Ireland is in recession. Or maybe not. The latest figures from the Central Statistics Office (CSO) show that Gross Domestic Product (GDP) declined by a hefty 4.6 per cent in the first quarter of this year, compared to the previous three months. As it also fell in the final quarter of 2022, the Irish economy meets the technical definition of being in recession.
That, however, does not sit easily with other figures, or with the evidence we see around us. The unemployment rate has fallen to an historic low of 3.8 per cent and businesses are crying out for staff. Bank savings continue to rise and the exchequer is flush with cash. Consumer spending is on the rise. If this is a recession, then bring it on.
Of course, in a real sense, it is not a recession. Ireland’s economic data is hopelessly messed up by the activities of a small number of big multinational companies. A drop in output and exports from the pharma sector is largely responsible for the GDP fall. Whether this is just a swing which will be reversed, or the start of a trend, is impossible to say, though we can note that the pharma companies operating here appear to be performing well. The same lack of a full picture applies to tax payments from the multinational sector. At least tax is paid in cash, while for exports, imports and investment, factors such as the movement of intellectual property assets and manufacturing contracted from Ireland but undertaken elsewhere can have an impact. And for now the cash continues to come in, even though – as the Fiscal Advisory Council pointed out – just three companies pay one third of all corporate tax.
The domestic economic indicators remain strong, with increases in investment and consumer spending.The swings in multinational activity and the concentration of tax payments continues to argue for some caution; corporation tax receipts were down in May compared to the same month in 2022, though remain well ahead for the year. June figures will be important to see the trend. For now, economic growth is strong despite the statistics, but Ireland is ever more reliant, too, on a few global giants.