* GDP growth figure of 26 percent in 2015 prompted review
* New yardstick strips out effect of multinationals' EU
* "Adjusted Gross National Income" to help fiscal planning
(Adds context and quotes)
By Padraic Halpin
DUBLIN, Feb 3 Ireland will use a new yardstick
to measure the health of its economy to account for its status
as the European base for a number of major multinationals,
something that has made a nonsense of conventional measures.
Last year alone, growth in gross domestic product (GDP) was
adjusted up to 26 percent from 7.8 percent after firms' capital
assets were revalued.
When U.S. economist Paul Krugman suggested the number was a
fantasy, coining the term "leprechaun economics", the government
sensed it might not be getting full credit for a rapid economic
recovery admired around Europe.
The new measure, "Adjusted Gross National Income" - or
"GNI*" - will be phased in by the end of 2018 and exclude the
effects of firms re-domiciling, or relocating or depreciating
their capital assets, the Central Statistics Office (CSO) said
"It is critically important to generate reliable measures of
the aggregate size of the economy," a group of economists and
academics, chaired by Irish Central Bank Governor Philip Lane,
said in a series of recommendations. "It has long been
recognised that GDP is an inadequate indicator for Ireland."
CSO Director General Padraig Dalton said Krugman's comment
risked trivialising a complex issue, noting that Ireland was a
case study for the impact of globalisation on economic
statistics around the world.
Ireland has a population of only 4.8 million, about the same
as the U.S. state of Alabama, but is the European base for
Google, Apple and other multinationals, not
least because of its low corporate tax regime. The dramatic
revisions of 2015 were largely the result of the relocation of
entire balance sheets from outside the European Union.
At the stroke of a pen, they meant Ireland's proportional
debt burden fell to 79 percent of GDP, below that of Belgium,
France and Austria, rather than 94 percent as originally
estimated. By other measures, Ireland's debt burden, which
soared after the 2008 financial crisis, remains among the
highest in the EU.
Lane said the new indicator would help with fiscal planning,
assessing the sustainability of private and public debt stocks,
and judging the appropriate level of credit in the economy.
His group also recommended that the CSO publish adjusted
data on underlying investment and domestic demand as well as
similarly-adjusted measures for exports and imports to provide
more meaningful indicators.
Even if the official GDP figure for 2015 is misleading, a
swathe of secondary numbers, from unemployment to retail sales
and business surveys, have pointed to a sharp recovery and back
up Ireland's record as the fastest growing economy in the
European Union for the last three years.
Economic growth in 2015 would probably have been of the
order of 6 percent by the new GNI* measure, the CSO said.
(Reporting by Padraic Halpin; Editing by Tom Heneghan)