The economy as a whole grew in 2021-Q2, driven by non-financial corporations' higher gross value added. This increase is seen in both their higher gross operating surplus (profit), and their compensation of employees. Growth was spread across economic activity sectors. Domestic-dominated areas such as construction and trade rebounded after restrictions were eased. Foreign-multinational-dominated sectors such as industry and Information Technology continued the growth that had been far less affected by the pandemic.  More information is contained in the Quarterly National Accounts.

Ireland has a positive current account (CA) balance in the quarter (the negative of B.12 of S.2). This meant that Ireland (including, of course, the foreign-owned corporations operating here) generated a surplus to invest in the rest of the world. The current account balance can also be seen as what is left of gross saving (B.8g) after the country has invested in fixed capital (P.5): in recent quarters we have invested disposable income here and we have invested in the rest of the world also. 

Gross Saving - Investment = Current Account Balance.

Gross Saving less investment can be estimated for each sector, showing the contribution of corporations, government and household to the change in our account with the rest of the world. Figure 2.1 illustrates the trends in, and relationships between the current account balance, gross saving and investment. 

Figure 2.1 illustrates how the Current Account Balance has settled down since 2020, as the flow of intellectual property imports ceased. Households and corporations are generally saving more than they are investing, while government is borrowing to fund interventions related to the pandemic. Overall, the economy is not increasing overall borrowing requirements from the rest of the world.  

Government Borrowing

The government deficit (net borrowing, B.9) was €2.9bn in the second quarter of the year. On the expenditure side, the government supported household incomes, as mentioned above, through social transfers (D.62) such as the Pandemic Unemployment Payment, and through subsidies (D.3), such as the Employment Wage Subsidy Scheme. These payments were lower than in the equivalent quarter of 2020. Government spending on providing services such as health and education directly (P.3) was higher than this quarter last year and higher than pre-pandemic levels. On the income side, revenue from taxation was higher than in 2020Q2, or in any prior second quarter of a year: receipts of taxes on income (D.5, such as PAYE and corporation tax) were up 17% on the second quarter of 2020, and 27% on the second quarter of 2019. VAT-type (D.2) taxes were 13% higher than 2020-Q2, possibly owing to the higher levels of sales as the restrictions were less severe than in 2020-Q2.

Non-Financial Corporations (S.11)

The Gross Value Added (GVA, B.1g) of Non-Financial Corporations, which drives Ireland's GDP, was €11.9bn (20%) higher in the first quarter of 2021 compared to the equivalent quarter last year. GVA is made up of compensation of employees (D.1) and gross operating surplus (GOS, B.2A3G), with both parts contributing to the GVA increase.

In earlier quarters affected by the pandemic we saw corporations in industry and information technology grew even as the rest of the economy contracted. As the economy opened up between April and June, both parts added to their GVA, and domestic-dominated sectors, which include retail and hospitality, grew faster than those mostly operated by multi-nationals. While we are comparing a low base in 2020-Q2, the GVA of domestic-dominated sectors were also higher than in 2019-Q2. Figure 2.3 shows how domestic-dominated sectors grew faster than foreign-controlled corporations. The Quarterly National Accounts show gross value added by economic activity (NACE A10) with analysis of the multi-national dominated sectors. 

As there was an increase in the operating surplus of foreign-controlled corporations, there was also an increase in their dividends and reinvested earnings paid to the rest of the world (D4 Uses). Fixed capital formation was at a more normal level than the 2017-2019 period and this left the sector as a net lender in 2021-Q2.  

Financial Corporations (S.12)

Financial corporations (S.12) showed a higher net use of property income (D.4) in the second quarter of 2021 compared to the second quarter of 2020, leaving their gross saving (B.8g) lower, and the sector a net borrower (B.9) in the quarter. Most of the investment income of S.12 relates to transactions with the rest of the world and further details are given in the International Accounts. 

Rest of the World Sector (S.2)

As our globalised economy has grown, so both imports and exports have increased. Sales of goods and services sent to the rest of the world have risen faster than those bought from abroad, improving our balance of goods and services. Since most of the international trade is conducted by foreign-owned firms, this improvement is associated with higher profits for those firms, and hence higher outflows of profits (as dividends and reinvested earnings) to other countries, so the current external balance (B.12, which includes investment income as well as imports and exports) is reduced by these returns to the owners of foreign multi-nationals. Even with this reduction, the current account balance was €5bn lower for the rest of the world (and so €5bn higher for Ireland) in the second quarter of 2021 compared to the same period in 2020. The figures for 2019 are distorted by the large imports of intellectual property (service imports) in that quarter, so comparisons with that are less illuminating. 

Further details on transactions with the rest of the world are provided by institutional sector in the International Accounts, which include the financial account as well. 

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