The CSO Quarterly National Accounts: Quarter 4, 2019
The latest data for the Irish economy is broadly positive with GDP increasing 5.5% in 2019 and GNP 3.3%. In GDP terms Ireland had the fastest growing economy in the EU in 2019.
However, Irish GDP data is distorted by the outsize impact of a small number of large multinationals. These multinational activities are themselves distorted by tax planning activities. Globalisation effects, such as the movement of Intellectual Property (IP) assets into Ireland, makes it difficult to accurately compare Ireland’s performance with that of other EU countries.
Even so, the Irish economy performed well in 2019. The useful ‘modified final domestic demand’ indicator, which strips out intellectual property investment and purchases of aircraft by leasing companies grew by a solid 3% in 2019 and by 3.4% year-on-year in the fourth quarter of 2019. Modified investment grew by 5.6%.
Personal consumption grew by 2.8% in 2019, although this fell to 2% year-on-year in the fourth quarter. More concerningly, seasonally adjusted personal consumption failed to grow at all in the fourth quarter compared to the previous quarter.
NERI Co-director Dr Tom McDonnell also notes the slowdown in growth in construction, albeit from an unsustainably high base. After three consecutive years of double digit growth it appears that the growth in construction related activity is starting to normalise. Even so, growth, at 5.8%, remains well above the long-run average and construction activity grew by two thirds between 2013 and 2019.
Today’s national accounts release confirms the strong performance of the economy in 2019. Labour market data from the CSO had already revealed robust employment growth of 2.9% along with average weekly wage growth of 3.6% in nominal terms and 2.7% in real terms.
Dr McDonnell adds that there is as yet limited evidence of overheating in the economy. Even so, we expect that the faster than average growth we have seen in recent years will end in 2020 given the natural evolution of the business cycle and the impact of the coronavirus on global and domestic demand and on global supply chains.