Source publication:  National Income & Expenditure Annual Results

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The above figure decomposes annual GVA growth into capital services, labour input and multi-factor productivity. GVA growth from 2000 to 2007 was mainly driven by capital services. In 2008, the first year of the recession, there were falls in multi-factor productivity, a common initial occurrence in recessions. The second year of recession, 2009, was associated with labour input falling more than GVA, linked to large falls in hours worked in that year. In the same year, capital services and multi-factor productivity increased slightly. The economy returned to growth in 2010 and 2011 but labour input continued to decline, resulting in increases in multi-factor productivity during these years. GVA growth remained stable in the year 2012 and 2013, before increasing significantly in 2015. This large increase was due to a level shift in activity driven by multinational activity, as previously discussed. A more stable level of growth was observed in 2016.

Source publication:  National Income & Expenditure Annual Results, Gross Value Added for Foreign-owned Multinational Enterprises and Other Sectors Annual Results

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The chart above shows real GVA growth split into sectors dominated by Foreign-owned and Domestic and Other sectors. Irish economic growth from 2000 to 2007 was driven mainly by the Domestic and Other sector. Ireland experienced negative economic growth in both the Domestic and Other sector and in the Foreign sector in 2008, although the contraction was concentrated in the Domestic and Other sector. Ireland’s positive economic growth in 2009 came entirely from the Foreign sector, while growth in the Domestic and Other sector continued to be negative. In 2010, Irish economic growth came mainly from the Foreign sector, while it came mainly from the Domestic and Other sector in 2011. Domestic and Other sector growth in 2012 was again negative, while Foreign growth was almost non-existent. The years 2013 and 2014 were dominated by growth in the Domestic and Other sector. The substantial jump in GVA in 2015 is largely due to the relocation of large multinational companies to Ireland, in particular where their net exports are now attributable to Ireland. Ireland’s Domestic and Other growth has averaged six percent in 2015 and 2016.

*See Glossary of Terms or the Appendix for more information on the Foreign-owned Multinational Enterprise dominated sectors.

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In the chart above, the Domestic and Other sector of the economy is decomposed by factor inputs. The high rates of growth in the Domestic and Other sector from 2000 to 2007 have been driven mainly by capital services. Increases in labour inputs of between 0.5 percent and three percent are also observed. Labour contributed negatively to GVA growth from 2009 to 2012 with overall compensation of employees declining due to falling labour hours and job losses. The growth in the Domestic and Other sector since 2013 has seen large contributions from capital services, while also showing positive growth in labour input.

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Growth in the Foreign-dominated sector of the Irish economy up to 2014 has come almost entirely from capital services and multi-factor productivity. Gross value added in the Irish economy has grown at a much greater rate in the Foreign-dominated sector than the Domestic and Other sector and has followed a different cyclical pattern. The Foreign-dominated sector of the Irish economy experienced a recession in 2003 due to the dotcom bubble. This was associated with falling multi-factor productivity and, to a much lesser extent, labour input. The Foreign-dominated sector also experienced negative growth in 2008 as a result of the global financial crisis and a third instance of negative growth in 2013, which was preceded by low growth in 2012.

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The chart above shows the sources of GVA growth in the Foreign-dominated sector with the years 2015 and 2016 included. The 2015 growth rate is mostly due to significant corporate relocations of entire balance sheets dominated by intellectual property products by Foreign-owned multinationals. Significant exports involving contract manufacturing abroad drove the very strong GVA results for 2015. This surge in growth is presented in the chart above in the form of a significant increase in capital services and a related fall in multi-factor productivity.

Source publication: National Income & Expenditure Annual Results

Get the data: Eurostat

The above figure highlights Ireland’s position in real GVA growth terms relative to its European counterparts. Looking at Ireland as a whole, cumulative growth in real GVA increased by over 100 percent over the period 2000-2016. This large growth in real GVA places Ireland at the top of the distribution. Real GVA growth for Ireland’s Domestic and Other sector is also at a relatively high position in the distribution. Like the cumulative labour productivity growth shown in the previous chapter, the Foreign sector in the Irish economy had cumulative growth that was far larger than the growth in any other EU country, due to the large influx of activities relating to contract manufacturing and aircraft leasing.

Get the data: EUKLEMS data (note that this is not fully comparable with the Irish data)

The above chart shows Ireland’s MFP position relative to its European partners over the period 2000 to 2014. The multi-factor productivity country comparisons follow a similar story to the previous graph. The Foreign sector in the Irish economy had a relatively strong performance when compared to its European counterparts, showing cumulative growth of four percent over the entire period behind the Czech Republic, Finland, Germany and Austria. Ireland, as a whole, shows a similar strong performance relative to the other EU countries shown. The overall economy posted cumulative growth of three percent in the period up to 2014. The Domestic and Other sector of the economy show a slightly different picture. Unlike the Irish Foreign sector, the Domestic and Other sector had positive cumulative growth of about 1 percent over the period.

Get the data: StatBank PIA02, EUKLEMS data (note that this is not fully comparable with the Irish data)  

This chart shows Ireland’s MFP relative position to its European partners when the period up to 2015 is considered. Unlike the previous chart showing multi-factor productivity growth up to 2014, the multi-factor productivity country comparisons up to 2015 show a different story. The Foreign sector in the Irish economy has the lowest result of the selected countries, showing cumulative growth of -80 percent over the period. Ireland as a whole achieved cumulative growth of -14 percent in the period up to 2015, resulting in a position at the bottom end of the distribution. The Domestic and Other sector in the Irish economy shows a more positive picture. Unlike the Irish Foreign sector, the Domestic and Other sector had positive cumulative growth of about three percent over the period. This positive growth raises Ireland’s position to fifth in the graph, higher than Estonia, Denmark, France and Belgium.

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Looking at the average annual growth over the period 2000 to 2014, Information and Communication experienced the largest average annual growth within the period, followed by Professional, Admin and Support Services. Most of the growth was again attributable to capital services. Public Admin and Defence experienced the largest growth in labour input, while sectors related to Industry and the Construction sector suffered large falls in labour input over the period up to 2014.

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There has been considerable variation in average GVA growth by sector over the period 2000 to 2016. Industry and Professional, Admin and Support Services experienced the largest average annual growth in GVA over the period and much of this growth was driven by capital services. In the case of Industry, labour input and MFP contributed negatively to GVA growth overall. The sector with the largest amount of MFP growth was the Information and Communication sector, followed by the Agricultural sector and the Finance and Insurance sector. Similar to the period up to 2014, Public Admin and Defence saw the largest increase in growth from labour input, while the Construction sector saw the largest fall in labour input. The latest productivity growth results indicate that GVA growth returned to pre-2015 levels in 2016 for industries such as Industry, Information and Communication and Professional, Admin and Support Services. The Industry sector had growth in GVA of 3 percent, Information and Communication growth of 9 percent and Professional services growing by 13 percent in 2016.

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The above chart shows the breakdown of GVA by factor inputs in the Information and Communications sector. The steady increase in growth during the period 2000 to 2002 was mainly driven by capital services. In 2003, with the onset of the dotcom bust, a significant fall was evident in MFP and labour input for the sector. Growth in GVA recovered until 2007, mainly driven by MFP and capital, with labour input only making a small contribution over the period. The onset of the international recession in 2008 led to a decline in growth until 2011. The slightly negative growth in 2011 was mainly driven by falls in labour input. The recovery in GVA growth from 2012 up to 2016 has primarily been as a result of large increases in capital services, particularly from 2014 to 2016.

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The chart above shows GVA in the Distribution, Transport, Hotels and Restaurant sector broken down by factor inputs over the period 2000 to 2016. GVA growth fell in 2001 and a fall in MFP is observed as labour input did not fall until 2002. Following the reduction in labour input in 2002 and the rise in GVA, MFP begins a fairly flat trajectory with small decreases followed by small increases until 2005. In line with increased spending in the economy, higher levels of growth in 2006 and 2007 occurred. In this sector the impact of the crisis was most keenly felt with GVA growth falling by 2.4 percent in 2008 and by 10 percent in 2009. These large declines in GVA were due to falling demand for retail services, in particular, but also back up the supply chain to falling wholesale demand. Consequently, as labour was laid off we observe falling labour input and MFP. The sector returned to growth in 2013 and there have been consistent levels of growth of about five percent from 2014 to 2016, due in particular, to increased levels of MFP.