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FactCheck: Does Ireland really have the fastest-growing economy in Europe?

TheJournal.ie’s GE16 FactCheck tests a prominent claim by the government parties.

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AS PART OF our GE16 FactCheck series, we’re testing the truth of claims made by candidates and parties on the campaign trail.

If you hear something that doesn’t sound quite right, or see a claim that looks great, but you want to confirm it, email factcheck@thejournal.ie.

Roisin in Dublin Fingal noticed a Fine Gael ad on YouTube, which contains the claim that Ireland’s is the “fastest growing economy in Europe.” So she asked us to check it out.

Claim: Ireland has the fastest-growing economy in the EU
Verdict: TRUE, using the standard measure of growth. By an alternative measure, we have the second fastest-growing economy.

What was said:

Source: Fine Gael/YouTube

The claim has become a bit of a staple of the governing parties’ campaigns, having been made by Minister Michael Noonan at the party’s recent Ard Fheis, and featuring heavily on social media:

The facts

The standard measure of economic growth is to compare GDP (gross domestic product – the total value of goods and services produced in a country) from one point in time to the same point in time one year earlier.

To measure “real” growth, and ensure that an increase in the price of goods and services doesn’t skew the numbers, economists adjust the figures for inflation, by using a certain year’s price levels as a benchmark.

This is called “chain-linking”.

However, GDP includes the value of goods and services produced by foreign multinational corporations.

Since much of their profits are not circulated within the Irish economy, some economists see GNP (gross national product) and GNI (gross national income) as truer measures of Ireland’s underlying economic growth. There is more on this further down.

By several different GDP measures, and using data from two sources, Ireland does indeed have the fastest rate of growth in the EU and Eurozone.

Eurostat, the European Commission’s statistics directorate, puts Ireland’s yearly growth rate at 5.2% in 2014, the most recent available figure for annual GDP growth figures.

GDPgrowthannual1114 Source: Eurostat

However, quarterly figures are available up until September 2015, and show Ireland’s growth rate at 6.3% in the third quarter of 2015 – the highest in the EU and Eurozone.

This means that from July to September 2015, Ireland’s GDP was 6.3% higher than it was from July to September 2014.

Our growth rate peaked at 6.9% in the first three months of 2015, and the average year-on-year growth rate for January to September 2015 was 6.47%.

These figures are year-on-year comparisons, adjusted for inflation, and chain-linked to 2010 prices:

GDPgrowthQuarterly Source: Eurostat

The specific numbers in one graph being shared by Fine Gael come from two different sources – the CSO and Eurostat.

As confirmed by Fine Gael to TheJournal.ie, the party arrived at the figure of 7% growth using the CSO’s data for the first three quarters of 2015, published on 10 December.

These figures are chain-linked to 2013 prices:

gdocso Source: CSO.ie

As you can see, average year-on-year growth for the first nine months of 2015 was indeed just slightly over 7%.

However, Fine Gael used a different measure and a different source for the 1.9% EU average growth rate – Eurostat’s Winter 2016 Economic forecast.

Since official figures for the fourth quarter of 2015 are not yet available, these are the predicted rates of economic growth for the whole of last year.

eurostatforecast Source: Eurostat

As you can see, if the party had used Eurostat’s forecast as the source of both claims, the figure for Ireland would be 6.9% growth, and not 7%.

However, that figure still puts our growth rate significantly above the second-placed country, Malta, whose forecast growth in 2015 is 4.9%.

An alternative measure

Let’s look at GNP – which adjusts for the profits of multinationals, and counts the combined value of goods and services produced by Irish-registered companies and Irish residents.

This arguably gives a better picture of the underlying performance of the Irish economy, than GDP does.

gnp2015 Source: CSO.ie

According to the CSO, the average year-on-year growth in our GNP was 5.66% in the first nine months of 2015, as opposed to 7% in terms of GDP.

Year-on-year growth in the third quarter was 3.23%, as opposed to a 6.76% growth in GDP.

However, GNP growth for the first half of last year was almost on a par with GDP growth, and from January to March, GNP grew at a higher rate (6.85%) than GDP did (6.76%).

Eurostat does not track GNP, so for comparison with other EU economies, we have to rely on gross national income (GNI), a similar measure which the World Bank, for example, is now using instead of GNP.

GNI is calculated by taking GDP, adding to it interest and dividends from Irish companies and property abroad, and subtracting interest and dividends from foreign companies in Ireland.

By that measure, Ireland ranks second in the EU, behind the UK, but some distance ahead of third-placed Malta.

GNI Source: Eurostat

So, by the standard measure (GDP), and from two different sources, Ireland does indeed have the fastest-growing economy in Europe, the EU, and the Eurozone.

By a different measure (GNI), and accounting for the unusually large role of foreign multinationals, Ireland had the second-fastest rate of growth in 2015.

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About the author:

Dan MacGuill

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