AS THE OLD saying almost goes, there are statistics, damned statistics, and Irish statistics.

If you were to take the country’s headline indicators at face value, many paint the picture of an economic miracle seemingly too good to be true.

GDP growth which has left most of the developed world in the dust. Productivity which is about 2.5 times the European average. And report after report which ranks Ireland as one of the top 10 countries to live in.

You might be sensing a ‘but’. While there’s little doubt that Ireland is a wealthy country, it is sometimes underappreciated the extent to which national economic indicators are impacted by the activities of multinational companies.

Many big US companies do have substantial operations here, employing thousands of people. But many also use Ireland as their non-US headquarters.

This means that multinationals often route their profits through Ireland. While there are positives for Ireland – such as a corporate tax boom – the downside is that a chunk of Ireland’s economic activity is actually just numbers being shifted around by corporate accountants.

This then has a knock-on impact, as these same indicators are used internationally to judge how well our economy is performing.

Those on the outside looking in can be unaware that these numbers can be skewed, and so Ireland is placed near the top of the pile of many of these international lists.

But this is all a bit theoretical. Let’s get into some examples.

GDP is the big one – but what about productivity? 

GDP (gross domestic product) is the most obvious one. This stat measures the value of all the goods and services produced by a country. Traditionally, it’s been used as a shorthand for the size of the economy.

GDP growth for a country is normally somewhere between 1% and 4% a year – which is why there was such an international outcry when Ireland reported in 2015 that its GDP surged by 26% in a single year.

More recently, GDP jumped by 15% in 2021 and 9.4% in 2022, before a big fall to negative 5.5% in 2023. What’s with the big numbers and wild jumps?

Well, we’ve already covered in detail why Ireland’s GDP is so skewed – the breakdown is available here.

But the long and short of it is, when multinationals shift money through Ireland, that money is counted in our GDP stat. Even if it has basically nothing to do with how an Irish business is performing.

The Central Statistics Office recognised this problem years ago, and has been at pains to always stress the impact of foreign companies on headline GDP stats. It’s why it prefers to use its own figure, ‘Modified Domestic Demand’, which attempts to strip out this multinational impact.

But ok, GDP is perhaps a bit of an obvious one. Even though it is still cited by the likes of the European Union, plenty of people domestically know its flaws. It’s a statistical gimme.

So let’s look instead at productivity.

For a start, what is it? Productivity measures a person’s ‘Gross Value Added’ (GVA) – ie, the value of the stuff you produce. Then it divides it by the hours you work.

So say a person makes 10 chairs a day worth €100 each, and works for eight hours. That’s a ‘GVA’ of €1,000 (10 x €100) divided by eight = €125. So this person’s ‘Productivity’ is €125 per hour.

This is meant to be a relatively straightforward figure to measure how efficient a workforce is. But in Ireland, this number comes with some caveats.

At €107.80 per hour, the country has the highest labour productivity in the EU, over double the average across the bloc of €44.70 per hour.

However, break this down and productivity in ‘domestic’ companies is €59.60 per hour in 2024, versus a staggering €410.80 per hour in ‘foreign’ businesses.

Again, this is because of how multinationals move money around. If a US multinational with 10 workers moves €1 million through Ireland, each employee has ‘generated’ €100,000.

Even if, in reality, the actual employees may have little to do with all this money being produced. This is a simplistic example, but it gives some idea of what’s happening.

And this means Ireland’s productivity is prone to wild swings.

Figures published earlier this month show that, in 2023, Ireland’s productivity fell by 7.5%, the most of any EU country.

Now, even when you look at just domestic companies, Ireland’s productivity performs well compared to the rest of the EU. But again, it’s another key economic indicator which the CSO has warned is impacted “due to [the effect of] globalisation”.

What about imports and exports? 

Then, with all the tariff shenanigans lately, Irish imports and exports are worth a mention.

Again, this should be a fairly straightforward stat. The value of the goods and services sold by all the businesses in the country. Again, it’s likely pretty skewed.

The value of Irish goods exports spiked by 14% in 2024. Much of this was driven by pharmaceuticals, where exports rose by a stunning 29% last year.

Now, Ireland does genuinely have a sizeable pharmaceutical industry, being one of the major global producers of the likes of Viagra and Botox.

But did the industry here really see production rise by 29% in a single year? It’s unlikely. As covered previously, many of these businesses have their intellectual property, or their official non-EU headquarters, or both, located in Ireland.

The profit shifting we mentioned before also gets counted as exports and imports, as these companies use their Irish corporate entities to move money around.

It’s also one of the reasons pharma has been targeted by irate American politicians, who want these companies to pay more tax (by declaring more sales) in the US.

And living standards? 

Finally, it’s worth briefly mentioning living standards – do Irish people have a good standard of living compared to people in similar countries?

There are mixed accounts.

Research published in 2021 by the former head of the Central Bank Patrick Honohan found that Irish prosperity and living standards were overstated.

This is because many indexes which look at living standards do so by using figures such as GDP. And as we’ve established, in Ireland’s case, these are heavily influenced by multinationals.

Honohan found that when controlling for these multinational fluctuations, Ireland’s standard of living fell from the second-highest in Europe, to somewhere between the eighth and the 12th.

Still good, but not nearly as high as our economic numbers would make things appear.

A more recent study from the ESRI also looked at this issue while attempting to strip out the impact of multinationals.

It found that Ireland “appears to have an above average standard of living”.

However, the study also said that, when indicators such as household consumption (ie, how much do people spend) are used, it could also be considered that Ireland “has a below average standard of living”. Again, this shows how hard it is to get a handle on the truth.

The difficulty in determining exactly how Ireland’s standard of living compares, goes back to the central point – the distortions caused by multinationals can obscure how Ireland’s economy is really doing.

This isn’t all to say Ireland is a poor country. Far from it – when you look at figures which aren’t messed around by multinationals, such as unemployment, there are strong indicators that the economy is doing well.

But just how well exactly? Do we have one of the best-performing economies in the world? Or a slightly above average European economy, which has lots of foreign money flowing through it which doesn’t impact ‘typical’ workers?

The way multinationals warp much of Ireland’s data, it’s much harder to say.