International Accounts Q2 2022

Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €41bn in the second quarter of 2022, a decrease of €1.3bn compared with the first quarter of 2021. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €9.7bn in the second quarter of 2022, an increase of €1bn from the previous quarter.

The composition of direct investment income outflows is presented in Figure 4.2. Income outflows on reinvested earnings were €32.5bn in the second quarter of 2022 an increase of €21.5bn compared with the first quarter of 2021. Dividends & distributed branch profits outflows at €5.8bn were down €23bn on the previous quarter while Income on debt outflows at €2.7bn were up €166m.

Figure 4.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €41bn in direct investment income outflows in the second quarter of 2022, €26.5bn can be attributed to the manufacturing sector and €8.9bn to the information and communications sector. Manufacturing sector income outflows decreased by €4.6bn while information and communications sector income outflows increased by €1.8bn 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 decreased by €33.9bn in the second quarter of 2022. Direct investment abroad decreased by €9.5bn in the quarter.

The stock of FDI assets held abroad increased from €1,175.9bn in Q1 2022 to €1,099.7bn in Q2 2022, while the stock of FDI assets held in Ireland increased from €1,236.3bn in Q1 2022 to €1,288.1bn in Q2 2022. FDI assets held in Ireland by foreign investors increased by €51.8bn. FDI assets held abroad by Irish investors decreased by €76.2bn.

The impact of foreign direct investment income on the current account balance is shown in Figure 4.6. In Q2 2022 net direct investment income (FDI income inflows less FDI income outflows) was -€31.3bn while the net of all other current account components (trade in merchandise, services and other income) stood at €47.2bn. The resultant balance was a current account surplus of €15.8bn.

The impact of direct investment transactions on the financial account balance is shown in Figure 4.7. In Q2 2022 there were net flows of €24.5bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was -€17.9bn. This contributed to a financial account surplus of €6.6bn.

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 4.8. In Q2 2022 there was a net direct investment position of -€188.4bn. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€445bn. The overall net IIP balance is -€633.5bn.

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 2022 the annual rate of return on FDI investment in Ireland was 11% compared to 3.2% on FDI investment abroad.