Source publication: National Income and Expenditure 2018 Tables 1-22 and Annex 1 for 1995-2018 (XLS 396KB)

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The above figure decomposes annual GVA growth into capital services, labour input and multi-factor productivity. GVA growth of 8% was recorded in 2018, following the increasing trend in GVA growth since 2016. This 8% GVA growth was attributed to decreased capital services and a doubling of the MFP result recorded in 2017. Labour growth has remained consistently steady at 1% since 2016. The strong GVA growth since 2016 can be explained by strong results in foreign dominated sectors such as Manufacturing, ICT and in the Domestic and Other sectors in areas such as Transport and Wholesale and Retail. Looking over the entire period, GVA growth recorded annual average growth of 5% over the eighteen years, driven by strong results in the early noughties and unprecedented growth in 2015. The pre-crash period was driven by increased capital services, while the years of the financial crash were associated with declining labour input and weak demand.

Source publication:  National Income and Expenditure 2018 Tables 1-22 and Annex 1 for 1995-2018 (XLS 396KB)

The chart above shows real GVA growth split into sectors dominated by Foreign-owned and Domestic and Other sectors. The sustained increase in GVA growth since 2016 has been driven by the continued increase in contributions from the foreign dominated sectors such as Manufacturing and ICT. In 2018 the 8% GVA growth was due to a 6% contribution from the foreign dominated sector and a 2% contribution from the Domestic and Other sector. The latter years of GVA growth are in stark contrast to the early 2000’s where, for example in 2007 the 8% GVA growth was explained by a contribution of 6% from the Domestic and Other sector but only a 2% contribution from the Foreign Dominated sectors.

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

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The figure above shows the Domestic and Other sector of the economy decomposed by factor inputs. The Domestic and Other sector recorded GVA growth of 4% in 2018, down from 5% in 2017. The 4% growth in 2018 can be explained by an increased contribution from capital services of 2% and steady growth in labour input of 2%. The increase in capital services was due to an increase in investment in Transport. The earlier years saw high rates of growth in the Domestic and Other sector from 2000 to 2007 and were due mainly to capital services with increases in labour input of between 0.5% and 3% also observed.

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The chart above shows the factor inputs in the Construction sector. In 2018, GVA growth reduced from 13% in 2017 to 11% in 2018. This slight decline was explained by a fall in MFP from 4% in 2017 to -3% in 2018. However, the labour and capital input indicators grew on 2017, with labour growing from 6% to 9% and capital growing from 3% to 5%. The increased labour input was due to strong growth in hours worked, while the increased capital input was due to increased investment in Buildings and Structures. The Construction sector was one of the hardest hit sectors during the financial crisis with negative GVA growth recorded between 2008 and 2012. Since 2013, GVA growth recovered and has grown at levels not seen since pre-crisis.

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For the Wholesale and Retail sector, GVA growth rebounded from -1% in 2017 to 6% in 2018. The strong GVA growth was attributed to the strong growth in retail sales, particularly in motor vehicles growing at 6.2%. The capital contribution declined from 5% in 2017 to 2% in 2018, while the labour input declined from 1% in 2017 to no growth in 2018, with no growth being recorded in hours worked. In this sector the impact of the crisis was felt most with GVA growth falling by 5% in 2008 and by 13% in 2009. These large declines in GVA were due to falling demand for retail services but also back up the supply chain to falling Wholesale demand.

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The Accommodation and Food sector is a classic example of a domestic dominated sector. In 2018, growth was recorded in the sector, with GVA increasing from 5% in 2017 to 9% in 2018. This could be associated with increased tourism in Ireland with trips to Ireland increasing by 6.9% in 2018. The strong GVA growth can be put down to increased contributions from labour, where hours worked grew by 8% in 2018. A small increase in the capital services was recorded in 2018 with growth of 1%, the first since 2015. This was due to increases in capital stock associated with Building and Structures growing by 9%. Like the Wholesale and Retail sector, this sector also suffered badly during the crisis, with large falls in labour input occurring during the years 2008-2011. Since then, the sector has recovered and has recorded increases in labour input that match pre-crisis levels.

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The figure above shows GVA in the Market sector broken down by factor inputs over the period 2000 to 2018. The Market sector is an aggregate sector which encompasses all market activity in the economy. The sector includes all NACE sectors excluding Real Estate, Public Administration, Education and Human Health (see glossary for more details). The most recent year, 2018 saw continued growth in GVA in the Market sector reaching 9%. This growth was associated with the strong economic performance across practically all sectors but was also associated with a corresponding increase in MFP. Like the overall economy, labour input in the market sector remained steady at 1%. In general, GVA growth had remained under 10% in the early noughties before turning negative in 2008 and for the following few years due to the financial crisis.

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The chart above shows the sources of GVA growth in the Foreign dominated sector with the years 2015 to 2018 included. GVA growth of 14% occurred in 2018, a 4% increase on 2017. This 14% growth was associated with a large fall in capital services, falling from 2% in 2017 to -8% in 2018. This fall in capital services occurred while at the same time MFP increased to 21% to balance the impact. 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.

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The chart above highlights the foreign dominated sector of Manufacturing. Due to the large globalisation events of 2015, much of the detail over the entire period is difficult to interpret. As a result, the full data is best viewed on Statbank. In 2018 GVA growth increased by 10%, following an increasing trend since 2016. The 10% GVA growth in 2018 was explained by a slight fall in capital services, while MFP increased to 16%. As MFP growth is an indicator calculated as a residual, it can be difficult to explain the precise reason for changes to it, it might be due to increased efficiency in the use of inputs or new technology.

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The above chart shows the breakdown of GVA in the Information and Communications sector by factor inputs. Due to revisions of intangible assets for 2017, a large spike occurred in that year with an increase in capital input of 50% and a corresponding decrease in MFP. In 2018, GVA growth of 21% was recorded in the sector, the highest since pre-crisis periods. This was attributed to a small but modest increase in capital input of 2%, while the remainder of the GVA growth was explained by growth in MFP of 19%. Greater use of the digital platforms for many entities in this sector together with profitable FDI additions go some way towards explaining this strong MFP result. The only negative growth took place in 2003, with the onset of the dot-com bust, where a significant fall in MFP and labour occurred.

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The above figure highlights Ireland’s position in real GVA growth terms relative to its European counterparts. Looking at the Foreign dominated sector in the Irish economy, average growth in real GVA stood at 9.8% over the period 2000-2018. This sizeable growth in real GVA places Ireland at the top of the distribution. This is due to the large influx of activities relating to IP intensive manufacturing including contract manufacturing and aircraft leasing. Real GVA growth for Ireland is also at a relatively high position in the distribution falling just behind the Foreign sector, with an annual average growth rate of 4.7%. The impact of the Foreign sector goes a long way towards explaining this result for the overall economy. The Irish Domestic and Other sector also performs relatively well recording an annual average growth rate of 2.8%. This result places the Domestic and Other sector 12^th in the distribution just behind Eastern and Central European countries such as Bulgaria, Poland, Latvia and Estonia, among others. 

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The above chart shows Ireland’s MFP position relative to its European partners over the period 2000 to 2018. The Irish economy had a relatively poor performance when compared to its European counterparts, showing annual average growth of zero percent over the entire eighteen-year period behind countries such as Ireland-Domestic and Other, Finland, Germany, the UK and Austria, among others. The Foreign sector in the Irish economy also shows a poor performance relative to the other EU countries shown. The Foreign sector posted annual average decline of 1% in the period up to 2018, resulting in a position at the bottom of the distribution. The negative results in the Foreign sector as well as in the Irish economy are explained by the impact that sudden large additions to capital, particularly intangible capital have on GVA results.  In these cases, the results of productivity calculations can be that strong positive capital services are reported along with negative MFP results.

The Domestic and Other sector of the economy recorded an annual average growth rate of 0.1% in the period to 2018, resulting in a position at the bottom of the distribution, just above Italy. Austria, Germany and France recorded positive MFP annual average growth rates in the period to 2018.

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The chart above shows the percentage change in MFP growth in 2018. The Foreign sector in the Irish economy recorded the largest growth in MFP on 2018, with a result of 21%. This was due to the fall in capital services and the strong growth in GVA, while labour remained unchanged. The picture for the Irish economy follows a similar one to the Foreign sector, with growth of 8% recorded. This result is impacted by the globalisation activities of the Foreign sector and places Ireland at the top end of the distribution among the countries examined. This result also highlights the correlation between MFP and intangibles presented earlier. The Domestic and Other sector recorded growth of -0.07% and places Ireland at the bottom of the distribution, just above Italy, Finland and Belgium.

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There has been considerable variation in GVA growth by sector in 2018. Among the sectors examined, Information and Communications as well as Manufacturing, had some of the largest growth in GVA. Much of this GVA growth can be explained by positive MFP contributions and smaller contributions from capital, which highlights the correlation between MFP and intangibles discussed in the previous chart. Within the Domestic and Other sectors examined, Construction and Wholesale and Retail had some of the largest increases in GVA growth in 2018. Large increases in labour input occurred in the Construction sector with growth of 9%, while growth in capital services of 2% in the Wholesale and Retail sector helped to provide further insight into the contributors to positive GVA growth.

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The chart above shows the contributions to MFP growth for 2018. Manufacturing and ICT made the largest contribution to growth in 2018, however these sectors are dominated by MNE activity. Wholesale and Retail and Mining and Quarrying are domestic dominated sectors and also made positive contributions to MFP growth. This was due to the strong GVA growth recorded in these two sectors in 2018, linked to strong retail sales and higher levels of activity. The main negative contributors were Financial and Insurance activities as well as Professional and Scientific services. The negative contribution from Financial services was due to GVA growth of 2%, associated with this growth was an 8% increase in capital services and consequently negative MFP growth is observed. A similar story was evident in the Professional Services sector where GVA growth of 6% was recorded. Increased capital investment and labour growth occurred in 2018 in comparison to 2017, leading to a decline in MFP growth.

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The chart above shows the contribution of both Labour productivity and MFP to individual sectors in the economy. The biggest contributors to both Labour productivity and MFP came from the foreign dominated sectors of Manufacturing and ICT. The biggest contributor from the domestic dominated sectors came from Wholesale and Retail. For Financial and Insurance, the sector contributed negatively to MFP growth, however contributed positively to Labour productivity growth. The MFP result was due to GVA growth of 2%, a slight increase in labour on 2017 but a slight fall in capital which led to a decline in MFP. The positive contribution to labour productivity was due to both GVA and hours increasing steadily in 2018.