Aircraft leasing activities to distort trade figures, says ESRI

Inclusion in national accounts will make it harder to interpret data, says FitzGerald

John FitzGerald: said GDP, the standard measure of growth used internationally, represents a “seriously defective” indicator of Irish economic welfare . Photograph: Alan Betson

John FitzGerald: said GDP, the standard measure of growth used internationally, represents a “seriously defective” indicator of Irish economic welfare . Photograph: Alan Betson

 

The inclusion of aircraft leasing activities in the national accounts later this year is likely to seriously distort the State’s trade figures, according to economist John FitzGerald.

Ireland is a global hub for aircraft leasing, with approximately 4,000 commercial aircraft leased through companies here, representing a total value of $115 billion. Changes to accounting conventions will see the purchases of aircraft included as imports in the next set of national accounts compiled by the Central Statistics Office.

“As well as making the data on exports and imports difficult to interpret, this will also make the policy implications of changes in the current account of the balance of payments more obscure,” Prof FitzGerald said.

Problems

Problems Interpreting National Accounts in a Globalised Economy

aircraft

He notes that gross domestic product (GDP), the standard measure of growth used internationally, represents a “seriously defective” indicator of Irish economic welfare.

Measuring economic recovery here was initially hampered by the so-called “patent cliff” in the pharmaceutical sector, which acted as a drag on GDP, particularly in 2013. Data for last year also indicated a major fall-off in the volume of output in the State’s large IT sector.

However, this occurred in tandem with a surge in employment and a bigger wage bill in the sector, all of which produced a negative effect in GDP but positive effect on gross national product (GNP), which excludes the impact of multinational profit flows. The confusing pattern appears to relate to the pricing of inputs.

“If one focuses instead on gross national product, their true contribution to the Irish economy is clearer,” Prof FitzGerald said.

Distorted

Netherlands

“The solution lies in the provision of more detailed information, combined with a more critical analysis of what, in the past, seemed relatively simple national accounting concepts.”