Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €29.1bn in the third quarter of 2021, a decrease of €5.7bn compared with the second quarter of 2021. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €4.6bn in the third quarter of 2021. A decrease of €3.3bn from the previous quarter.

The composition of direct investment income outflows is presented in Figure 4.2. Income outflows on reinvested earnings were €12.1bn in the third quarter of 2021 a decrease of €11bn compared with the second quarter of 2021. Dividends & distributed branch profits outflows at €14.5bn were up €5.3bn on the previous quarter while Income on debt outflows were unchanged at €2.5bn.

Figure 4.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €29.1bn in direct investment income outflows in the third quarter of 2021, €20.1bn can be attributed to the manufacturing sector and €4.6bn to the information and communications sector. Manufacturing sector income outflows decreased by €1.1bn while information and communications sector income outflows decreased by €3.8bn 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 €2.5bn in the third quarter of 2021. Direct investment abroad decreased by €13.9bn in the quarter.

The stock of FDI assets held abroad increased from €1,118.8bn in Q2 2021 to €1,181.6bn in Q3 2021, while the stock of FDI assets held in Ireland increased from €1,157.0bn in Q2 2021 to €1,146.0bn in Q3 2021. FDI assets held in Ireland by foreign investors decreased by €11bn. FDI assets held abroad by Irish investors increased by €62.8bn.

The impact of foreign direct investment income on the current account balance is shown in Figure 4.6. In Q3 2021 net direct investment income (FDI income inflows less FDI income outflows) was -€24.5bn while the net of all other current account components (trade in merchandise, services and other income) stood at €47.8bn. The resultant balance was a current account surplus of €23.3bn.

The impact of direct investment transactions on the financial account balance is shown in Figure 4.7. In Q3 2021 there were net flows of -€11.4bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was €24.4bn. This contributed to a financial account surplus of €13bn.

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 4.8. In Q3 2021 there was a net direct investment position of €35.7bn. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€621.4bn. The overall net IIP balance is -€585.7bn.

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 Q3 2021 the annual rate of return on FDI investment in Ireland was 10.7% compared to 2.5% on FDI investment abroad.

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