Economists are likely to begin revising down their forecasts for growth in the domestic economy this year in light of Central Statistics Office (CSO) figures published yesterday which showed virtually zero expansion on the home front in 2002.
The CSO's National Income and Expenditure Annual Results for 2002 (sometimes called the annual accounts) showed that in real terms, gross national product (GNP) growth was just 0.1 per cent last year. This was the worst result in 20 years.
Measured at constant prices, GNP grew from €74.32 billion in 2001 to just €74.37 billion in 2002.
At the end of May, it was widely expected to have increased by 0.6 per cent, while forecasts earlier in the year pegged the likely expansion of the Republic's economy in 2002 at 1 per cent and more.
The GNP return was in direct contrast to gross domestic product (GDP), which in real terms jumped from €89.32 billion to €95.5 billion, an increase of 6.9 per cent. GDP includes profits repatriated by Irish-based multi-nationals.
Many of them take advantage of the Republic's low corporate taxes by ensuring that profits from all their European activities are booked here. The amount repatriated last year came to €26 billion.
The gap between the two measures seems to have created a similar gulf between economists.
Friends First chief economist, Mr Jim Power, described the GNP result as disappointing but added that he was not surprised. He recently predicted that GNP would grow at around 1.6 per cent this year, but said last night he was going to change this.
"I will be revising down my own growth predictions for 2003," he said. However, he did not say just how far his readjustment would go.
Not everyone reacted with the same pessimism. Goodbody Stockbrokers' chief economist, Mr Colin Hunt, said he would not be changing his recent forecast of GNP growth of 3.5 per cent. Both he and Mr Dan McLaughlin of Bank of Ireland argued yesterday that neither GNP nor gross domestic product (GDP) were accurate measures of the country's economic health.
Instead, they maintained that domestic demand, which includes consumer and Government spending and house prices, painted a clearer picture of what happens in the Irish economy. This came in at 2.7 per cent last year. However, Mr Power pointed out that this was in sharp contrast to 1999, when domestic demand topped 9 per cent.
Mr Hunt suggested that in 12 months, the national accounts could show that GNP had overtaken GDP.
He pointed out that the indications from the first quarter were that multinational profits were falling, while at the same time the euro's strength against the dollar would also eat into earnings.
Mr Power pointed out that whatever the arguments for or against either indicator, GNP represented the section of the economy which the Government taxes. He warned that the Minister for Finance, Mr Charlie McCreevy, would face the toughest environment for 15 years when putting Budget 2004 together. "It will be the hardest Budget for at least a decade."
