Handful of multinationals behind 26.3% growth in GDP

Surprising growth figures affected by number of one-off factors in tech and aircraft leasing

A handful of multinational companies in the tech, pharma and aircraft leasing sectors were responsible for an extraordinary jump in Ireland’s headline rate of economic growth last year.

According to the Central Statistics Office (CSO), Irish gross domestic product (GDP) grew by a colossal 26.3 per cent in 2015 rather than the 7.8 per cent previously estimated in March. The reclassification related to a number of once-off factors, including the relocation of aircraft leasing assets, a spate of so-called corporate inversion deals and the transfer of international patents, all of which were widely recognised as not reflecting changes to the real economy.

Ireland has become a favoured destination for fiscal restructuring deals involving large multinationals. Among the previously reported deals in 2015, tech giant Apple reportedly relocated a substantial portion of its intellectual property assets here last year amid the global clampdown on multinational tax avoidance.

Aircraft leasing firm Aercap also redomiciled the bulk of its €39 billion in assets in the Republic early last year as part of its takeover of rival firm International Lease Finance Corporation.


Wild swing

Another factor cited in the wild swing in GDP was contract manufacturing, whereby firms here engage third-parties abroad to manufacture products on their behalf, which are recorded as Irish exports.

Inversion deals, where Irish headquartered companies take over larger players internationally, meaning future production and profits are booked from Ireland, are also believed to be a factor. US medical devices giant Medtronic moved to Ireland during the period through a merger with rival Covidien in a tie-up estimated to be worth $48 billion.

These factors boosted Ireland’s stock and productive assets and contributed to a 102 per cent growth in net exports in 2015, the CSO figures show, and a 97.8 per cent jump in output. In an explanatory note, the CSO said these additional assets add to the productive capacity of Ireland and affected the accounts for 2015 .

Growth rate

Several analysts said the high growth rate masked the true performance of the Irish economy. “The new headline growth figures for Ireland bear scant relationship to developments on the ground here,” Investec’s Philip O’Sullivan said, while noting that employment growth during the period grew by just 2.6 per cent, a tenth of the growth rate recorded for GDP.

Ulster Bank chief economist Simon Barry said consumer spending, which rose by 4.5 per cent gave a more accurate picture of Ireland’s economic performance. The new figures also had the effect of reducing the Government’s debt to GDP ratio to below 80 per cent, down from nearly 94 per cent, which means Ireland can borrow more and on better terms.

Minister for Finance Michael Noonan said the figures show the economy continues to grow.“Ireland is now in a position where we borrow relatively small amounts at very low rates which ensure that investment is made in delivering more than the bare minimum of services to our citizens. These are all evidence of a country growing in real terms,” he said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times