The week has been eventful for Ireland’s economy, as evidenced by substantial corporate tax revenue, a multinational company shuttering an R&D facility, and a sobering caution from the country’s financial regulator. Here are some of this week’s economic highlights.
Firstly, contrary to initial calculations that the economy had grown by 1.2 percent, recent data from the Central Statistics Office reveals that Ireland’s gross domestic product (GDP) fell unexpectedly by 1 per cent in the second quarter. Factors such as a drop in multinational output and exports are to blame. This sharply contrasts with last year’s growth, and indicates a 4.4 per cent contraction in the economy over the first half of 2024.
Minister of Finance, Jack Chambers, attributed this contraction to the persistent instability within the multinational sector. He observed that due to its salient role in Ireland’s economy, GDP metrics may not accurately represent living standards of the country’s residents.
In a more positive light, revenue from corporation tax in August more than doubled compared to the same period the previous year. Government records indicate that last month, €3.7 billion was accrued in corporation tax, representing a whopping €1.9 billion or almost 109 per cent boost from August, 2023. New data from the Finance Department suggests that this increase compensated for a deficit earlier in the year.
Year-to-date figures display that corporation tax garnered is thriving at 28.4 percent more than the corresponding period in 2023. This totals €16.3 billion, adding an extra €3.6 billion to state funds.
Despite all this, the purported stability of the job sphere in this prosperous period remains questionable. Staff at Intel Research and Development were informed that their existing facility at Shannon in Co Clare will be shut down by next year’s end. Operations in Ireland will be relocated to the company’s Leixlip base. Around 750 employees at the Shannon facility have been presented with redundancy or early exit options, reflecting similar offers made to workers across the corporation.
The company has not implied any further job losses resulting from the shutdown of a facility in the village, known as Intel Shannon since its inception in 2000 and which operates independently.
On the brighter side, the second quarter of the year saw a surge in retail expenditure, employment rates, and foreign direct investments (FDI) in Dublin. These aspects were highlighted in the freshly released Dublin Economic Monitor, a document curated by the four local Dublin authorities.
The S&P Global Purchasing Managers’ Index (PMI) for Dublin reported a slowdown in the expansion rate of activities. Nevertheless, the solid services sector upheld growth. In addition, a rise in construction work likely signified a quickening pace in local home building. In stark contrast, the manufacturing sector faced a deepening downfall, showing contraction in seven out of the last eight quarters.
As per MasterCard’s data, consistent growth in retail expenditure in Dublin’s economy continued in the second quarter, matching the steady growth rate seen in the first quarter. The total spending grew by 0.7 per cent relative to the first quarter and was 2.3 per cent higher compared to the second quarter of 2023.
Despite the hurdles posed by the Covid-19 pandemic, consumer expenditure has witnessed a steady quarter-on-quarter growth for the past four years.
The week also witnessed the national financial guardian accusing the Government of needlessly inflating prices in the Irish economy. As per the pre-budget proposal submitted by the Irish Fiscal Advisory Council, the Coalition has been accused of pursuing an “everything now” approach for the forthcoming budget. This includes promises of tax slashes, escalated daily expenses, and a continual escalation in capital investment. Amidst a time of record employment and escalating real wages, these measures could undesirably stir up matters.
While decreasing energy prices have brought about some reprieve, the council reports that domestic prices inclusive of rents, food services, and medical costs are rapidly escalating. Consecutive violations of the Government’s spending rule have already contributed an additional €1,000 to annual household expenses. This spending rule intends to cap annual increases in public spending at 5 per cent, considered as a viable rate for the economy.