Latest GDP figures hint at return of Leprechaun Economics

RTÉ News​

17 hours ago

Ten years ago Ireland's growth was described as "Leprechaun Economics" by Nobel Prize-winning economist Paul Krugman after the State's Gross Domestic Product grew by an astonishing 26% in 2015.
The row over how Ireland calculated its national accounts also prompted debate about whether the country was a "tax haven".
The Department of Finance shut down tax loopholes and the Central Statistics Office now offers alternative figures which give a clear picture of the domestic economy.
Yesterday, the CSO published latest GDP figures showing the economy grew by an enormous 9.7% in the first three months of the year.
By any measure, the figures were remarkable and caused considerable surprise in Government circles and among economists.
Ordinary people did not suddenly become 10% richer in the first quarter of the year. But that's how it appears to international observers who use GDP as a measure of a country's national income.
What's really happened is there has been a surge in exports as pharmaceutical companies have raced to ship products to the US ahead of Donald Trump's tariffs.
Exports are only one component of GDP. Multinational companies have been booking profits in Ireland and that too has added to the surge in economic growth.
Observers expect those profits will result in a significant rise in corporation tax in the coming months when that money is taxed. But the latest Exchequer returns, which show how much money Ireland collected in tax, reveal a more mixed picture.
Corporation tax receipts are down so far this year by 9.4% while the other main taxes are up.
The Department of Finance said that is due to a timing issue, so it is unlikely to be a structural decline in revenue.
The Fiscal Advisory Council, an independent watchdog which monitors the public finances, has raised concern about the speed of increase in the Government's spending.
It said current spending "is growing strongly so far this year, up 5.9% on the same period last year. This is much faster growth than Budget 2025 forecasts would allow. Should this continue, large overruns will occur".
While the multinational sector is booming, the picture is different for the domestic economy, which grew by a moderate 0.8% in the first three months of this year.
That is a much better barometer of conditions for workers who saw wage growth of 0.8% in the first three months of the year.
One way or another, the activity of multinationals is distorting Ireland's economic figures.
The lesson for the Government is that circumstances are going to be highly volatile as it prepares for the Budget over the summer months.