Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €34.8bn in the second quarter of 2021, a decrease of €1.8bn compared with the first quarter of 2021. This decrease was mainly due by a decline in income outflows from the manufacturing sector. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €7.8bn in the second quarter of 2021. A decrease of €2.4bn from the previous quarter.

The composition of direct investment income outflows is presented in Figure 4.2. Income outflows on reinvested earnings were €23.2bn in the second quarter of 2021 an increase of €19.9bn compared with the first quarter of 2021. Dividends & distributed branch profits outflows at €9.2bn were down €21.5bn on the previous quarter and Income on debt outflows were €2.5bn.

Figure 4.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €34.8bn in direct investment income outflows in the second quarter of 2021, €21.2bn can be attributed to the manufacturing sector and €8.3bn to the information and communications sector. Manufacturing sector income outflows decreased by €4.2bn while information and communications sector income outflows increased marginally by €0.1bn when compared to the previous quarter.

Foreign direct investment (FDI) transactions abroad and in Ireland are shown in Figure 4.4. Direct investment into Ireland increased by €6.2bn in the second quarter of 2021. Direct investment abroad increased by €9.9bn in the quarter.

The stock of FDI assets held abroad increased from €1,078.5bn in Q1 2021 to €1,118.8bn in Q2 2021, while the stock of FDI assets held in Ireland increased from €1,152.7bn in Q1 2021 to €1,157.0bn in Q2 2021. FDI assets held in Ireland by foreign investors increased by €4.3bn. FDI assets held abroad by Irish investors increased by €40.3bn.

The impact of foreign direct investment income on the current account balance is shown in Figure 4.6. In Q2 2021 net direct investment income (FDI income inflows less FDI income outflows) was -€27.0bn while the net of all other current account components (trade in merchandise, services and other income) stood at €42.0bn. The resultant balance was a current account surplus of €15.0bn.

The impact of direct investment transactions on the financial account balance is shown in Figure 4.7. In Q2 2021 there were net flows of €3.7bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was €17.1bn. This contributed to a financial account surplus of €20.8bn.

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 4.8. In Q2 2021 there was a net direct investment position of -€38.2bn. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€568.9bn. The overall net IIP balance is -€607.1bn.

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 4.9. 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 Q2 2021 the annual rate of return on FDI investment in Ireland was 10.8% compared to 2.7% on FDI investment abroad.

Next Chapter >> International Investment Position