Editorials

The Irish Times view on the controversy over Ireland’s economic figures

Irish GDP figures are misleading and distort public debate on the economy, though the multinational presence here has still grown significantly in real terms

Central Bank of Ireland governor Gabriel Makhlouf, who argued that much of the growth in Irish figures was driven by real activity. (Photograph: Leah Farrell / RollingNews.ie)
Central Bank of Ireland governor Gabriel Makhlouf, who argued that much of the growth in Irish figures was driven by real activity. (Photograph: Leah Farrell / RollingNews.ie)
Tue Feb 21 2023 - 20:50

The debate on Ireland’s economic data has flared up again, with Central Bank governor Gabriel Makhlouf, in an interview with the Financial Times, pointing to the “real” factors behind Ireland’s economic figures. US Nobel laureate Paul Krugman responded that Irish officials were “in denial” about what was really going on.

The debate mainly surrounds Gross Domestic Product (GDP), the key measure used internationally to measure the size of economies and their growth rate. The data showed that Irish GDP grew by 12.2 per cent last year – enough to keep overall euro zone economic growth in positive territory.

OECD figures published on Tuesday, meanwhile, showed Ireland’s GDP growth in the final quarter of 2022 was the highest in the industrialised world ; the economy did perform well , but the figures vastly overstate the real growth rate.

The debate has again caught the attention of a number of influential international economists who have long been critical of Ireland’s corporate tax regime. These criticisms have some validity – in the past some of Ireland’s tax tactics were overly aggressive. However, there is another side to the argument. Ireland spotted the opportunity – created in part by US tax law – to attract massive real investment, generating tens of thousands of jobs and massive tax revenue. And it has introduced reforms in line with OECD tax rules.

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The issue of economic data and how it is used by Government does require further thought. The Central Statistics Office does not have any leeway in the way it counts GDP, as this is ruled by international convention. And it has developed new measures to try to factor out the impact of multinational-related distortions.

Yet to the public this mix of indicators is confusing. Irish officials are not, to be fair, “in denial”. The Department of Finance, for example, now presents borrowing figures net of what it judges to be windfall corporate tax revenues. But Ireland’s messed up data damages our international reputation and confuses public debate.