for the shadow banking sector – Switzerland is a focus for these funds.
How else can you explain the price inflation withen Switzerland & deflation in Ireland ?
During the Years 2007 to 2009 Switzerland was the only European OECD country to increase its energy consumption year after year.

@The Dork of Cork The difference is that Switzerland, her currency and her banking sector, retain confidence. Not so much by anything that they have done but by them not being in the EU or US.

Collapse one big Swiss bank tomorrow and the two will look much more comparable (and its not like UBS hasn’t tried). Indeed their need for referenda would make Ireland look like a breeze of a nation to bail out.

The reason that Switzerland doesn’t have a shadow banking system is their daft 10/20 non bank rule in their tax code which they cannot remove because it would require a referendum. But it actually works against groups of companies putting operations into Switzerland, not just financing ops, normal cash generative companies in group cash pooling can be caught. This would be a case of making a virtue out of a necessity, I don’t think that the Swiss government don’t want a shadow banking system, but they can’t have one unless they convince the people to remove an absurd rule which generates little tax and puts them completely out of sync with the rest of the developed world.

@aisling said

@Paul I think you’ll find we’re not in it for CT, we’re in it for employment and thus income taxes and VAT.

Never was Upton Sinclair’s quote “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” more appropriate.

Ireland are not in the low corporate tax regime game for the CT, that is as Paul Quigley would have it a mere ‘consideration’ (Google’s behaviour shows shows that the CT is in fact a gratuity). The CT helps us attract considerable numbers of well paid jobs, though not real “investment”, and in return Ireland functions as a major node for one of the most odious of modern financial activities “tax arbitrage”. This is why the GDP/GNP distinction is so very important.

The divergence in GNP/GDP reflects the fact that we are basically an economy “at will” of the FDI export sector and political considerations in the US or the more generalized economic collapse being brought on by the Mitteleuropean austerity psychosis leaves us horribly vulnerable to the irrationality of the market (or that attack on Iran the European right is aching for). Surely the European component of the global financial crisis has disabused all but the most incorrigible free market fanatics of the dangerous fantasy that we can deregulate and deflate our way to prosperity?

The collapse in GNP demonstrates to all but the most desperate Euroholic or Irish neoliberal that our current policy of submission is destroying the domestic economy and the ECB consensus serves chiefly to impoverish every one in Ireland not involved in selling their services to our comfortable, well protected, ECB backed, Fiscal Compact touting, foreign creditors.


I am not looking for any lead lining. I am simply calling some of the BS which passes for rational economic analysis for what it is. The focus on GNP reflects the concerns of those of us who live and work in the domestic economy. That, by the way, is an overwhleming majority of people in Ireland on the island.

I have no knowledge of taxation, or the way in which take is allocated across the GNP/GDP boundary. I am, however, aware that unneccessary complexity is one of the ways in which les than respectable transactions are sanitised. The accountant’s alchemy can be put to all sorts of purposes, and your input is very useful and welcome.

My last comment was a bit careless. I have regularly acknowleged that FDI employment is an important asset in our economy, as is the associated income tax and VAT take. I also acknowledge the considerable skills and effort of those in the sector, which is highly competitive in many respects.

The FDI employment/ income tax contribution, however, has plateaued over a decade ago, with job losses balancing out new jobs, so the FDI sector canot offer much nore by way of soutions to employment or emigration.

In addition, the technical and organisational gap between the MNCs and the domestic economy is such as to limit linkages to small niches. Michael Hennigan regularly points out that successful Irish startups are almost invariably sold off as soon as they start to make real money.

Switzerland has a completely different history to Ireland. We all learned in school that they had clockmaking, which was the hoch tecnnics of its day, in the Middle Ages. They had Free Cities and artisan guilds, and they had a financial service industry yonks ago. Pace the Dork, there is nothing in Ringaskiddy to compare with the chemical/pharma industry of Basel.

In short, the Swiss have got serious clout, so when their government agencies and domestic businesses are talking to the MNCs, it’s a dialogue of equals. Individuals are recruited or contracted here by the MNCs, but that’s as far as the involvement goes. Surely the challenge is to break the glass ceiling, as a nation. It might be argued that the FDI sector is as much a part of the problem as it is a part of the solution.

@Paul Your last paragraph is just not true. No nation which engages in active tax competition is dealing with the MNC sector as equals. Not Ireland, not Switzerland. We both chase the same deals and the same investments and try our damnedest to sabotage the other ones bid since we’re often the final two in the beauty pageant. The fact that there are big Swiss companies doesn’t alter this. As is borne out by the jobs continuously created by the FDI sector we usually beat them. That these jobs are replacing job losses is not the point. Jobs are still being created by the sector.

I’m not saying that the domestic economy is not important, of course it is. But concentrating on one set of numbers and dismissing another is just plain daft. It has become a mantra, only GNP is relevant for Ireland whereas GDP is relevant for everyone else. I picked Switzerland because their GDP/ GNP divide is actually bigger than ours. GDP can be relevant for Ireland also in some circumstances, we need to look at both numbers, not just the worst of the two.

Ireland is a small nation, so where, especially in the current environment, is a small Irish start-up going to raise capital? Of course they’re going to sell out but that’s an irrelevance if the activities remain here, the jobs remain here and the profits are generated here.

Accenture are technically an Irish headed group but they brought no additional jobs or investment when they moved here. MS or Google are US headed yet are creating additional jobs. CRH is as Irish as they come yet generates most of its income, pays most of its tax and employs most of its employees outside Ireland. The “nationality” of a group is irrelevant in an open economy, the investment policies of that group are much more relevant. Cooley was an Irish owned Irish distiller. Now its US owned. But that could be a good thing if Beam can turn Kilbeggan into a global brand, if Beam with its global firepower can take on not only the other Irish brands in the PR stable but also Scotch and other spirits. No Irish company is in that position but the fact remains that Irish whiskey must be made in Ireland, so the jobs must remain here.

Yes, in an ideal world more should be done to stimulate the domestic economy. But we don’t have the money. MNCs have money so it makes sense for us to try to get them to invest it in Ireland where Irish people aren’t investing, Irish banks can’t fund investment, and neither can the Irish government. Foreign isn’t necessarily bad, just as domestic in the sense of Accenture or WPP or whatever isn’t necessarily good.

Sure – the money flows through Dublin & Caribbean offices …..perhaps into London and finally becomes 1000 Franc notes in some safety deposit box.

Speaking for myself I lost confidence in the Irish system 3 or more years ago now when the NAMA / Bank Bond stich up became apparent.

On a Holistic level I see I major bank credit created energy crisis in Europe and I guess the Micks will pay dearly again.
Unfortunetly we are all running down systems & not creating real capital – its a sad end to Western civilisation really.
The 105 Billion spent on Irish Building and stuff between 2005 & 2007 could come in handy now.
But because none of it was defaulted on without a rational capital development strategy it will all be paper claims on non existent economies

@ Aisling

According to the US government, Ireland is more dependent on US FDI than any other advanced economy.

There is no perfect metric and in a country where there is no drought in suckers for fairytales, it is useful to also use GNP.

Some people may believe that since 2000 there has been a huge productivity miracle. That’s not the case and a rise in exports does not necessarily mean jobs follow.

Since 1970, the value of exports has increased twenty eight times in real terms. The other demand components making up GDP have increased to a lesser extent over the same period e.g. personal consumption and public expenditure about four times and investment about three times.

‘CRH is as Irish as they come yet…’

I wouldn’t agree as 90% of its ownership is held outside Ireland and it has very little value added in the country compared with for example Nokia and Finland.

Government ministers somtimes brag about the amount of ‘Irish FDI’ in the US but the likes of CRH would likely raise most of their funds outside Ireland.

Elan, founded by an American in Ireland in 1969, is also called an Irish company; most of its shares are held in the US; its primary listing is on the NYSE and it has sold its Irish manufacturing plant in Athlone.

Greencore, which hasn’t kept a secondary listing in Dublin, is now effectively a British company as most of its operations are in the UK. Headed by a brother of the Minister for Agriculture, it was in the process of becoming a property developer in Ireland before the bust, using an EU bonanza to develop the prime sites of the former sugar plants.


the dorks simplistic reference to GNP telling you more about the man on the street is a view entirely advocated by Stiglitz. He also argues that GNP tells you much more economic sustainability than GDP, citing Argentina as an example in the late 90s of an impressive GDP versue lagging GNP as an example.

The percentage growth/decline in Ireland’s economy is very small and will remain small for the foreseeable future.

Returning ourselves to full employment could happen not through growth but through issuing a second source of digital money. One that is state issued and created free of debt.

@ Paul Ferguson

I woudl tend to agree but that could only be facilitated by exiting the Euro….i find it mind boggling how little debate there has been on that point. I keeping hearing it woudl be catostrophic without much substance to back that up. Let us firstly assume that an orderly exit could be achieved then what….our currency reflects the underlying value of the economy, exports surge, there would be no point exiting without a complete default on at least the promissory note – which woudl not be sovereign default anyway…can’t got back to the credit markets? why not? A much healthier balance sheet? falling unemployment – at least short to medium term debt – markets forgive all the time….are they really not going to invest in the debt of a country that has taken real initiative to get things moving again….surely there is more risk associated with irish bonds at the moment thant there would be with a clean slate….

not saying it is the answer and i don’t know the answer but would like to see some substantive debate on the matter not laced in doomsday rhetoric based on supposition…seems we are just on a painful spiral to the bottom over the next 5-10 years at the moment…surely quick correction now will pave the way for being in a much better place in that timeframe….

@ Aisling
It is obviously important that this board should have inputs from folk in the FDI sector, and of course from women. We don’t learn too much by talking only to those who agree with us.

I am not purporting to deny the quantity or quality of jobs which come with FDI, but the evidence is that the sector is not really expanding its jobs pool, or integrating much with the domestic mainstream. There are opportunities for individuals, but the organisational/technical gap between the MNCs and domestic entities seems just too great. Our relationship with MNCs is one in which we can only choose from a menu which they offer, and consider ourselves lucky to get an offer at all. That reminds me of our old hiring fairs.

Mostly we host US MNCs. That state of affairs betrays the particular political/ economic dynamic which underlies the monetary flows. As Dork points out, Ireland is a conduit, rather than a focus. It’s a place where MNC strategic decisions are implemented, but not made.

‘No Irish company is in that position but the fact remains that Irish whiskey must be made in Ireland, so the jobs must remain here’

I wouldn’t be so sanguine about the selling out of Irish startups. The pattern varies depending on the type of value which is perceived by the buyer. Ideas and people can easily be moved abroad. Job content can be changed to the point where the rump operation bears no meaningful resemblance to the original firm.

It is the idea of ‘Irish whiskey’, rather than the provenance of the liquid in the bottle, which has value for the millions of naïve new consumers worldwide. That’s the sort of smart makeover MNCs are really good at, and it’s not obvious how much of the spinoff will accrue to Ireland long term. Poster Richard Fedigan has lots to say on that subject.

Our own ‘brown bag’ corrupt practices are being highlighted in the media today, but MNCs do get up to some funny stuff. As you mention Accenture, I note that it originated as the business and technology consulting division of blue-blood US accounting firm Arthur Andersen.

Wikipedia says:
‘By the 1980s, standards throughout the industry fell as accountancy firms struggled to balance their commitment to audit independence against the desire to grow their burgeoning consultancy practices. Having established a reputation for IT consultancy in the 1980s, Andersen was no exception. The firm rapidly expanded its consultancy practice to the point where the bulk of its revenues were derived from such engagements, while audit partners were continually encouraged to seek out opportunities for consulting fees from existing audit clients. By the late-1990s, Andersen had succeeded in tripling the per-share revenues of its partners.
.. On June 15, 2002, Andersen was convicted of obstruction of obstruction of justice for shredding documents related to its audit of Enron resulting in the Enron scandal.. Since the U.S. SEC does not allow convicted felons to audit public companies, the firm agreed to surrender its CPA licenses and its right to practice before the SEC on August 31, 2002 – effectively putting the firm out of business..’

@Paul Please don’t resort to wikipedia entries on Andersen which give a completely incorrect analysis of the position of Andersen Consulting (now Accenture). They were legally separated, they’d filed for divorce, the decree nici had been granted just not the decree absolute before the Enron debacle raised its ugly head. The consulting fees Andersen charged Enron were not Accenture fees, they were ATR fees.

Don’t assume that Beam’s acquisition of Cooley could allow them take value out of Ireland. Politically incorrect as this may be to say, EU law means that they will have difficulty stripping value add ops out of Ireland. In trade terms the US doesn’t easily take on the EU, especially not if the potential benefit is “only” a couple of tens of millions. Our EU Membership is a clear benefit here given the WTO’s sanctions agreed that the EU can enforce against the US. The US would take on Ireland in the blink of an eye. Not so the EU which is actually slightly larger than the US and which has generally been successful in its WTO actions with the US.

Additionally our tax code means that they’d take a hit on trying to move any IP out. But more than that, the downside risk to leaving the IP in Ireland is 12.5% of profits. The TP risk to trying to move that IP is the US 35% odd rate of tax on corporate profits. Leave the profits and thus the IP in Ireland and you’re taxed at 12.5%. Move ’em and you’re facing an Irish exit tax and an ongoing TP risk well beyond 12.5% p.a.

@ Aisling

I have no beef with Accenture or its current management, but I have read accounts which are more critical than Wikipedia, so I was trying to be fair. I was simply making the point that conflicts of intrerest are found everywhere, and big businesses often have equally big conflicts of interest.

As I understand it, Accenture’s independent identity arose from the conflicts which grew up unchecked within the parent enterprise. It should always have been obvious that management consulting and auditing didn’t belong under the same roof, but it took a massive public scandal to drive the point home. Shredding docs was just the tip of the iceberg. There was a very serious multi-decade ethical failure on the part of the principals involved, and that sort of stuff is also at the heart of our financial crisis.

As someone who is neither an accountant or an economist, I naturally bow to your knowledge of the relevant tax issues around, but I am inclined to think that FDI transactions, and investment strategies, are pretty opaque. That said, there are plenty of equally opaque, thorny isses in the domestic economy also, as I am sure you will agree.

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