Latest economic growth figures already attracting unwelcome attention

Earlier this week, for the first time in my life, I took a call from a journalist with a Chilean newspaper seeking to understand Ireland’s economic growth rate of 26.3% last year.

The call came just three hours after the CSO published its revised national accounts data for 2015.

It just goes to show how technology has changed the way in which the world operates.

The fact that a data release in Dublin could make headlines in Chile in such a short space of time shows us just how globalisation has made the world such a small place.

More significantly, it shows how part of a small island off the west coast of Europe could make instant headlines all over the world. This is not necessarily a good thing, and in fact in this circumstance it is bad news.

As has been very widely reported at this stage, the numbers were truly extraordinary, suggesting as they do that the Irish economy, as measured by gross domestic product (GDP), expanded in size by almost €63bn in nominal terms last year.

To put this in context, the nominal increase in GDP in 2014 was just under €13bn.

Domestic observers were astounded by the numbers, because we had got no inkling that some strange things happened in the economy last year.

When the first estimate of growth was released in March, real GDP was estimated to have expanded by 7.8% in real terms. This represents an upward revision equivalent to more than €41bn. Not an insignificant amount of money, one would have thought.

International observers looking in at Ireland have been astounded by the latest growth data. It is the stuff of fairy tales.

If they do a bit of research they will discover that there is a relatively straightforward explanation, but it is an explanation that will sit uneasily with those who have expressed concern about Ireland’s corporate tax model in recent years.

The fact that a small number of transactions, presumably driven by tax considerations, had such a massive impact on the national balance sheet, will focus even greater scrutiny on Ireland’s tax model.

The imminent Apple tax ruling might not be particularly helpful either.

Given the immense challenges that Ireland is facing at the moment, the timing is not good.

Brexit is obviously the most pressing of those challenges at the moment. With the appointment of a new British prime minister this week, the game has actually moved on more quickly than might have been expected.

Although British prime ninister Theresa May was on the ‘remain’ side in the recent referendum, she has never been overly enthusiastic towards the European project.

Consequently, she has committed to proceed as quickly as possible to invoke Article 50, thereby formally triggering the process of UK withdrawal from the EU.

At that stage, all of the power in the negotiations would effectively be vested in the remaining EU-27.

The appointment of the pro-Brexit trio — Boris Johnson, Liam Fox, and David Davis — has certainty upped the exodus ante.

Some legal experts in the UK are currently arguing that Britain cannot lawfully invoke Article 50 without an act of parliament, as the referendum is advisory rather than legally binding.

Not surprisingly, other legal experts disagree. Some believe that parliament would refuse to ratify such an act of parliament, given how apparent it has become since June 23, just how big a mistake the UK electorate has made, based on dishonest information.

The fact that Boris, Gove and Farage have all seen their fortunes decline so dramatically since the referendum, gives certain credence to that possibility.

However, at the end of the day it could be dangerous to ignore the will of the people, and if given the chance, parliament could actually ratify it.

There is still a massive number of unknown unknowns, and we are not much clearer today as to how it might iron out, as we were on the morning of June 24.

The one big thing that has changed is that David Cameron is gone and Theresa May seems inclined to move ahead with the process as quickly as possible.

Meanwhile, sterling continues to drift lower on the exchanges and breached 84p to the euro earlier this week.

Despite the fact that the Irish economy in one year achieved more growth than typical European economies have done over the past decade, the vulnerabilities stemming from Brexit are very obvious.


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