10/5/21: Ireland PMIs for April: Rapid Growth and Inflation Signals

Ireland's PMIs have accelerated across all two key sectors of Services and Manufacturing in April, while Construction Sector continued to post declining activity (through mid-April).

Irish Manufacturing PMI rose from 57.1 in March to 60.8 in April as larger multinationals boosted their activities and increased pass-through for inflation. This marks third consecutive month of increasing PMIs for the sector. Meanwhile, Irish Services PMI rose from 54.6 in March to 57.7 in April, marking second consecutive month of above 50 PMIs readings. 

In line with the above developments, official Composite PMI rose from 54.5 in March to 58.1 in April. 

Irish Construction Sector PMI, reported mid-month, was at 30.9 (significantly below 50.0, signaling strong rate of contraction in activity) in mid-April, a somewhat less rapid rate of decline relative to mid-March reading of 27.0. All in, Irish Construction Sector PMI has been sub-50 for four consecutive month now.

In contrast to Markit that publishes official Composite PMI, I calculate my own GVO-shares weighted index of economic activity across three sectors: my Three Sectors Index rose from 55.0 in March 2021 to 58.3 in April. 

In terms of inflation, Services PMI release states that "Cost pressures remained strong in April, linked by survey respondents to labour, insurance, fuel, shipping and UK customs. The rate of input price inflation eased slightly from March's 13-month high, however. To protect profit margins, service providers raised their charges for the second month running. The rate of charge inflation was the strongest since February 2020, albeit modest overall." The indications are that Irish services firms are operating in less competitive environment than their global counterparts, with stronger ability to pass through cost increases into their charges. However, this feature of Irish data most likely reflects the accounting complexity within major multinationals trading through Ireland. 

Similar situation is developing in Manufacturing: "Supply chains remain under severe pressure, with longer delivery times owing to new UK Customs arrangements, transport delays and raw materials shortages. These factors, combined with strengthening demand, are leading to a heightening of inflationary pressures. Input prices increased at their fastest pace in ten years, while output prices rose at a series-record pace."

All in, we are witnessing signs of continued inflationary pressures across a number of months now, with even multinationals - companies using Ireland as primarily a tax and regulatory arbitrage location for their activities - feeling the pressures. This is an indication that inflation is building up globally and, as time drags on, starting to feed through to final prices of goods and services.

23/4/21: There are no 'social' winners amidst this pandemic

 

No one is left unscarred by the #covid19 pandemic when it comes to public approval trends for the major social stakeholders in Ireland: 

Source: Core Research. 

Broadly-speaking, the above is expected, although Core Research report contains one glaring omission: it does not survey public attitudes to media/press. Worse, the three improving stakeholder groups are also the three least impacted: own employer, citizens and large companies. Meanwhile, approval of the government is still nosediving. 

Covid pandemic is certainly testing Irish (and other countries') key institutional frameworks. The fallout from these tests is going to be long-lasting and deep. We went into the pandemic with huge deficits of trust in key institutions of our societies. And we are becoming more polarized and less enthusiastic in our support for these institutions since then.

7/4/21: Ireland PMIs for March: Growth and Inflation Pressures

 

Ireland PMIs for 1Q 2021 are out this week, so let's take a closer look at monthly activity data. 

• March services PMI came in at a surprising 54.6 - up on 41.2 in February and 36.2 in January. Given the country is in a phase 5 lockdown, and there has been little change on that in recent months, the new reading is a bizarre one. Per Markit: "Three out of four monitored sub-sectors registered higher business activity in March. The strongest rate of expansion was in Financial Services, followed by Business Services and Technology, Media & Telecoms respectively. Activity in Transport, Tourism & Leisure declined for the eighth month running, but at the slowest rate since last August." A lot of hope-for vaccines and 'getting back to normal' as well as exports rise behind these figures. Services PMI is now at its highest reading since February 2020.
• March Manufacturing PMI also performed well, rising to 57.1 from 52.0 in February. Manufacturing index has been more volatile in the pandemic than Services, so this rise is less of a surprise, given the global economic recovery and demand for Irish exports.
• We do not have full March data for construction sector PMI, which is reported mid-month, so all we do have is mid-March reading of 27.0. 

Official Composite PMI published by Markit was pretty upbeat in march 2021, rising to 54.5 - signaling strong growth, having previously posted 47.2 in February and 40.2 in January 2021. My own, Three Sectors Activity index - a weighted average of three sectors PMIs based on their share of gross value added - rose even more sharply: from 41.8 in January and 45.0 in February to 55.0 in March. If Construction sector PMI were to come in on-trend mid-April, the Three Sectors Index will be closer to 55.1-55.2 range.

As an aside, it is worth noting that Irish economic activity is showing similar trend to global activity when it comes to inflationary pressures (see: https://trueeconomics.blogspot.com/2021/04/5421-heating-up-inflationary-risks.html). Per Markit: "March data indicated soaring cost pressures. The Composite Input Prices Index posted a record one-month gain and signalled the fastest rate of inflation since July 2008. Cost pressures were much stronger at manufacturers than service providers." In other words, even small open economies with massive distortions coming from the multinationals' financial and tax engineering sides are now showing signs of heating up inflation. 

5/4/21: The Entrepreneurship Boom: Forced, Voluntary and Funded

 

My recent article for The Currency covering the ongoing global developments in entrepreneurship: The US is experiencing an entrepreneurship boom. So, what is going wrong in Ireland?: https://thecurrency.news/articles/40790/the-us-is-experiencing-an-entrepreneurship-boom-so-what-is-going-wrong-in-ireland/

3/8/20: Ireland's Real Surreal Economy

In recent months, I have mentioned on a number of occasions the problem of Ireland's growing GDP-GNI* gap. The gap is a partial (key, partial) measure of the extent to which official GDP overstates true extent of economic activity in Ireland.

In general terms, GDP is an estimate of the total value of all goods and services produced within a nation in a year. The problem is, it includes capital and investment inflows into the country from abroad and is also distorted by accounting manipulations by domestic and foreign companies attributing output produced elsewhere to output produced in the country. In Ireland's case, this presents a clear-cut problem. Take two examples:

1. An aircraft leasing company from Germany registers its 'capital' - aircraft it owns - in Dublin IFSC. The value of aircraft according to the company books is EUR10 billion. Registration results in 'new investment inflow' into Ireland of EUR10 billion and all income from the leases on these aircraft is registered to Ireland, generating annual income, of, say EUR100 million. EUR 10.1 billion is added to Irish GDP in year of registration and thereafter, EUR 0.1 billion is added annually. Alas, none of these aircraft ever actually enter Ireland, not even for services. Worse, the leasing company has 1/4 employee in Ireland - a lad who flies into Dublin once a month to officially 'check mail' and 'hold meetings', plus an Irish law firm employee spending some time - say 8 hours a week - doing some paperwork for the company. Get the idea? Actual economic activity in Ireland is 12 hours/week x EUR150 per hour x usual multiplier for private expenditure = say, around EUR230,000; official GDP accounting activity is EUR100 million (in years 2 on) and EUR10.1 billion (in year 1).
2. A tech company from the U.S. registers its Intellectual Property in Ireland to the tune of EUR10 billion and attributes EUR 2 billion annually in sales resulting from the activities involving said property from around the world into Ireland. The company employs 1,000 employees in Dublin Technology Docks. Actual economic activity in Ireland is sizeable, say EUR 7 billion. Alas, registered - via GDP - activity is multiples of that. Suppose IP value grows at 10% per annum. In year 1 of IP transfer, company contribution to GDP is EUR 2 billion + EUR 10 billion + EUR 7 billion Normal Activity. In Year 2 and onwards it is EUR 2 billion + 10%*EUR 10 billion + EUR 7 billion Normal Activity. 

Now, normal GNI calculates the total income earned by a nation's employees and contractors, etc, and businesses, including investment income, regardless of where it was earned. It also covers money received from abroad such as foreign investment and economic development aid.

So GNI does NOT fully control for (1) and (2). Hence, CSO devised a GNI* measure that allows us to strip out (1) above (the EUR 10 billion original 'investment'), while leaving smaller parts of it still accounted for (employment effects, appreciation of capital stock of EUR 10 billion, etc), but largely leaves in the distorting effects of (2).  Hence, GNI* is a better measure of actual, real activity in Ireland, but by no means perfect.

Still, GNI*-GDP gap is telling us a lot about the nature and the extent of thee MNCs-led distortion of Irish economy. Take a look at the chart next, which includes my estimates for GDP-GNI* gap for 2020 based on consensus forecasts for the GDP changes in 2020 and the indicative data on flows of international trade (MNCs-dominated vs domestic sectors) implications for potential GNI* changes:

As it says in the chart, Irish GDP figures are an imaginary number that allows us to pretend that Ireland is a super-wealthy super-duper modern economy. These figures are a mirage, and an expensive one. Our contributions to international bodies, e.g. UN, OECD et al, is based on our GDP figures, and our contributions to the EU budget are, partially, based on GNI figures. None are based on GNI*. For the purpose of 'paying our way' in global institutional frameworks, we pretend to be a Rich Auntie, the one with a Gucci purse and no pension. For the purpose of balancing our own books at home, we are, well, whatever it is that we are, given GNI*. 

This distortion is also hugely material in terms of our internal policies structuring. We use international benchmarks to compare ourselves to other countries in terms of spending on public goods and services, public investment, private entrepreneurship etc. Vast majority of these metrics use GDP as a base, not GNI*. If we spend, say EUR10K per capita on a said service, we are spending 14% of our GDP per capita on the service, but 23% of our GNI*. If, say, Finland spends 20% of its GDP per capita on the same service, we 'under-spend' compared to the Finns on the GDP basis, but 'over-spend' based on GNI* basis.

There is a serious cost to us pretending to be a richer, more developed, more advanced as an economy, than we really are. This cost involves not only higher contributions to international institutions, but also potential waste and inefficiencies in our own domestic policies analysis. Gucci purse and no pension go hand-in-hand, you know... 

18/7/20: Europe, the Land of the Unliving Leadership

If the U.S. of A. is the land of the brain-dead leadership, Europe (the EU) is the land of the unliving ones. The difference is the ratio of effort to failure. The Trump Administration is almost effortlessly creates daily flow of disasters. Meanwhile the EU27 is endlessly engages in strenuous attempts to not achieve something trivial.

Latest instalment is the European leadership summit this weekend: https://www.reuters.com/article/us-eu-summit/eu-nations-deadlocked-at-tense-coronavirus-recovery-summit-idUSKBN24J0A2.

One thing of note from Ireland's (and other net contributing states') perspective is that, as I predicted two months ago (https://www.thecurrency.news/articles/17392/france-and-germany-have-proposed-a-e500m-fund-to-shield-european-economy-what-does-it-mean-for-ireland), the proposed EU fund for addressing COVID19-induced recession will be a net cost to the more advanced European states.

What's worse is that this cost will be a function of Ireland's famously grotesquely inflated GDP. The tax avoidance shenanigans of the multinational corporations will cost us more in the COVID19 Fund case. And since all measures of our economic activity, from GDP to GNP to GNI to GNI* already include taxes paid by the multinationals to the Irish Exchequer, this added cost is not going to be recovered through tax revenues.

Here are some facts. The latest data for the official "Modified gross national income at current market prices" or GNI* - a measure of economic activity that is published by the Irish authorities, that partially (note: partially) strips out these tax shenanigans - is 2018. So we can use data through that year as a yardstick by which we can measure the official and only partial gap between the real economic activity in the State and the imaginary pretend-to-matter GDP of the Republic.

In 2018, actual GNI*-measured activity was EUR 197,460 million, while official GDP was EUR 324,038 million. The real economy of Ireland was, therefore, at least 39 percent less than the officially-measured economy of Ireland. Put differently, we claim we had a national income of 324 billion, but in reality, we only made 197.5 billion. If Ireland was filling a mortgage application, it would be lying on its income line.

This gap is growing over time (chart next, with estimates for 2019 based on actual GDP reported and estimated GNI* gap from the gross value added statistics, and 2020 forecast):

Yes, you see it right:

• Officially, actual productive capacity of the Irish economy, was 39.06% lower than implied by GDP measure in 2018.
• Estimated, based on officially released, but not yet fully aggregated, data 2019 gap was around 39.8 percent. Worse than in 2018.
• Based on official growth and inflation forecasts for 2020, and gross value added data for multinationals-led sectors vs domestic sectors for 1Q 2020 already reported by the CSO, real economy gap to imaginary GDP is likely to be in the region of 43.5% in 2020, or, possibly even higher. This higher figure is suggested by the booming exports of the Ireland-based multinationals during the first 3 months of the pandemic.

Since EU contributions are, in part, based on GNI (not GNI*), which is closely linked to GDP, and thus to gross accounting effects from the multinationals, Irish contributions to the EU27 budget are excessively inflated, roughly, by the gap factor. We know as much, as even ESRI - the mouthpiece of the 'official Ireland' - said so before.

Now, back to the EU27 'COVID Fund'. 

Irish authorities finally recognised the fact that Ireland will be a net payer into the fund, as opposed to a net beneficiary: https://twitter.com/tconnellyRTE/status/1284433835581726725?s=20. Which is what I warned about two months ago, when many Irish commentators were busy dividing the imaginary COVID Fund largesse into spending and investment priorities 'made available' to Ireland from Europe. 

Based on the GDP/GNI* gap, Ireland's repayments on the EU27 'COVID Fund' are likely to be 40% higher than the actual Irish economy's productive capacity would entail. 

The Fund is also likely to alter, long-term, the structure and the distribution of the Member States' contributions. Most likely, it will increase a GDP or GNI-linked share being paid in by Ireland. But even without accounting for this, the fact that we will be net payers into the Fund means that our investment priorities to be financed from the Fund will have to change dramatically. In fact, for every EUR1 borrowed from the fund, we will have to generate EUR 1.43 or more in added activity / return only to account for the GDP/GNI* gap. 

Take a simple example: suppose we borrow from the Fund EUR 1 billion to build a hospital. Nice idea. An expected return from the hospital that justifies such a project should be around cost of administration of investment + cost of funds + return and risk premia. Hard to pin these down, but, say we want to invest in a hospital in the first place because it will have socio-economic returns equivalent to 5 percent net of the cost of raising funds, if we were to issue bonds at 0 percent interest rate. With GDP/GNI* gap we have 5%*(1+43% Gap) = 7.15% required return to make that investment compatible to the Fund. And that is assuming we are just repaying our own share to the Fund. If the Fund also lends money to, say, Poland - a net recipient of transfers from the normal EU budgets, we will have to pay, roughly a GDP-weighted share of Poland's borrowings into the fund, too. Say that amounts to our normal net EU taxes contribution of ca 0.15 percent of GDP (historical average for 2016-2018 is actually 0.153%). This means we are actually going to be repaying 0.2145% of our GNI*-based economic capacity for Poland's financing. And so on. 

What could have been economically feasible or efficient to invest in under GDP base consideration may not be feasible or efficient under the repayment cost linked to our real economic activity measures, e.g. GNI*. That hospital we would like to have, and that makes sense as a combination of a fiscal stimulus and socio-economic investment, will no longer make sense to invest in, solely because we have spent decades fooling ourselves and the world around us that we are richer than we really are... whooping 38-40 percent richer. Playing a role of a rich uncle is has a cost, folks... 

Worse, the need for the repayment of the funds in the future, and more egregiously, the need to pay for the funds not borrowed by Ireland, will mean that in the longer run, Ireland will have to run higher debt or higher budget surpluses or both. If, say, Malta or Slovakia, or Hungary or Poland were to draw down funds from the COVID Fund, Ireland will need to contribute to repaying the money they borrowed. Such a repayment will either require Ireland issuing new debt or Ireland paying in from budget surpluses in years to come. 

In other words, the COVID19 Fund is a prescription for more austerity in Ireland in the future years. Not for less. 

Irish PM / Taoiseach says it is a good thing: rescuing Europe is also favourable to Ireland. I agree. The problem is that every little bit counts and Ireland will be going into 'rescuing Europe' with a pretend-to-matter GDP base, not with the real economy-measuring GNI*. And that is wrong. It is a right thing to contribute to other countries' recovery. It is a stupid thing to do so while playing a 'rich uncle' role we hoisted out of vanity and some strategic venality (yes, truth hurts, and truth about MNCs in Ireland hurts our pretence at not beggaring our neighbours though our tax rules).

Ireland's kommentariate will really enjoy investing in public infrastructure, the EU-style... the unliving leadership of Europe is setting us up for another 2012 'Game-changing Deal' (https://www.telegraph.co.uk/finance/financialcrisis/9365504/Debt-crisis-Ireland-hails-euro-game-changer.html). Then, again, the hope is that by the time the EU27 actually agree to the terms and conditions of the 2020 COVID19 Fund, we will be dealing with the recession of 2025 or 2032 or 2087.

6/7/2020: Irish Services Sector Activity Index: May 2020

COVID19 impact on services sectors activity in Ireland, data through May 2020:

Huge adverse impact on the economy. Note precautionary purchasing effect on Retail sales in the difference between Wholesale & Retail index and Wholesale sub-index. And some recovery in May, compared to 1Q 2020. But overall, conditions are still dire. And we are not yet seeing the effects of consumer behavior changes on post-restrictions demand. That is still coming...

Forward industry view (ex-behavioral aspects) for June 2020, via Purchasing Managers Index:

24/6/20: COVID19 Social Impact: June 2020 Ireland

Interesting insights from the CSO on some impacts of COVID19 pandemic on general population: https://www.cso.ie/en/releasesandpublications/ep/p-sic19eep/socialimpactofcovid-19surveyjune2020asnapshotofexperiencesandexpectationsinapandemic/.

The following are of significant medium and long-term concern:

1. Health impact 1: 40.9% of all respondents to the survey report increased body weight since the start of the COVID19 restrictions, against 13.7% who report weight loss.
2. Health impact 2: "49.0 of newly labour inactive respondents (those in employment before the onset of the COVID19 crisis and currently not working) reported an Increase in weight. This compares with 37.6% of respondents that are currently working."
3. Health impact 3: The above health effects are most likely primarily driven by stress. For example: "Analysis of weight change by household composition found that a higher percentage of adults living in households with children reported having gained weight (47.5%) when compared with adults living alone (35.2%)." Given that households with children faced the pressure of not only own lockdown-related factors, but also the burden of caring for children and the pressures of home-schooling, changes in the health status are likely to be signifcantly driven by stress.
4. Precautionary savings: "Of respondents that reported reduced expenditure and/or an increase in income, just over half (51.1%) said that they have/will put additional money into Savings."
5. Workplace: Of the respondents who reported as working from home, 19.6% stated they do not have adequate work space and/or equipment. "Almost one in five (18.5%) respondents reported being Very or Extremely concerned about their employer’s ability to provide a safe work environment in the context of COVID-19."

What does this mean for business? Some thoughts:

• We are likely to see stronger focus on health and well-being when it comes to consumers voting with their Euros in months and years to come. Smaller, natural and sustainability-focused brands are likely to have an opportunity space as long as they can maintain value proposition. 
• The above also supports increased demand for personalisation of goods and services being supplied to consumers, a trend that will accelerate should COVID19 restrictions persist or even re-accelerate. 
• Financial implications of COVID19 will reinforce workplace and brand effects: as consumers return to work, they will increasingly demand greater safety and more direct engagement with their employers and brands. 
• Production processes will shift toward ensuring tighter control and quality delivery by the brands, which means that co-manufacturing and outsourcing will be less favoured by consumers than in-house production. 
• Direct-to-Consumer channels of sales will become more important, as they provide greater assurances to consumers of quality, provenance and ESG-impacts attributes of their suppliers.
• On investment side: organic cash flow-funded investment will become more important in years to come. This will be driven by greater preference amongst retail investors for liquidity and by the re-discovery of the need for cash-based safety buffers amongst the companies. Low cost of funding in the bonds markets and in the banking channel will also disfavour households shifting out of their precautionary savings accumulated during the pandemic.

I am sure there will be other disruptive factors at play as well. 

1/6/20: COVID19 and European Banking

McKinsey research note on European banks' potential losses due to COVID19 is quite on the money:

With more than 1/3rd of European executives expecting "a muted recovery that would lead to sharp drops in banks’ revenue, a squeeze on their capital, and a hit on return on equity", European banks can expect revenues to drop by 40 percent plus, and ROE drop 11 percentage points in 2021.

And the problems are strategic. COVID19 is actually accelerating changes in customers' demand for services. "McKinsey’s European customer survey shows how customer behavior and needs have changed over the past month: digital engagement levels have climbed up to 20 percent, the use of cash has halved, 30 to 40 percent of customers have expressed a greater need for advice, while 20 to 40 percent want products to help them through the crisis.4 Pension shortfalls are a particular challenge with those close to retirement facing a very immediate problem."

Alas, European banks, especially those operating in the 2008-2014 crises-hit economies, such as Ireland, Italy, Spain and Portugal, are utterly unprepared for these shifting trends. I wrote about these problems in a series of two article for The Currency here: https://www.thecurrency.news/articles/4810/a-catalyst-for-underperformance-how-systemic-risk-and-strategic-failures-are-eroding-the-performance-of-the-irish-banks and https://www.thecurrency.news/articles/3833/culture-wars-and-poor-financial-performance-just-what-is-going-on-within-irelands-beleaguered-banks.

25/5/20: Irish Employment: COVID19 Effects

Irish data on employment and labour force reported by CSO now comes in two streams: one is COVID pandemic-ignoring, and one accounting for potential effects of the pandemic. Here is the latest release snapshot, covering 1Q 2020:

Not to challenge CSO on their methodology that is based on a cautious interpretation of the COVID19-related new unemployment assistance claims as not being fully reflective of traditional unemployment. However, it is worth doing a simple exercise: taking data reported in the labour force survey for the period of January-March (1Q) 2020, and combining this with April 2020 monthly unemployment claims data. Here is what we get:

• Officially, per 1Q data, there were 2,353,500 people in employment in Ireland at the of March 2020. 
• COVID-19 adjusted, the above number was down to 2,070,371.
• In April 2020, Number of persons out of work, estimated to include COVID-19 claim was 694,683, up 312,372 on March figure.
• Adding April unemployment estimate to 1Q 2020 COVID-19 adjusted estimate of those in employment, estimated April 2020 employment levels in Ireland should be at around 1,758,000.

As illustrated in the chart:

6/5/20: Trump, Irish Pharma and Amazeballs Economics Stats

The Mondo Bizarro of Irish Economics:

Industrial production activity:

And yet, 

• Irish Manufacturing PMI plummeted to 36.0 in April, from 45.1 in March, the lowest since March 2009
• Irish Services PMI "continued its historic descent in April to 13.9, indicating the fastest decline in Irish service sector output in the 20-year survey history. The month-on-month decrease in the Index, at 18.6 points, was smaller than March’s 27.4-point plunge, but still far exceeded anything else in the series to date."

So actual industrial indices are showing booming Manufacturing across both turnover and volumes of production in March, yet PMI surveys showing collapsing activities. You really can't make this up. But, wait, worse: energy-generation is down, apparently, in volume by 0.2% y/y, yet 'modern sectors' activity is up 35.4%. Which points to the heroic efforts of the Irish economy to be the most energy-efficient in the Universe. 

Of course, the entire circus of Irish economic statistics is driven by the 'dotted-out' sectors in the industrial activity tables - the CSO's way of saying "you, peasants, don't need to know what multinationals are up to".

Amazeballs! Just in time for Mr President to muse about taking US pharma out of Ireland's tax [non] haven... https://www.rte.ie/news/business/2020/0504/1136374-pharma-trump-ireland-coronavirus-vaccine/. 

2/4/20: COVID19 in three charts

#COVID2019 economy in three pics:

U.S. unemployment claims, week 2 of filings:

Irish unemployment claims, first month of filings:

 World GDP forecast after one month of Covid pandemic:

FUGLY! All around. 

25/3/20: More than €3bn: The Need for Stimulus in Ireland

"€3bn a month or more – the cost of offsetting the Covid-19 shock" my article for @thecurrency on the size of the fiscal/monetary stimulus required for Ireland. Available atr: https://www.thecurrency.news/articles/12547/e3bn-a-month-or-more-the-cost-of-offsetting-the-covid-19-shock.

19/2/20: Facebook becomes another Ireland Inc's reforms test case

First the 'anti-American'  EU Commission's moved against a wonderful U.S. company washing tens of billions of tax free money through Ireland (see: https://www.reuters.com/article/us-eu-apple-stateaid/apple-says-14-billion-eu-tax-order-defies-reality-and-common-sense-idUSKBN1W1195) and now, the U.S. IRS ('anti-American' as they are) have moved against another wonderful U.S. company washing billions of tax free money through Ireland.

The latest case is, of course, the anti-American IRS suing Facebook over its shenanigans in Ireland: https://www.reuters.com/article/us-facebook-tax/facebook-faces-tax-court-trial-over-ireland-offshore-deal-idUSKBN20C2CQ. Per report: "The IRS argues that Facebook understated the value of the intellectual property it sold to an Irish subsidiary in 2010 while building out global operations, a move common among U.S. multinationals."

It is worth noting that this intellectual property redomiciling to Ireland has dramatically increased since the irish Government 'tax reforms' of 2014. Whilst the CSO does not fully account for such transfers in its GNI* measure, the gap between Irish GDP and GNI* has accelerated to historically new levels in recent years, as highlighted here: https://trueeconomics.blogspot.com/2020/02/9220-ireland-more-of-reformed-tax-haven.html.

The case is yet another hammer blow to Ireland's reputation in international economic policy circles and a testament that Ireland's famed compliance with the OECD BEPS rules is a fig leaf of decorum, to be stripped publicly by the EU and the U.S. (and probably other G20) authorities in years to come.

16/1/20: Irish GE2020: Kommersant

My musings on the Irish election 2020 via Russia's Kommersant.ru: https://www.kommersant.ru/doc/4220157.

13/12/19: World Bank and WEF reports highlight relatively poor competitiveness rankings for Ireland

The latest World Bank "Doing Business" report rankings and the WEF's "Global Competitiveness Report" rankings show Ireland in a mid-tier 1 position (24th ranked in both tables) in terms of competitiveness - hardly an enviable position.

Ireland's position marks a deterioration from 23rd rank in WEF table, driven by relatively poor performance in ICT adoption (hmmm... Silicon Docks economy is ranked 49th in the World), macroeconomic stability (ranked 34th), product markets competitiveness (35th), and financial system (42nd).

Full WEF report here: http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf and full WB report here: https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf WB country profile for Ireland: https://www.doingbusiness.org/content/dam/doingBusiness/country/i/ireland/IRL.pdf.

A summary chart for Ireland from WB report:

Which, again shows poor performance in the area of credit supply, as well as trading across the border (correlated to the effective market size),  but also in access to electricity, registering property, dealing with construction permits, and enforcing contracts.

11/12/19: Private Sector Leads Electrification of Transport in Ireland

Ireland's uptake of electric vehicles has risen dramatically in 2019 (to-date, data through November), according to the data release from CSO.

Based on annualized numbers, Ireland is on track to add 3,790 new electric vehicles in 2019, of which 3,998 are expected to be private vehicles. In general, across all years we have data for, private sector (households) leads uptake of electric vehicles, with public sector lagging.

In 2019, new electric vehicles will account for ca 3% of the total new vehicles registered in Ireland. In the private sector, electric vehicles will account for 2.53% and in the public sector the share of electric vehicles in all new vehicles registered will rise to 1.07%. This marks major increases over 2015-2018 cumulative additions share of 0.44% total, 0.53% private and 0.32% public.

16/10/19: Recalling the Celtic Tiger

Recalling the Celtic Tiger, edited by Brian Lucey, Eamon Maher and Eugene O’Brien is coming out this week from the series of Reimagining Ireland Volume 93, published by Peter Lang, DOI 10.3726/b16190, ISBN 978-1-78997-286-3.

The book includes 12 mini-chapters by myself and multitude of contributions from some top-level contributors. Wroth buying and reading... and can be ordered here: https://www.peterlang.com/view/title/71254.

16/10/19: Ireland and the Global Trade Wars

My first column for The Currency covering "Ireland, global trade wars and economic growth: Why Ireland’s economic future needs to be re-imagined": https://www.thecurrency.news/articles/1151/ireland-global-trade-wars-and-economic-growth-why-irelands-economic-future-needs-to-be-re-imagined.

Synopsis: “Trade conflicts sweeping across the globe today are making these types of narrower bilateral agreements the new reality for our producers and policymakers.”

20/8/19: Public Spending in the Euro Area: Post-Crisis Austerity?

Given the never-ending repetition of the 'austerity narrative' in European economic analysis, it is virtually impossible to conclusively address the issue of changes in public spending during the crisis and the post-crisis periods and the relationship between fiscal policies and economic growth. Thew reason for this is the lack of singular set metrics that can capture these dimensions of the debate.

However, this lack should not be a reason for not trying.

Here is an interesting chart (based on the IMF WEO data and 2019 forecasts), plotting average Government expenditure as a share of GDP for two periods for euro area economies. The two periods under consideration are: 2000-2007 and 2013-2019. I am also showing two metrics for Ireland: the GDP (a measure of economic activity that vastly overstates the true extent of national economic activity) and GNI* (an official Irish Government metric of national economic activity). Note: using 2014-2019 average paint effectively the same picture.

The picture is worrying. Thirteen out of nineteen euro area economies have witnessed a rise in Government spending as a share of GDP in post-crisis period compared to pre-crisis period, two experienced virtually no change, and four experienced declines. In other words, based on the ratio of Government spending to economic activity, only four states exhibit a clear case of 'austerity'.

Ireland is an interesting outlier to the picture (hence, reporting of GNI* metric): based on GDP measure, Ireland's Government spending as a share of GDP averaged 32.85 percent per annum in 2000-2007, and this fell to 30.32 percent in 2013-2019 - an austerity gap of 2.53 percentage points per annum. But based on GNI* measure, Ireland's Government spending rose from 38.69 percent in pre-crisis years to 45.51 percent in post-crisis period - an expansion gap of 6.82 percentage points.

Overall, using the above metric, top austerity countries in the euro area are:

• Malta (gap of -4.86 percent)
• Ireland (GDP gap of -2.53 percent)
• Germany (gap of -2.227 percent)
• Austria (gap of -1.311 percent)

Top fiscal expansion countries are:

• Finland (7.514 percent)
• Ireland (GNI* gap of 6.822 percent)
• Spain (4.3 percent)
• Estonia (4.26 percent)