Thursday, July 11, 2013

11/7/2013: Assessing 2 years of Irish economic performance since Q1 2011

Currently, the Dail is debating around the clock one of the most important pieces of legislation: The Protection of Life During Pregnancy Bill 2013 (see my post on the core ethical issue involved in the actual vote here: The Government is unhappy with the possibility that it might lose several very high profile TDs on the issue.

In the background, Irish economy is appearing to gather more and more supporters of the thesis that things are getting better under the stewardship of the Government. Are they? Let's take a look at the Q1 2013 data from the Quarterly National Accounts.

Quick guide: I take four metrics of economic health: GDP, GNP (which is GDP less net transfers of profits and earnings abroad), Final Demand (private and public investment and spending on goods and services) and Total Demand (Final Demand less changes in stocks of inventories). To be more precise: Final Demand = Personal Consumption of Goods and Services + Net Expenditure by Central & Local Government on Current Goods & Services + Gross Domestic Fixed Capital Formation).

Also, consider the above variables in terms of current prices (including inflation effects) and in constant prices (controlling for inflation), as well as seasonally-adjusted and not seasonally-adjusted.

Here are three summary tables. Red marks cases of decline (in percentage terms) in excess of 1%, Green marks cases of increase in excess of 1%.

Remember - these are 2 years cumulated changes.

First GDP and GNP not seasonally-adjusted:

Second GDP and GNP seasonally-adjusted:

 Last, Final and Total Demand:

In the first two tables, I also showed the changes in GNP that accrue to changes in MNCs decisions to either retain earnings or expatriate them (Factor Payments). Whenever GDP is down and GNP is up, this effect is solely due to decline in transfers by MNCs of profits abroad or higher returns from Irish investments abroad repatriated into Ireland or both.

Another quick explanation: I reference both Q1 2011 to Q1 2013 change, as the Government officially took over the economy at the end of Q1 2011. But since economic activity is 'sticky' (and does not immediately respond to changes in Government policies) and since any Government requires some transition to power, we can treat both Q1 and Q2 2011 as basically being determined by the previous Government. Hence I am also showing comparatives for Q1 2013 relative to Q1-Q2 2011 average.

Draw your own conclusions.

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