Multinationals in Ireland increase direct investments to €261bn

Ireland was famously accused by Nobel economist Paul Krugman of engaging in “Leprechaun economics” when GDP figures purportedly showed the economy grew in size by 26% in 2015.

The huge effects that multinationals play in investing and creating jobs in the Irish economy have been laid bare but the levels of foreign direct investment are lower than the headline figures at first might suggest, the latest CSO data show.

The headline figures show that there was €1.5 trillion in stock of foreign direct investment in 2019, or €1trn, when so-called reverse investments are taken into account and excluded.

However, that figure falls to €261bn when investments that are only passing through and other items such as the value of intangible intellectual property owned by foreign-owned companies and held in Ireland, as well as the effects of aircraft leasing firms, are also excluded. 

The €261bn stock, which was up sharply from the €215bn in 2018, can be seen as a more accurate picture for foreign direct investment than headline figures of €1.5trn or €1trn.

The CSO publication, Foreign Direct Investment in Ireland, is one of a series of releases that throw a light of foreign direct stock and flows into the economy.

Over 296,000 Jobs Abroad Linked to Foreign Direct Investment from Ireland In 2019https://t.co/oJo2g5jwZ9 #CSOIreland #Ireland #NationalAccounts #BalanceofPayments #Economy #Economics #Macroeconomics #EconomicIndicators #GovernmentFinances #EconomicActivity #Output #ValueAdded pic.twitter.com/Kynb7NNaee

— Central Statistics Office Ireland (@CSOIreland) May 14, 2021

The accounting practices of the multinationals have for a long time had a huge distorting effect on a number of international performance indicators for the Irish economy. 

Ireland was famously accused by Nobel economist Paul Krugman of engaging in “Leprechaun economics” when GDP figures purportedly showed the economy grew in size by 26% in 2015.

That came after multinationals registered vast quantities of intellectual property and other intangible assets in Ireland following big changes sparked by global tax reforms.

However, the multinationals still play an outsized role in Ireland even when many of the accounting distortions are stripped out.

CSO figures published last year showed that there were 380,000 jobs linked to foreign direct investment in Ireland in 2018 and US multinationals accounted for 132,000 of the total. 

In its latest release, the CSO said that so-called redomiciled companies employed around 11,000 people in Ireland in 2018.

Friday’s release also showed that so-called pass-through investments which were not destined for Ireland, accounted for a significant 31% of foreign direct investment in 2019.