There has been some comments in the media over the past week or so about changes to the way national accounts are compiled in the EU.
A good deal of this has focussed on changes relating to illegal/informal/underground economic activities. It should be noted that there is no change to the treatment of these activities in ESA2010. The definitions and conceptual approach to such activities remains exactly as it was in ESA95. The major differences between ESA95 and ESA2010 are summarised here.
A DoF presentation with some of the key forecasts in the SPU is available here. There is also a press release.
The full text is here.
The CSO have published the end-2013 update of these series:
There isn’t much to surprise in the figures. Gross debt at the end of 2013 was €203 billion (124 per cent of GDP). Once offsetting assets of €42 billion in the same categories are accounted for net debt was €161 billion. The assets were:
Other assets not used in the net debt calculation are include shares and other equity of €29.8 billion and other financial assets (mainly accounts receivable) of €9.2 billion.
The market value of Ireland’s €203 billion of nominal debt instruments was €219 billion at the end of the year. The estimated pension liabilities of the government are put at €98 billion, while contingent liabilities are “just” €73 billion.
The 2013 general government deficit is provisionally estimated to have been €11.8 billion (7.2 per cent of GDP) from €13.4 billion in 2012.
The ‘operating balance’ of the government sector went from a deficit of €12.5 billion in 2012 to one of €11.8 billion in 2013, an improvement of just €0.7 billion. The improvement in the overall deficit was greater because of changes in the capital budget.
Gross fixed capital formation was further reduced from €3.1 billion in 2012 to €2.7 billion in 2013. With consumption of fixed capital at €2.3 billion the increase in the public capital stock was just €0.4 billion. The main change in the capital account was a €0.7 billion gain in the ‘net acquisition of unproduced assets’ which likely relates to things such as mobile phone and lottery licenses.
Revenue from taxes and social contributions rose from €49.1 billion to €51.6 billion, while investment income was up around €0.5 billion to €2.7 billion. Much of these increases were offset by an increase in interest expenditure of €1.5 billion to €7.4 billion. Social transfers paid decreased from €29.0 billion to €28.6 billion, of which €24.0 billion were in cash.
The CSO have published the Q4 2013 update of the IIP data.
These are important data but, as with many macro aggregates on the Irish economy, establishing meaningful trends can be difficult. In the data the totals look enormous but the IFSC sector has foreign assets of €2,390 billion and foreign liabilities of €2,394 billion for a net external liability of just €4 billion. It is possible to generate some ridiculously large external debt figures for Ireland by including the liabilities of the IFSC but they are wholly matched by foreign assets.
The net international investment position of the non-IFSC sector improved significantly in the final quarter of 2013, moving from –€172 billion to –€150 billion. This measure troughed in Q4 2011 at -€196 billion. The bulk of the –€150 billion arises from the –€116 billion net IIP of the government sector.
The net IIP of the non-IFSC sector began to improve in 2012 though obviously the position of the government sector continued to deteriorate. However, this was more than offset by the improvement in the net IIP of the Central Bank which fell from –€101 billion at the end of 2011 to –€37 billion now (these are the liabilities to the ESCB including TARGET2 balances). Most of this improvement occurred in 2012.
In the most recent quarter there was a €6 billion improvement in the net IIP of the non-financial corporate sector, from –€87 billion to –€81 billion. However, on this the release notes the following:
With the relocation of a number of group headquarters to Ireland, foreign assets of Non-Financial Companies increased by €47.5bn and foreign liabilities increased by €41.4bn resulting in a decrease of €6.1bn in the net liability to €81.2bn
Thus, all of the quarterly improvement for the sector (and half of the total quarterly improvement for the non-IFSC sector) is as a result of company re-domiciling. To the extent that these companies have retained earnings on their balance sheets this is also likely to have impacted GNP figures for the same quarter.
Ireland’s Gross External Debt was largely unchanged at €1,604 billion, with 70 per cent of this arising from the foreign debt-instrument liabilities of the IFSC sector. The Net External Debt after subtracting foreign assets in debt instruments was –€696 billion (i.e. an asset position).
Removing the impact of the IFSC, the Net External Debt of the non-IFSC sector at the end of 2013 was a liability position of €92 billion. This was €146 billion at the end of 2012 and €182 billion at the end of 2011. Again, the improvement in 2012 was due to improvements in the Central Bank position but this did not continue into 2013. The 2013 improvement in Net External Debt can mainly be attributed a jump in debt instrument assets under the heading “debt liabilities to affiliated enterprises”. These debt instrument assets show an increase of €30 billion over the year, all of which happened in Q4. Again this can be attributed to the re-domiciling of firms.
As a result of the impact of the IFSC sector looking at the overall totals for Ireland is largely meaningless. There has been some improvement in the stripped-out results for the non-IFSC sector but, recently at least, much of that can be attributed to boardroom decisions.
The 2012 release of the Annual Business Survey of Economic Impact is available here.
The coverage is obviously not as broad as the various equivalent figures provided by the CSO. The Forfás survey is limited to “client” companies with ten employees or more but a benefit of the survey is that the indicators surveyed are decomposed by company ownership.
