Ireland’s recovery from the after effects of the 2008 financial crisis is a compelling story and foreign direct investment is an important part of the narrative. Quantifying the multinational sector’s contribution, however, remains a difficult task.
But research conducted by Trinity College Dublin economist John FitzGerald (who is also a columnist with The Irish Times) published on Tuesday by the Economic and Social Research Institute (ESRI) does shine some light on the matter.
Prof Fitzgerald found that foreign companies accounted for some 29 per cent of net national product (NNP) in 2021 compared with 22 per cent in 2013 when the Republic’s economy was mired in recession. Overall, about half the growth that lifted the Irish economy out of the doldrums since 2013 is due to the “exceptional performance” of multinationals. Importantly, that means domestic firms have played a nearly equal role.
Multinationals contribute to NNP – a measure of the welfare of people within the economy – through the wages they pay to their staff but also the corporation tax levied against their operating surpluses, Prof Fitzgerald explained.
Over the eight-year period, the share of the Republic’s wage bill paid by foreign-owned companies swelled to 33.4 per cent from 27.3 per cent in 2013. Annual corporation tax receipts from multinationals, meanwhile, jumped from €3 billion in 2013 to €19.6 billion last year.
But for all of that positivity, Prof Fitzgerald also found that the State had a lower standard of living in 2021, as measured by consumption per head, compared with many of our neighbours. While there are issues around the comparability of the data, the Republic’s relatively high savings rate, particularly during the pandemic, is cited as the main factor behind the discrepancy.
Although outside the scope of Prof Fitzgerald’s research, it is worth noting that 2022 saw a dramatic slide in living standards in the Republic, the worst since the financial crisis. Against the backdrop of an energy shock and soaring inflation, real wages fell 3.3 per cent, according to the Organisation for Economic Co-operation and Development.
Eurostat data published last week also indicated that Irish price levels were the highest in Europe in 2022. As prices rise, households are saving proportionally less money than during the pandemic.
Amid a stubborn housing crisis and an assortment of other issues, the story of the Irish recovery post-2008 is certainly a remarkable one but it’s no fairy tale.
