International Accounts Q3 2023

Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €42.8bn in the third quarter of 2023, a decrease of €1.2bn compared with the second quarter of 2023. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €19.8bn in the third quarter of 2023, an increase of €2.7bn from the previous quarter.

The composition of direct investment income outflows is presented in Figure 4.2. Income outflows on reinvested earnings were €13bn in the third quarter of 2023, an increase of €50.7bn compared with the second quarter of 2023. Dividends & distributed branch profits outflows at €26.4bn were down €51.7bn on the previous quarter while income on debt outflows at €3.5bn were down €185m.

Figure 4.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €42.8bn in direct investment income outflows in the third quarter of 2023, €22.1bn can be attributed to the manufacturing sector and €10.9bn to the information and communications sector. Manufacturing sector income outflows decreased by €1.1bn while information and communications sector income outflows decreased by €2.4bn 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 €23.7bn in the third quarter of 2023. Direct investment abroad increased by €7.1bn in the quarter.

The stock of FDI assets held abroad increased from €1,140.2bn in Q2 2023 to €1,166.9bn in Q3 2023, while the stock of FDI assets held in Ireland increased from €1,221.7bn in Q2 2023 to €1,262.5bn in Q3 2023. FDI assets held in Ireland by foreign investors increased by €40.8bn. FDI assets held abroad by Irish investors increased by €26.7bn.

The impact of foreign direct investment income on the current account balance is shown in Figure 4.6. In Q3 2023 net direct investment income (FDI income inflows less FDI income outflows) was -€23.0bn while the net of all other current account components (trade in merchandise, services and other income) stood at €43.8bn. The resultant balance was a current account surplus of €20.8bn.

The impact of direct investment transactions on the financial account balance is shown in Figure 4.7. In Q3 2023 there were net flows of -€16.5bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was €35.4bn. This contributed to a financial account surplus of €18.8bn.

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 4.8. In Q3 2023 there was a net direct investment position of -€95.6bn. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€482.0bn. The overall net IIP balance is -€577.6bn.

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 2023 the annual rate of return on FDI investment in Ireland was 14.2% compared to 5.4% on FDI investment abroad.