Productivity in Ireland 2016

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

Get the data: StatBank N1604, StatBank N1623, Statbank PIA01

Over the period to 2016, gross value added grew annually at an average of 5.3 percent. A breakdown by sector indicates that the largest source of this growth has been from Industry (NACE sectors A-E). The second largest contributor to growth has been the Remaining sectors¹. Professional, Administrative and Support Services sector (M and N) is the third largest. Information and Communication (J) was fourth and Distribution, transport, hotels and restaurants was fifth in terms of economic growth. For the Foreign and Domestic and Other sectors analysis, the contribution of the Domestic and Other sector increased by 3.4 percent and the Foreign sector increased by 10.7 percent. However, the contribution to overall economic growth from the Domestic and Other sector is significantly greater than for the Foreign sector. This publication also breaks down economic growth by inputs; capital input (measured as capital services) was responsible for almost all GVA growth during the period. This was followed by a small increase in labour input, while multi-factor productivity growth was slightly positive at 0.1 percent.

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

Get the data: Statbank N1604, Statbank N1623, Statbank PIA01

Significantly, when the years 2015 and 2016 are excluded, the overall average annual growth in the economy for 2000 to 2014 falls to 3.8 percent from 5.3 percent for the entire period. For the Foreign sector, average annual growth amounts to 6.2 percent for the period to 2014. The Domestic and Other sector recorded a more moderate increase of 3 percent for the same period. On the inputs side, there is a positive contribution to productivity growth by MFP of 0.8 percent and a reduced impact from capital input.

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

Get the data: StatBank N1604, StatBank N1623, StatBank PIA01

To better understand the developments in productivity in the economy, the chart above presents the sixteen-year period broken out by stages in the economic cycle. The first section covers the period of the ‘Celtic Tiger’ and includes the onset of the recession in 2008. The second part covers the downturn years and this is followed by the return to growth in the economy. The period of 2015 to 2016 is presented separately because of the extreme changes that occurred in 2015.

The period 2000 to 2008, prior to the recession, was characterised by sustained economic growth of over five percent. This growth was concentrated in the Domestic and Other sectors, reflecting the importance of Construction over the period. Capital services explain most of the improvements in productivity over the period, with labour playing only a small part.

Economic growth considerably weakened to an average annual growth rate of around 2 percent for the period 2009 to 2011. From a sectoral perspective, Industry was relatively unchanged over the three-year period at 1.2 percent. Professional, Admin and Support services and the Information and Communication sector remained positive, while Distribution and Transport and the Remaining sectors were negative. Growth in the Domestic and Other sector and in the Foreign sector was positive in the period. Capital services and MFP increased by an average of four percent over the period, but was offset by a fall in labour input.

The period from 2012 to 2014 saw positive average growth in all four main sectors of the economy, driven by increased capital services. There was significant growth in both the Foreign sector and the Domestic and Other sector.

The period 2015 and 2016 was dominated by a major increase in the industrial sector due to the relocation of large multinational companies to Ireland. From a productivity perspective, this was associated with a dramatic increase in capital services and a corresponding fall in multi-factor productivity as a consequence of labour input remaining unchanged.

¹The Remaining sector includes Agriculture, Construction, Finance and Insurance, Real Estate, Public Admin Health & Education, Arts and Culture.