Ireland’s growth figure closer to 4%, Taoiseach tells the Dáil

The revised growth rate for 2016 of over 26 per cent is not representative in terms of the reality of the Irish economy, Taoiseach Enda Kenny told the Dáil on Wednesday.

He said the Department of Finance’s figure for economic growth last year was in the region of 3.5 per cent to 4 per cent.

He said the department would base its policy on “a more normal growth rate’’.

The Taoiseach was responding to the revision upwards to a 26 per cent economic growth rate by the Central Statistics Office (CSO).

“These are figures compiled accurately by the CSO and are taking into account changes in the international economy,’’ he added.

Mr Kenny said the real growth was in jobs, consumer spending and the drop in unemployment and represented the real value of the economy.

The Taoiseach was replying to Fianna Fáil leader Micheál Martin who said the CSO should be asked to design a proper and accurate way of calculating the real size of the Irish economy.

Mr Martin said it was shocking the department of Finance and the Taoiseach's own department had not, years ago, worked to create a proper model to calculate a realistic growth figure.

He said the figures put forward were “false’’ in terms of the reality of the Irish economy.

The reclassified CSO growth rate of 26.3 per cent was nearly four times that recorded in China for the same period and reflected a 102 per cent spike in net exports.

The figures appear to have been hugely affected by a number of one-off factors, including activity in the aircraft leasing sector and restructuring by multinational companies involving the movement of patents.

The Irish Times has learned the Central Bank governor met the CSO on Monday and made known his concerns that the GDP growth figures do not accurately reflect economic activity in Ireland.

Real economy

Philip Lane’s concerns were echoed by a number of commentators, who questioned the relevance of reporting figures that bore so little relationship to the real economy.

The revisions also raised eyebrows abroad with renowned US economist Paul Krugman referring to the figures in a tweet as “leprechaun economics”.

A better measure of the underlying growth of the economy was probably provided by consumer spending, which rose by a more modest 4.5 per cent last year.

The changes are unlikely to affect Minister for Finance Michael Noonan’s proposed budgetary adjustment of €1 billion as most of the factors used to calculate 2017 fiscal space have been fixed.

On the downside, the increased GDP metric will necessitate a bigger financial contribution to the EU’s budget.

The new figures also reduced the Government’s debt- to-GDP ratio to below 80 per cent from nearly 94 per cent, which has positive implications for Ireland’s sovereign debt rating.