Thursday, 28 November 2019
Department of Finance
In July 2019, the Central Statistics Office (CSO) published the National Income and Expenditure (NIE) results for 2018. The NIE includes the most recent updated series for gross fixed capital formation (GFCF) in Ireland. The year-on-year percentage growth rates for GFCF in constant (i.e. inflation adjusted) and current prices from the NIE for the years in question are presented in the table.
|GFCF (constant prices)||-11.6||-6.8||-21.1|
|GFCF (current prices)||-17.8||-3.7||-18.6|
The negative growth rate of GFCF in 2008 is primarily explained by the fall in construction investment related to the downturn in that sector at that time.
In recent years, GFCF has become distorted by the globalised investment activities of a small number of large multinational firms, and as a result has been very volatile on an annual basis. These distortions, which have very little impact on the underlying domestic economy, include the following:
- Investment in aircraft by the aircraft leasing sector for international leasing activities.
- The relocation of intellectual property-related assets or patents to Ireland.
The year-on-year declines in 2017 and 2018 are mainly a result of annual declines in the on-shoring in intellectual property assets by the multinational sector in those years, with investment by the aircraft leasing sector also a factor in 2017. However, when we look beyond these distortions it is clear that the underlying investment patterns in the economy in those years were positive.
Indeed, it should be noted that an alternative investment series - 'modified investment' - which is also published by the CSO and which removes the aircraft leasing and intellectual property related distortions from the GFCF figures, recorded positive growth rates in both 2017 and 2018.