Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697750913416.pdf (Ireland)
Tithe an Oireachtais Houses of the Oireachtas An Oifig Buiséid Pharlaiminteach Parliamentary Budget Office Introduction to the Irish economy: Economic Growth Economic Growth Economic Growth is defined as an increase in the (value) amount of goods and services produced in the economy in a given period, usually one year (this measure can be adjusted for inflation).

The opposite of economic growth is when the economy is contracting or getting smaller.

This is called a recession.


A recession is typically defined as two consecutive quarters of economic contraction.

Economic growth is usually associated with rising living standards, while periods of recession (where the total value of goods and services is getting smaller) are often associated with falling living standards.

Measuring Economic Growth GDP Gross Domestic Product (‘GDP’) is one way of measuring total economic activity.
It adds up the total value of goods and services produced in the domestic economy, irrespective of whether domestic or foreign firms produce them.

It can be calculated by adding up total consumption, investment, and Government spending in the economy.

Net Exports (Exports minus Imports) are also included.
While GDP may not be the best measure of economic activity in the Irish economy it is the standard measurement used by many international bodies, including the European Commission and the International Monetary Fund (‘IMF’), to track how economies are performing over time and to compare the size of various economies.

GNP Gross National Product (‘GNP’) is a slightly different way to measure economic activity.

Gross National Product is calculated the same way as GDP however, it excludes net factor income.
Net factor income takes into account money coming into the country from abroad (such as money earned by Irish companies based overseas) and excludes money that leaves Ireland (such as profits of multinationals being repatriated abroad).

In the past, GNP was considered a better measure for the Irish economy than GDP as the large number of multinationals in Ireland meant that significant profits were repatriated abroad.
However, in recent years many issues have arisen that meant that both GDP and GNP weren’t reflective of the underlying economic activity.

This led to the development of new metrics to capture growth in the economy.

GNI* By adjusting for subsidies received by Ireland from the European Union (‘EU’) and the taxes paid to the European Union, we arrive at a measure called Gross National Income (‘GNI’).

The Central Statistics Office (‘CSO’) also produce a series called Modified Gross National Income (GNI*)1.
In 2015, there were significant imports of intellectual property assets into Ireland.

The way these assets are treated in the national accounts caused GDP to increase by more than 25%.

Modified GNI was created in response to this to help capture underlying growth in the economy by excluding distorting effects, such as the depreciation on Intellectual Property (‘IP’) and on leased aircraft.

GNI* also excludes the net factor income of redomiciled Publicly Limited Companies (PLCs).

1 CSO, Modified GNI.


PBO Publication 8 of 2023 ParliamentaryBudgetOfficeQuarPBO Publication 11 of 2019IntroductionThe Medium-Term Expenditure Framework is a set of administratve procedures employed for the management of Voted Current Expenditure over the medium term by way of three-year ceilings.

The legal basis for these ceilings is set out by the Ministers and Secretaries (Amendment) Act 2013 (the Act).
These ceilings were first introducedon an administrativebasisin 2012, under the Comprehensive ExpenditureReport 2012-2014, and were subsequently place on a legal and procedural footing.

Ceilings are set out in each Budget for the following three years (e.g.

Budget 2019 includes ceilings for 2019, 2020 and 2021).

These ceilings cover Voted Expenditure in addition to the National Training Fund ) and the Social Insurance Fund.
The ceilings are set at an aggregate level, and also at Ministerial Vote Group level.Capital and Current ExpenditureSince 2014, ceilings have been given for both capital and current expenditure in the Budget.

However, the processfor setting these ceilings is different.The capital expenditureceiling is mostly set and modified as part of the National Development Plan.
Meaning that while the proportional growth in capital expenditure ceilings is very large, changes to capital ceiling tend to be the result of conscious decisions and central planning for the level of capital invest to be made in the coming years.

However, as Figure 2 shows, the relationship is inverted when absolute values are used.

The absolute value of revisions in current expenditureceilings is significantly largerthan those for capital.
Tithe an Oireachtais Houses of the Oireachtas An Oifig Buiséid Pharlaiminteach Parliamentary Budget Office Modified Gross National (‘GNI*’) is: y GNI y Minus the depreciation on Intellectual Property y Minus the depreciation on leased aircraft y Minus the net factor income of redomiciled PLSs.

There are some potential drawbacks to using GNI* as a measure of economic activity in Ireland.

GNI* statistics are only produced on an annual basis; quarterly data is not available.
In addition, GNI* is calculated in a top- down manner, by subtracting items from headline GDP, rather than by modifying the components of GDP.

As noted by the Central Bank of Ireland, this means it is not possible to identify the contribution of specific sectors of the Irish economy to overall GNI*2.

MDD Modified Domestic Demand measures all spending by households and Government, and modified investment (total investment excluding some aircraft purchases and Intellectual Property investments).
Unlike GNI*, it is produced quarterly and can provide regular updates on the economy’s performance.

However, it does not capture the contribution of net exports, which positively impact the underlying economy.

Figure One: Irish Economic Growth - GDP, GNP, GNI* & MDD 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Indexed to 2010 (2010 = 100).

GDP GNP GNI* MDD 2 Central Bank of Ireland, The Disconnection of GDP from Economic Activity Carried out in Ireland.
PBO@oireachtas.ie www.oireachtas.ie/pbo 06 March 2023 Disclaimer: This document has been prepared by the Parliamentary Budget Office (PBO) for use by the Members of the Houses of the Oireachtas and to aid them in their parliamentary duties.

It is not intended to be comprehensive or definitive.

The PBO may remove, vary or amend any information contained therein at any time without prior notice.
The PBO accepts no responsibility for any references or links to, or the content of, any information maintained by third parties.

ParliamentaryBudgetOfficeQuarPBO Publication 11 of 2019IntroductionThe Medium-Term Expenditure Framework is a set of administratve procedures employed for the management of Voted Current Expenditure over the medium term by way of three-year ceilings.

The legal basis for these ceilings is set out by the Ministers and Secretaries (Amendment) Act 2013 (the Act).
These ceilings were first introducedon an administrativebasisin 2012, under the Comprehensive ExpenditureReport 2012-2014, and were subsequently place on a legal and procedural footing.

Ceilings are set out in each Budget for the following three years (e.g.

Budget 2019 includes ceilings for 2019, 2020 and 2021).

These ceilings cover Voted Expenditure in addition to the National Training Fund ) and the Social Insurance Fund.
The ceilings are set at an aggregate level, and also at Ministerial Vote Group level.Capital and Current ExpenditureSince 2014, ceilings have been given for both capital and current expenditure in the Budget.

However, the processfor setting these ceilings is different.The capital expenditureceiling is mostly set and modified as part of the National Development Plan.
Meaning that while the proportional growth in capital expenditure ceilings is very large, changes to capital ceiling tend to be the result of conscious decisions and central planning for the level of capital invest to be made in the coming years.

However, as Figure 2 shows, the relationship is inverted when absolute values are used.

The absolute value of revisions in current expenditureceilings is significantly largerthan those for capital.