Irish National Accounts & Balance of Payments 2015 Results · • National Accounts and Balance of Payments 2015 results published in July • Provide a clear but dramatic picture

Irish National Accounts & Balance of Payments

2015 Results

UN EG Economic Globalization and Intl Trade November 2016

Michael Connolly

CSO Ireland

Context

• National Accounts and Balance of Payments 2015 results published in July

• Provide a clear but dramatic picture of the scale and complexity of globalisation activities in Ireland

• Results driven by the relocation of entire balance sheets dominated by Intellectual Property (IP) in Ireland

– Co-location of IP with manufacturing / service operation growing MNE practice

– Addition of €300bn of relocated IP to Capital Stocks impacted depreciation estimates

– Relocations also brought associated contract manufacturing activity into Irish results

• Results based on hard data provided to CSO’s Large Cases Unit by respondents

– LCU has access to a broad range of data sources (BOP, Trade, Business Statistics data, Corporation Tax data) and conflicts the data to ensure consistency of results

– LCU engagement with respondents and access to broad range of data maximises CSO’s ability to understand a very complex economy

2 www.cso.ie

MNE Dominance - LCU Data 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

MIP Turnover Trade Export Trade Import BOP ServiceExports

BOP ServiceImports

www.cso.ie 3

Communication challenges

• Balancing core principles of Confidentiality & Accessibility - difficult

• Ability to compile Official Statistics is based on the extent to which individuals and companies trust the CSO with sensitive information

• Can’t divulge any information that would identify a company in explaining the drivers behind the changes

• Implications

Limited in our ability to fully explain the rationale for the revisions

Obliged to suppress certain details

• Critical for users of the Irish statistics - insight into domestic economic activity

• High-level, cross-sector group chaired by Central Bank of Ireland Governor to report to DG in December on how best to meet user needs on domestic activity

4 www.cso.ie

Results 2015

Year-on-Year

Growth Rates

GDP + 26.3% (+7.8%)

GNP + 18.7% (+5.7%)

Previous provisional estimate in brackets

100

120

140

160

180

200

220

240

260

€b

illio

n

GDP

GNP

Annual GDP & GNP Constant Prices 2006 - 2015

5 www.cso.ie

0

200

400

600

800

1,000

1,200

2011 2012 2013 2014 2015

€b

illio

n

Balance Sheet Impact Impact on Capital Stocks

(Incl. transactions and reclassifications)

6 www.cso.ie

-600,000

-500,000

-400,000

-300,000

-200,000

-100,000

0

€m

illio

n

Net IIP, March 2016 Net IIP, July 2016

Balance Sheet Impact – Intl Accounts Revisions to Ireland’s Net International

Investment Position

Impact of Increases in Stock of Capital

Assets

Increased Capital Assets

Increased Production of

Goods and Services

Increased Exports

Increased Depreciation

Increased Profits

8 www.cso.ie

Annual Sector Growth by Share of GDP and Growth Rate - 2015

Dist. Transport Software & Comms + 7.7%

Other Services + 5.8%

Industry + 97.8%

Agriculture + 10.4%

Public Admin + 5.7%

Construction + 7.1%

Change to Value added of Industry

• Production generally abroad for these entities – contract manufacturing arrangements

• Economic ownership remaining with Irish entities

– ownership of Intellectual Property

– controlling production and distribution chains and sale to third parties / affiliates

www.cso.ie 10

Trend in Net Exports 2010 = 100 v's Total Exports and Imports

0

70

140

210

280

350

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

€b

illio

n

20

10

= 1

00

Exports Imports Net Exp TDD11

Impact of relocations GDP to GNI

transition

• MNE Profits - calculated after depreciation

• Significant impact on profits of additional depreciation

due to increased capital assets

12

Year GDP BOP Profit Outflows

GNI Depreciation NNI

2014 193,160 29,715 161,759 30,891 130,868

2015 255,815 53,173 200,762 61,558 139,204

Diff 62,655 23,458 39,003 30,667 8,336

Change 32.4% 24.1% 6.4%

www.cso.ie

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2008 2009 2010 2011 2012 2013 2014 2015

%

Net Exports Total Domestic Demand

Contribution of Domestic Demand and Net Exports to Annual GDP

13

www.cso.ie 14

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

-

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ratio €billions

Trend in Irish and EU Household Savings

GDI PCE Saving Ratio EU Saving Ratio

EU

IE

Since July

• Extensive contact with Eurostat on National Accounts, BOP and Industrial Production Index results

• GNI Mission visit August 30th to verify revisions

– Very productive meeting & results verified

– Reported to the GNI Committee in October

• CSO presentations at National Accounts WG & BOP WG

• Extensive contact with IMF, OECD, and ECB as well as with national users

• For insight into domestic economy pointing national users to – indicators such as Retail Sales, Employment, Vehicle Registrations

– indicators of domestic activity within National Accounts framework such as Personal Consumption and Expenditure, Household Sector, NDP & NNI

• Published results on economic activity (Value Added) for sectors dominated by foreign-owned MNE’s

15 www.cso.ie

In conclusion

• Results are compiled in accordance with required regulations and standards

• GDP is still relevant and meaningful and does tell a story

• But for increasingly complex economies - a single indicator can no longer tell the full story

• Work needed to provide insight on the domestic story – including work in domain of business statistics e.g. effect of globalisation on Industrial Production Index

• National and international implications of the results – significant

• More globalisation events of this nature - possible

16 www.cso.ie