The Irish economy grew much slower than originally estimated in the first quarter of this year, as multinationals sent home more profits.
The Central Bureau of Statistics (CSO) cut original estimates for growth in the first quarter by more than four points, just a day after the EU issued a warning about volatile Irish data.
Gross domestic product (GDP) grew by 6.3 percent in the first three months of 2022, compared to the end of 2021, down from the originally estimated 10.8 percent.
The revision stems from what the CSO calls “factor income outflow,” a technical term for foreign companies that shift net profits back to their parent companies.
The revision is likely to significantly reduce overall EU and eurozone growth for the quarter when updated at the end of this month.
Eurostat was forced to revise its GDP estimates for the bloc by half a percentage point earlier this year following the upward revision of Irish growth to 10.8 percent.
Yesterday, in its summer economic forecast, the European Commission warned of “great volatility” in Ireland’s GDP figures, saying it has “increased significantly” over the past decade as multinational companies expanded their presence here.
The EU executive said the matter skews both Irish and EU data.
“Ireland is not the only foreign-owned EU member state [multinationals]but their weight is so great in Ireland that it affects the ‘standard’ aggregates of national accounts for both the Irish economy and the EU economy in general’, the Commission said.
The figures also show the difference between domestic and foreign owned sectors.
Changed domestic demand, which excludes volatile aircraft lease and patent transactions, shrank by 1 pc in the first quarter. compared to the previous quarter.
And in 2021, the multinational sector grew more than twice as fast as the domestic economy.
CSO figures confirm that gross domestic product will grow by 13.6 pc in 2021. grew, while the changed domestic demand grew by 5.8 pc.
Multinational-dominated sectors grew 20.7 percent last year, while other sectors grew 4.8 percent, according to the CSO in its national accounts.
Exports grew by 14.1 percent in 2021.
However, due to lower imports of intellectual property rights – patents and copyrights – imports fell by 8.3 percent.
The European Commission attributes the fluctuations in Irish GDP data to time differences between the registration of multinational exports and imports in Irish national accounts.
Fewer Covid restrictions last year saw the domestic economy recover somewhat, with personal consumption of goods and services up 4.6 percent, the CSO said.
The current account balance — a measure of economic activity and wealth flowing in and out of the country — registered a €60.7 billion surplus in flows with the rest of the world last year.
In 2020 there was a shortage.
The amended current account balance — which removes the impact of companies moving their headquarters here, as well as patents and aircraft leasing — posted a €26 billion surplus last year.
Multinational net profit outflows amounted to €86.6 billion in 2021, an increase of €14.2 billion from 2020.