The report in the Sunday Business Post that Ireland will take a €352m cut in money from the EU recovery and resilience fund is the consequence of assessing Irish economic performance on the basis of gross domestic product (GDP).
The Irish GDP increase presents an artificially strong image of the Irish economy because it reflects the total economic activity recorded in Ireland.
With a huge number of multinational companies headquartered in Ireland, attracted by corporation tax rates, Ireland can have a high GDP but the wealth generated by these multinational businesses doesn’t circulate in the wider Irish economy.
The original measurement by the EU for the first tranche of what was intended to be an €850m fund, Ireland’s share of the EU €750bn Recovery and Resilience fund, involved wider measures including population and unemployment rate over five years as well as GDP.
Moving to GDP measurement alone presents Ireland in an artificially strong position because of the multinational dimension and exceptional performance of the pharmaceutical sector, Ireland’s largest export in the past year.
It may be technically correct to say that we won’t know if the cut of €352m will be the actual amount as this is based on the current forecast and the actual performance of the Irish GDP could turn out different from the forecast.
However, it is unlikely to be a major variation given the importance of multinational companies to Ireland and their likely continued strong performance in the time ahead, especially in the pharmaceutical sector.
Difference in agriculture and multinationals
Based on official statistics alone, Irish agriculture represents less than 1% of GDP. Yet when another measure of national economic performance, Gross National Income (GNI), is used, agriculture represents 6.7% and 9.5% of goods exports, employing 164,000 people or 7.1% of total employment (CSO/Department of Agriculture). GNI reflects the income retained in the country whereas GDP reflects the amount of money earned in the country though not necessarily retained as businesses repatriate profits.
Even the GNI measurement doesn’t fully reflect the value of agriculture to the Irish economy.
Value is created by farmers rearing livestock or milking cows, with further value added in the processing sector.
Ultimately, 90% of the production is sold outside Ireland with the proceeds of these sales returned to rural economies scattered across Ireland. Virtually none of the proceeds of produce from Irish farms and factories is invested outside the region in which it was generated.
Consequences of the cut for Irish farmers
Ireland was one of 15 EU countries to be allocated an extra payment in the EU CAP budget because of “structural challenges in their agriculture”.
The EU Farm to Fork strategy, with its focus on environment, reduction of greenhouse gas emissions and increasing organic farming, will require huge EU and national government investment in the reorientation of Irish farming.
The fund is identified by Government as a key source of revenue for this purpose and if it is cut by a large amount, then it is foreseeable farmers will lose in a big way, if they are forced to farm in a different less productive way with reduced financial support to fund the transition.
Using GDP to measure the performance of the Irish economy doesn’t properly reflect the true position given the inclusion of multinational companies.
It follows that this shouldn’t be the basis for allocating EU funding that is being depended on to reshape the core Irish agricultural economy in its transition to compliance with the new demands of EU policy.
Read more
What does it mean for Irish farmers?
CAP budget finally over the line
Irish CAP budget has been maintained – Taoiseach
Sharing of Brexit adjustment reserve fund
The report in the Sunday Business Post that Ireland will take a €352m cut in money from the EU recovery and resilience fund is the consequence of assessing Irish economic performance on the basis of gross domestic product (GDP).
The Irish GDP increase presents an artificially strong image of the Irish economy because it reflects the total economic activity recorded in Ireland.
With a huge number of multinational companies headquartered in Ireland, attracted by corporation tax rates, Ireland can have a high GDP but the wealth generated by these multinational businesses doesn’t circulate in the wider Irish economy.
The original measurement by the EU for the first tranche of what was intended to be an €850m fund, Ireland’s share of the EU €750bn Recovery and Resilience fund, involved wider measures including population and unemployment rate over five years as well as GDP.
Moving to GDP measurement alone presents Ireland in an artificially strong position because of the multinational dimension and exceptional performance of the pharmaceutical sector, Ireland’s largest export in the past year.
It may be technically correct to say that we won’t know if the cut of €352m will be the actual amount as this is based on the current forecast and the actual performance of the Irish GDP could turn out different from the forecast.
However, it is unlikely to be a major variation given the importance of multinational companies to Ireland and their likely continued strong performance in the time ahead, especially in the pharmaceutical sector.
Difference in agriculture and multinationals
Based on official statistics alone, Irish agriculture represents less than 1% of GDP. Yet when another measure of national economic performance, Gross National Income (GNI), is used, agriculture represents 6.7% and 9.5% of goods exports, employing 164,000 people or 7.1% of total employment (CSO/Department of Agriculture). GNI reflects the income retained in the country whereas GDP reflects the amount of money earned in the country though not necessarily retained as businesses repatriate profits.
Even the GNI measurement doesn’t fully reflect the value of agriculture to the Irish economy.
Value is created by farmers rearing livestock or milking cows, with further value added in the processing sector.
Ultimately, 90% of the production is sold outside Ireland with the proceeds of these sales returned to rural economies scattered across Ireland. Virtually none of the proceeds of produce from Irish farms and factories is invested outside the region in which it was generated.
Consequences of the cut for Irish farmers
Ireland was one of 15 EU countries to be allocated an extra payment in the EU CAP budget because of “structural challenges in their agriculture”.
The EU Farm to Fork strategy, with its focus on environment, reduction of greenhouse gas emissions and increasing organic farming, will require huge EU and national government investment in the reorientation of Irish farming.
The fund is identified by Government as a key source of revenue for this purpose and if it is cut by a large amount, then it is foreseeable farmers will lose in a big way, if they are forced to farm in a different less productive way with reduced financial support to fund the transition.
Using GDP to measure the performance of the Irish economy doesn’t properly reflect the true position given the inclusion of multinational companies.
It follows that this shouldn’t be the basis for allocating EU funding that is being depended on to reshape the core Irish agricultural economy in its transition to compliance with the new demands of EU policy.
Read more
What does it mean for Irish farmers?
CAP budget finally over the line
Irish CAP budget has been maintained – Taoiseach
Sharing of Brexit adjustment reserve fund
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