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Foreign Direct Investment

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Direct Investment Income Outflows Increased by €14.4bn in Q1 2021

InflowsOutflows
Q4 20184.75421.579
Q1 20195.57822.971
Q2 20195.15622.69
Q3 20196.11423.933
Q4 20195.71422.133
Q1 20205.93124.411
Q2 20202.5221.441
Q3 20205.16530.895
Q4 20207.32922.223
Q1 202110.21136.614

Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €36.8bn in the first quarter of 2021, an increase of €14.4bn compared with the fourth quarter of 2020. This increase was brought about by singularly strong income outflow growth for several large multinationals. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €10.2bn in the first quarter of 2021. This marked an increase of €2.9bn from the previous quarter. 

Revisions have resulted in increases of 3.2bn and 1bn for the previous two quarters for FDI income inflows. These increases were spread out among a number of firms.

Income on Debt OutflowsReinvested Earning OutflowsDividends & Distributed Branch Profits Outflows
Q4 20182.83914.5694.171
Q1 20192.4889.69710.786
Q2 20192.59118.3381.761
Q3 20192.94417.6953.295
Q4 20192.89214.3444.897
Q1 20202.7579.4212.235
Q2 20202.85916.1382.444
Q3 20202.93823.7594.198
Q4 20202.56314.2345.427
Q1 20212.663.24430.71

The composition of direct investment income outflows is presented in Figure 5.2. Income outflows on reinvested earnings were €3.2bn in the first quarter of 2021, with dividends & distributed branch profits outflows at €30.7bn and income on debt outflows at €2.7bn. The aforementioned strong growth in income in the first quarter of 2021 was predominantly seen in dividends. The figure for reinvested earnings in the first quarter of 2021 decreased by €11bn when compared to the fourth quarter of 2020 while dividends increased by €25.3bn. A similar drop in reinvested earnings and a simultaneous increase in dividends occurred in the first quarter of 2020, however, not on the same scale. This increase in dividends was caused by a small number of large multinationals.

Direct Investment Income Outflowsof which Manufacturingof which Information and Communications
Q4 201821.57912.344.852
Q1 201922.97114.4554.656
Q2 201922.699.9227.206
Q3 201923.93315.034.095
Q4 201922.13312.5835.228
Q1 202024.41114.8545.53
Q2 202021.44113.0645.897
Q3 202030.89518.7538.505
Q4 202022.22313.9135.827
Q1 202136.61425.4138.201

Figure 5.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €36.8bn in direct investment income outflows for the first quarter of 2021, €25.4bn can be attributed to the manufacturing sector and €8.2bn to the information and communications sector. Income in the first quarter of 2021 has increased for both sectors when compared to the previous quarter. The overall growth in income from the previous quarter, and the previous year, can be explained by growth in the manufacturing sector’s income.

AbroadIn Ireland
Q4 201838.59960.873
Q1 20198.802-1.451
Q2 2019-60.335-7.184
Q3 201927.34629.807
Q4 201952.846112.313
Q1 2020-19.92932.426
Q2 2020-9.03849.377
Q3 2020-26.157-19.643
Q4 202015.7298.643
Q1 202115.414-7.441

Foreign direct investment (FDI) transactions abroad and in Ireland are shown in Figure 5.4. Direct investment into Ireland decreased by €7.4bn in the first quarter of 2021. Direct investment abroad increased by €15.4bn in the quarter. 

Revisions to the series have resulted in a number of significant changes, for example, in Q4 2019, Q2 2020 and Q4 2020. These changes were introduced as a result of a corporate structuring for a large multinational.

AbroadIn Ireland
Q4 2018838.928916.516
Q1 2019877.742957.756
Q2 2019846.664941.308
Q3 2019927.444995.297
Q4 20191001.6861079.57
Q1 2020921.0951162.288
Q2 2020962.9871191.17
Q3 2020947.2011116.795
Q4 2020987.5311097.554
Q1 20211078.5231152.716

The stock of FDI assets held abroad increased from €987.5bn in Q4 2020 to €1,078.5bn in Q1 2021, while the stock of FDI assets held in Ireland increased from €1,097.6bn in Q4 2020 to €1,152.7bn in Q1 2021. FDI assets held in Ireland by foreign investors increased by €55.2bn. FDI assets held abroad by Irish investors increased by €91bn, this was due to a broad increase in holdings abroad for a range of multinationals as well as increases in assets held by the Redomiciled PLCs. Changes to the position series are noticeable from the large transactions included in the revisions relating to the corporate restructuring referred to in the previous paragraph.

 

Net Direct Investment IncomeAll Other Current Account ComponentsCurrent Account Balance
Q4 2018-16.8252.758-13.978
Q1 2019-17.39327.319.917
Q2 2019-17.534-15.997-33.532
Q3 2019-17.81929.43611.616
Q4 2019-16.419-42.354-58.773
Q1 2020-18.48-27.444-45.924
Q2 2020-18.92128.7769.855
Q3 2020-25.7341.01715.287
Q4 2020-14.89425.78410.89
Q1 2021-26.40345.44419.04

The impact of foreign direct investment income on the current account balance is shown in Figure 5.6. In Q1 2021 net direct investment income (FDI income inflows less FDI income outflows) was -€26.4bn while the net of all other current account components (trade in merchandise, services and other income) stood at €45.4bn. The resultant balance was a current account surplus of €19bn.

Net Direct Investment TransactionsAll Other Financial Account ComponentsFinancial Account Balance
Q4 2018-22.274-36.308-58.797
Q1 201910.253-1.7688.485
Q2 2019-53.151-0.188-53.339
Q3 2019-2.4614.1371.677
Q4 2019-59.4670.718-58.748
Q1 2020-52.355-5.918-58.274
Q2 2020-58.41559.1040.689
Q3 2020-6.51417.70911.196
Q4 20207.0864.53611.621
Q1 202122.855-10.65512.201

The impact of direct investment transactions on the financial account balance is shown in Figure 5.7. In Q1 2021 there was net flows of €22.9bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was -€10.7bn. This contributed to a financial account surplus of €12.2bn.

Net Direct Investment PositionAll Other Net IIP ComponentsNet IIP
Q4 2018-77.588-520.72-598.308
Q1 2019-80.014-542.769-622.784
Q2 2019-94.644-555.31-649.955
Q3 2019-67.853-584.281-652.134
Q4 2019-77.884-600.542-678.425
Q1 2020-241.193-491.34-732.535
Q2 2020-228.183-481.614-709.796
Q3 2020-169.594-517.286-686.881
Q4 2020-110.023-526.91-636.932
Q1 2021-74.193-563.384-637.577

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 5.8. In Q1 2021 there was a net direct investment position of -€74.2bn. This net position is significantly reduced following the increases to Irish FDI assets held abroad. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€563.4bn. The overall net IIP balance is -€637.6bn.

Direct Investment Position Abroad (left axis)Direct Investment Position In Ireland (left axis)Return on FDI Abroad (right axis)Return on FDI in Ireland (right axis)
Q4 2018838.928916.5162.635506265138378.83072417721022
Q1 2019877.742957.7562.626056403817988.79232288808423
Q2 2019846.664941.3082.610716884147679.38321994501269
Q3 2019927.444995.2972.329197234550019.16038127312752
Q4 20191001.6861079.572.252402449470198.49662365571478
Q1 2020921.0951162.2882.487799846921338.01582740250265
Q2 2020962.9871191.172.105843588750427.71661475691967
Q3 2020947.2011116.7952.040749534681668.85390783447276
Q4 2020987.5311097.5542.120946076629499.01732397677016
Q1 20211078.5231152.7162.338846737621739.6444397405779
Direct Investment Position Abroad (left axis)Direct Investment Position In Ireland (left axis)Return on FDI Abroad (right axis)Return on FDI in Ireland (right axis)
Q42018845.336915.8492.53792574786838.6880042452413
Q12019896.385966.7252.456979980700268.55900074995474
Q22019863.272950.7122.397622070448259.12715943419248
Q32019940.4321004.3852.124449189308748.93412386684389
Q42019966.6411025.7892.14247067939398.9477465638645
Q12020933.9511038.2842.318751197867988.90122548358638
Q22020908.6041096.5822.159136433473778.28301029927539
Q32020895.0641008.0551.989019779591189.6567151593911
Q42020983.4261100.2181.732311327949438.85660841760451
Q120211078.2021149.3531.956312453510579.6354209716249

The rate of return on FDI investment in Ireland and abroad alongside the stock of FDI assets held in Ireland and abroad is presented in Figure 5.9. The rate of return is calculated by FDI income divided by FDI positions. The return on investments in Ireland is significantly higher than the return on investments made abroad. 

In Q1 2021 the annual rate of return on FDI investment in Ireland was 9.6% compared to 2.3% on FDI investment abroad. Increases to FDI income inflows in recent quarters has led to an increase return on Irish FDI investment abroad in this revised series.


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