Tommy Broughan (Dublin Bay North, Independent)
Link to this: Individually | In context | Oireachtas source

109. To ask the Minister for Finance the most up-to-date gross domestic product and gross national product to debt ratios following the recent Central Statistics Office revisions to growth figures for 2014 and 2015; and if he will make a statement on the matter. [23259/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The most up-to-date general government debt (GGD) to Gross Domestic Product (GDP) and Gross National Product (GNP) ratios are set out as follows:

Source: Eurostat, CSO, Department of Finance

The historical debt, GDP and GNP data included within the table is published by the Central Statistics Office on its website (www.cso.ie). Updated general government debt figures will be issued by the CSO in mid-October following the submission of the end-September EDP return to Eurostat.

Tommy Broughan (Dublin Bay North, Independent)
Link to this: Individually | In context | Oireachtas source

110. To ask the Minister for Finance his views on the recent gross domestic product statistics from the Central Statistics Office; if the revisions to previous lower estimates will be maintained in upcoming quarters; if he is satisfied that there are no further major unknowns in the compilation of national output going forward; and if he will make a statement on the matter. [23260/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Central Statistics Office (CSO) last week published national income and expenditure results for 2015. These figures indicate that real GDP grew by some 26 per cent last year. This is significantly stronger than the previous estimate of 7.8 per cent.

This substantial upward revision is largely related to the activities of a small number of large multinational firms and reflects a number of exceptional factors which have limited impact on actual activity in the Irish economy.

The main channels through which these factors affect Irish GDP figures include:

- The effect of 'contract manufacturing' where Irish headquartered multinationals contract the production of goods to third party companies abroad but these products are recorded in Ireland's trade balance;

- The relocation of intellectual property-related assets or patents to Ireland. Ceteris paribus, this will reduce the level of royalty imports and as result increase Irish GDP;

- An increase in new aircraft imports to Ireland for international leasing activities generating substantial fee income without significant employment effects;

It is important to note that these factors do not reflect activity levels we are seeing on the ground. Although these revisions have significantly boosted investment and net export growth, they do not have a direct bearing on employment and wealth creation for Irish citizens.

It is important to stress that whilst these headline GDP figures have clearly been distorted and are exaggerated in an Irish context, more concrete indicators of the underlying levels of economic activity point to a continuation of a now firmly-rooted recovery. Specifically, indicators such as consumer spending, tax trends and labour market developments all confirm that Ireland's economic fundamentals remain strong.

It is also important to stress that the figures published by the CSO are compiled in accordance with best international practice and statistical standards. They measure what they are supposed to measure. However, in a small, open and very globalised economy such as Ireland, it is clear that relevance of these figures as a metric by which underlying economic trends and changes in living standards can be assessed is considerably less than elsewhere.

With this in mind, the Central Statistics Office is to put together a group of experts to provide guidance on how a more relevant indicator could be produced and published alongside these figures in the future. My Department will be represented on this group.

The national income and expenditure results are the definitive measure of Irish national output and reflect all available information at the time at which they are published. However, GDP in all countries, but especially in Ireland, is always subject to revision.

Irish GDP is volatile by comparative standards due to the small open nature of the Irish economy. The best way to mitigate risks associated with this volatility is through prudent management of the public finances and competiveness-oriented policies. That is what the Government will continue to do.

In light of the exceptional nature of these growth figures I also wish to make clear that the Government will not formulate policy on the basis of these inflated figures. Rather, policy will continue to be designed on the basis of more normal growth rates in the region of 3½ to 4 per cent per annum over the coming years.

So, in other words, these upward revisions to GDP for largely technical reasons are not being used to formulate policy. Similarly, in the event of a downward revision for purely technical reasons, there would be no reason to react from a policy perspective.

In summary, the figures for last year greatly overstate the "true" level of economic activity here. The figures measure what they are supposed to measure, but for a small, open and globalised economy, GDP must be interpreted with caution. However, it is clear that the economy is growing solidly and the Government will form policy on the basis of "normal" growth rates.