Ireland’s Economists Left Speechless by 26% Growth Figureby
Outsized GDP expansion leaves Irish analysts baffled
Growth numbers driven by companies relocating to Ireland
In three days, Jim Power is due in London to brief the British-Irish Trade Association on the state of the Irish economy. Now, he has no idea what he is going to say.
The economy grew 26 percent in 2015, officials from the Central Statistics Office told a stunned room full of economists and reporters in Dublin on Tuesday. Previously, they had estimated growth of 7.8 percent.
“I’m not going to stand up and say the economy grew by 26 percent,” Power, an independent economist, said after the release. “It’s meaningless -- we would be laughing” if these numbers came out of China, he said.
The figure is mostly explained by the open nature of Ireland’s economy and its attraction to U.S. companies seeking access to a 12.5 percent tax rate. Among firms that have inverted to Ireland, mostly through acquisitions, are Perrigo Co. and Jazz Pharmaceuticals Plc. Corporations with assets overseas of 523 billion euros ($580 billion) were headquartered in Ireland in 2014, up from 391 billion euros in 2013, according to the statistics office.
“We are a very small economy, and if we get a big increase in assets, this is what happens,” Michael Connolly, an official at the CSO, said on Tuesday. Once explained the numbers are “believable,” he said.
In a statement, Finance Minister Michael Noonan pointed out that growth numbers cut Ireland’s debt and deficit ratios. Trouble is, they carry downsides too.
For one, tax inversions artificially inflate the size of Ireland’s economy. When the headquarters of a group of companies becomes resident in Ireland, all of its global profits may be counted as part of the nation’s gross national income, according to the ministry.
Since 2008, that gauge has been boosted by about 7 billion euros thanks to corporate relocations, without accompanying substance or employment, the ministry has said. This in turn drives up the country’s contribution to the European Union budget, which is based on the size of the economy.
For a second thing, it leaves self-described “baffled” analysts like Power at a loss to explain the state of the Irish economy. Power says he’ll look at indicators like employment growth and tax revenue for a better gauge, and guesses Ireland’s underlying economic growth was 5.5 percent last year.
“To me, it looks like Ireland is growing at a reasonable, not dramatic rate,” said Power. “There are so many transactions going on that nobody understands.”