About the NTMA
Business Areas

Irish Economy and Public Finances

July 2024

  • Macroeconomic outlook
      • Coming into the second half of 2024, the most recent data show an overall positive picture for the Irish economy, with some mixed trends in the first half of the year.
      • The last few years have highlighted the unique structure of the Irish economy. Ireland has a standard domestic retail/services economy which is augmented by a highly productive and fast-growing multinational sector. The two-speed nature of the Irish economy means that volatility can be expected in the usual measures of economic activity.
      • Following a growth rate of 8.6% in 2022, GDP fell by 5.5% last year. In Budget 2025, the Department of Finance forecast GDP to fall by -0.2% in 2024.
      • However, given that Irish GDP is distorted by the presence of multinationals, Modified Domestic Demand (MDD) is a more accurate measure of underlying domestic growth. Final MDD was up by 2.6% in from 2022 to 2023 and is predicted to grow by 2.5% in 2024. This growth in the domestic economy is largely driven by positive trends in the labour market and in personal consumption.
      • The labour market remains strong, with an unemployment rate of 4.3% in September. The labour force grew by 2.9% in in the 12 months to Q2 2024 and the employment rate increased by 2.7% in the same period. This is partially driven by the continued increase in the female labour force participation rate, which peaked in Q2 2024 at 61.4%.
      • Headline inflation was down to 0.0% in September 2024, continuing the downward trend since the peak of 9.6% in the summer of 2022 as the effect of the energy price spike abates. The Department of Finance estimates that 2024 headline inflation will be 1.7%. Prices continue to impact consumer spending, which grew by 4.8% in 2023 and are forecast to grow by 3.2% in 2024.
      • The increase in personal consumption, which comprises the majority of MDD, was partially counteracted by the decrease in modified investment (-4.4% in 2023). This has continued into 2024, with a decrease in modified investment of 6.7% from Q1 2024 to Q2 2024. Overall, modified investment is estimated to increase by a modest 0.2% in 2024.
      • This weakness in investment can also be seen in the sectoral breakdown of GVA, where construction contracted by 2.9% in 2023. The domestic side of the Irish economy as measured by domestic GVA grew by 6.1% in 2023. Professional, admin and support services were up by 2.5% while distribution, transport, hotels, and restaurants declined by 1.0%. Activity in the construction sector fell by 2.8% due to continuing building materials inflation as well as a readjustment to a higher interest rate environment. In the first half of 2024, domestic facing sectors similarly grew by 2.0%, as compared to H1 2023.
      • Multinational sectors like Industry (which is Pharma dominated) and ICT performed exceptionally during Covid and the years following. 2023 showed signs of slowdown for the Industrial sector. GVA in Industry declined by 21.7% in 2023, following growth rates of 22.8% and 22.2% in 2020 and 2021 respectively. In the ICT sector, growth was 7.4% in 2023, slightly faster than the 6.5% rate seen in 2022 but notably slower than average annual growth of 23.4% from 2020 to 2021. The softness in these sectors was reflected in exports of goods and services, which fell by 5.8% in 2023. This marks the first annual decline in exports since 2012. The weakness in Industry GVA continued in H1 2024.
      • The rising cost of living is partially offset by the improvement in household balance sheets seen over the past three years. Coming into the Covid crisis, Irish households were in a much better financial position than the last recession. Ireland had used the previous ten years to repair private sector balance sheets. From 2014-2019, disposable income expanded in aggregate and debt levels declined. In 2012, the debt-to-income ratio for Irish households was around 200%. In 2023, this was down below 100%.
      • Household balance sheets are not heavily indebted. Mortgage debt is mostly fixed at low rates for the next few years. The household savings rate has fallen in recent years from its peak in Q2 2020. The significant amount of savings accumulated during the pandemic makes the current decline a return to normality. There was a modest increase in household savings from 13.1% in Q4 2023 to 14.7% in Q1 2024.
      • Similar to GDP figures, current account data in Ireland should be taken with extreme caution given the presence of multinationals. Indeed, the unadjusted current account recorded a surplus of €14.4bn in 2018 but then a deficit of €75.4bn in 2019. In 2023 a surplus of €41.3bn was recorded. A clear understanding of the current account is difficult in the face of these distortions. The CSO has released a modified current account (CA*) measure which aims to be consistent with its GNI* calculation. This CA* metric was in surplus from 2014-23, with a surplus of €9.5bn in 2023.
  • Key Economic Figures

    • 2023

      2024F

      2025F

      2026F

      2027F

      2028F

      Consumer spending (% chg vol)

      4.8

      3.2

      3.3

      2.9

      2.7

      2.6

      Government spending (% chg vol)

      4.3

      3.0

      2.8

      1.8

      1.7

      1.7

      Modified Investment (% chg vol)

      -4.4

      0.2

      1.9

      4.8

      4.9

      4.6

      Exports (% chg vol)

      -5.8

      8.5

      1.9

      3.8

      3.8

      3.7

      GDP (% chg vol)

      -5.5

      -0.2

      3.9

      3.7

      3.7

      3.6

      Modified Domestic Demand (% chg vol)

      2.6

      2.5

      2.9

      3.0

      2.9

      2.8

      Nominal GNI* (%chg vol)

      290.9

      314.4

      331.1

      348.3

      365.8

      383.6

      Nominal GDP (€bn)

      510.0

      525.1

      557.3

      590.3

      625.1

      661.6

      Employment (% chg)

      3.4

      2.4

      1.8

      1.5

      1.2

      0.9

      Unemployment rate (% labour force)

      4.3

      4.4

      4.5

      4.5

      4.5

      4.5

      HICP (% chg yoy)

      5.2

      1.7

      1.9

      2.0

      2.0

      2.0

      GDP Deflator (% chg yoy)

      3.6

      3.2

      2.1

      2.1

      2.1

      2.1

      General Government Balance (€bn)

      8.3

      23.7

      9.7

      8.3

      7.1

      10.3

      General Government Balance (% GNI*)

      2.9

      7.5

      2.9

      2.4

      1.9

      2.7

      Primary Government Balance (% GNI*)

      4.1

      8.5

      4.0

      3.3

      3.0

      3.8

      General Government Debt (€bn)

      220.7

      217.2

      211.2

      212.5

      217.8

      224.8

      General Government Debt (% GDP)

      43.3

      41.4

      37.9

      36.0

      34.8

      34.0

      General Government Debt (% GNI*)

      76.1

      69.1

      63.8

      61.0

      59.5

      58.6

      Average interest rate on stock of GG debt

      1.6

      1.4

      1.6

      1.6

      1.8

      1.9


      Source: Department of Finance (Budget 2025).

  • Annual Public Finances
      • In 2024 the General Government Balance is expected to be €23.7bn. However, this headline figure is skewed by the inclusion of the €14bn from the CJEU ruling (See below). With the spike in revenues, this surplus is expected to increase to 7.5% of GNI* in 2024, before returning to the 2023 level of 2.9% in 2025. Excluding these revenues, Corporate Tax receipts continue to be a significant driver of government surpluses.
      • Corporate Tax revenues have more than doubled since 2020 and are expected to grow 23.3% year to date on the same period last year. In total, Corporate Tax receipts are predicted to come in at €29.5bn this year, of which €15.9bn is estimated to be ‘windfall’. When these “windfall” receipts are excluded from GGB, the Government is running an underlying deficit of €6.3bn in 2024 and €5.7bn in 2025.
      • Outside of these “windfall” and once-off elements, there has been continued increase in both tax revenue and expenditures. In addition to increased Corporation Tax revenues, both income tax and VAT are expected to increase by 7.1% and 7.0% respectively year to date on the same period last year. These increases indicate that growth is supported by continued strength in consumption and in the labour market.
      • Due to this fortunate position (albeit one which is highly concentrated on Corporation Tax), the Government has announced two new long-term investment funds - the Future Ireland Fund (FIF) and the Infrastructure, Climate and Nature Fund (ICNF). The aim is to ring-fence strong, but volatile corporate tax receipts to help alleviate spending pressures in the future. The FIF will be used to meet the Exchequer costs in the decades to come such as an ageing population and the digital and climate transitions. Each year 0.8% of GDP will be transfer to the FIF (€4-€6bn per annum). The ICNF will be capitalised with €2bn a year from 2025 to 2030. The fund will be more counter-cyclical and will ensure future Government’s ability to continue capital spending even during an economic downturn. It will also have a climate and nature component to help achieve carbon budgets through capital projects if carbon targets are unmet. Both funds have been seeded with the €6bn which resided in the National Reserve Fund.
      • In September 2024, the Court of Justice of the European Union (CJEU) ruled on the Apple State aid case. The CJEU set aside the judgement of the General Court and gave a final judgment in the matter. The CJEU confirmed the Commission’s decision that Ireland granted state aid. As the Government have stated, the case involved an issue that is now of historical relevance only; the Revenue opinions date back to 1991 and 2007 and are no longer in force. Ireland will respect the findings of the CJEU regarding the tax due in this case. The process of transferring the assets (€13bn plus interest) in the Escrow Fund to Ireland will take several months. In his Budget Speech, the Minister for Finance outlined the Government’s intention to use the funds for long term infrastructure spending. As stated previously, the NTMA has not included these funds in any of its issuance plans.
      • The NTMA completed its issuance for 2024 in September at €6bn. This is at the lower end of the €6-10bn funding range for 2024, reflecting the modest redemptions in the year, the Exchequer’s strong cash and fiscal position.
      • Following rapid growth, Ireland has managed to reverse the impact of Covid-19 on the debt position with a debt-to-GDP ratio of 43.7% in 2023 (relative to a pre-Covid debt ratio of 57%).
      • However, given the long-standing GDP distortions, Debt-to-GNI* is a more useful metric for evaluating Ireland’s debt sustainability. It has fallen from close to 170% in 2013 to 75.9% in 2023. The Department of Finance estimates that this will fall in 2024 to 69.1%. At the same time, the weighted maturity of the debt stands above 10 years - one of the longest in Europe. Ireland’s annual interest costs have fallen to €3.5bn in 2023 and is forecast to fall further to €3.1bn in 2024.
      • The GDP denominator issue means that other metrics of debt serviceability are required. Debt-to-GG Revenue (145.8% 2024f) and interest as a percentage of revenue (2.1% 2024f) are more apt measures for comparison with other sovereigns regarding Ireland’s debt serviceability.
      • It should be noted however that Debt-to-GNI* understates the ability of Ireland to repay debt. GNI* excludes certain activities that the Irish State could possibly tax and hence excludes some part of its ability to repay. This means that the Debt-to-GNI* ratio is likely too high. With debt-to-GDP too low, it is fair to say the reality of Ireland’s “proper” debt ratio is somewhere in between.
  • Key Annual Public Finance Figures

    • Description

      European
      System of
      Accounts
      (ESA)
      Code

      2023

      2024F

      2025F

      2026F

      2027F

      2028F

      €bn

      €bn

      €bn

      €bn

      €bn

      €bn

      Revenue

      Taxes on production and imports

      D.2

      33.0

      34.6

      36.6

      38.0

      39.5

      41.5

      Current taxes on income, wealth

      D.5

      59.9

      67.8

      69.2

      72.0

      73.7

      79.4

      Capital taxes

      D.91

      0.6

      0.6

      0.6

      0.6

      0.7

      0.7

      Social contributions

      D.61

      21.6

      22.7

      25.5

      27.5

      29.5

      32.0

      Property Income

      D.4

      2.0

      2.0

      2.0

      2.0

      2.2

      2.4

      Other

      6.6

      21.2

      7.1

      7.2

      7.3

      7.6

      Total revenue

      TR

      123.7

      149.0

      141.0

      147.3

      152.9

      163.6

      Expenditure

      Compensation of employees

      D.1

      31.1

      34.5

      36.5

      38.5

      40.2

      41.9

      Intermediate consumption

      P.2

      19.0

      19.4

      19.6

      20.9

      22.1

      22.8

      Social payments

      D.6

      39.8

      44.2

      44.7

      46.7

      48.6

      50.4

      Interest expenditure

      EDP_D.41

      3.5

      3.1

      3.5

      3.3

      3.8

      4.2

      Subsidies

      D.3

      2.5

      2.4

      2.4

      2.4

      2.5

      2.5

      Gross fixed capital formation

      P.51

      11.8

      13.3

      16.1

      17.5

      18.5

      20.7

      Capital transfers

      D.9

      2.2

      2.5

      3.0

      3.1

      3.0

      3.0

      Other

      5.5

      6.0

      5.5

      6.5

      7.1

      7.8

      Total expenditure

      TE

      115.4

      125.3

      131.3

      138.9

      145.8

      153.3

      General Government Balance (GGB)

      B.9=TR-TE

      8.3

      23.7

      9.7

      8.3

      7.1

      10.3

      GGB as % of GNI*

      2.9%

      7.5%

      2.9%

      2.4%

      1.9%

      2.7%

      Underlying GGB (excl. CT windfalls) €bn

      -2.9

      -6.3

      -5.7

      -7.0

      -7.1

      -6.9

      Primary Balance (PB) €bn

      11.8

      26.8

      13.2

      11.6

      10.9

      14.6

      Primary Balance as % of GNI*

      4.1%

      8.5%

      4.0%

      3.3%

      3.0%

      3.8%


      Source: Department of Finance Budget 2025

  • National Accounts Distortions
      • From 2015 onwards, Ireland’s national accounts are distorted by the reclassification of multinational companies and their assets as being resident in Ireland. Given the presence of such large distortions, GDP, GNP and even GNI have less information content when it comes to understanding Ireland’s “true” economic activity. That is, to understand the wealth and income generating capability of the Irish people we need to look to other metrics.
      • The reclassification of multinational companies’ activity as Ireland expanded the capital stock by c. €0.7trn over the course of 2015-2022. In some cases, whole companies re-domiciled in Ireland while in other cases multinationals moved assets (mostly intangibles) to their Irish-based subsidiary. The goods and services produced by the additional capital are mainly exported. This resulted in a step change in net exports in 2015 and the large year-on-year increases in net exports since.
      • Often the goods produced using the intangible assets based in Ireland are produced through “contract manufacturing”. This is where an Irish based company contracts out manufacturing to another company (typically outside of Ireland). The result of contract manufacturing is a goods export is recorded in the Irish Balance of Payments even though it was never produced in Ireland. There is little or no employment effect in Ireland from this contract manufacturing.
      • Contract manufacturing (CM) has occurred in Ireland prior to 2015 but did not have a significant net impact on GDP since the company engaged in CM would send royalties back to its parent as a royalty import. However now that the parent/intangible asset is here, there is no royalty import and Ireland’s GDP is artificially inflated. This scale of contract manufacturing is unprecedented.
      • But not all intangible assets in Ireland are utilised like this. On the services side, large amounts of intellectual property are now based in Ireland, mostly relating to companies in the ICT sector. Accordingly, we have seen Computer Services exports increase dramatically. Theses exports are booked as Irish as are the resulting profits. Such profits are repatriated in time and should not be considered income for Irish households.
      • Complicating matters further, there are subsidiary companies who exports computer services out of Ireland but also pay royalties back to parent companies (a royalty import). These flows will offset mostly but will push up both imports and exports in Ireland balance of payments.
      • Lastly, the presence of aircraft leasing companies and redomiciled PLCs in Ireland can skew the national account figures to a smaller but still significant amount. In adjusting for globalisation effects, these distortions need to be considered.
      • The upshot of all of this is that Ireland’s investment, exports and imports are heavily skewed by multinational companies’ activity. However, there is clearly real activity occurring in Ireland. Employment in multinational sectors has increased dramatically and make up 12% of employment, and 19% of the country’s wage bill. Lastly, the corporate tax paid in Ireland from these companies has grown exceptionally strongly.
      • In response to the distortions, the CSO have worked to provide indicators and detailed datasets that give a better understanding of Ireland’s highly globalised economy. New supplementary indicators include one closely related to Gross National Income (known as GNI*) and another is a modified version of domestic demand (MDD).
      • For GNI*, Gross National Income is stripped of the profits of redomiciled companies, depreciation on R&D/ IP assets and depreciation on aircraft leasing. On a nominal basis, GNI* amounted to €291bn in 2023 compared with €510bn for Gross Domestic Product (GDP). This figure suggests the Irish economy is approximately half the size of what GDP would indicate.
      • Of note, GNI* rose by a significant 9.0% in nominal terms from 2022 to 2023. Adjusting for prices, GNI* grew by 5.0% in 2023 and is forecast to grow by a similar 4.9% in 2024. This highlights how volatile the Irish National Accounts can be and how there is a need for a suite of indicators to best capture trends.
      • Modified final domestic demand (MDD for short) is proving to be a useful metric but one with its own limitations. This measure is domestically focused and is constructed to be less affected by the activities of multinational companies. The measure includes private consumption, government consumption and a modified metric for investment. Importantly, MDD ignores the net exports channel altogether where much of the distortions occur. The downside here is that domestic net exports is ignored too. A plus point for MDD is that it is released quarterly (versus the annual GNI* release). It can thus give us a more-timely gauge of the real economy.
      • MDD (which excludes inventories) fell in real terms by 5.7% from 2019 to 2020 but rebounded to grow by 8.8% from 2021 to 2022. Growth in 2023 was more modest at 2.6%, and is forecast to be 2.5% in 2024.
  • National Accounts Distortions - Data Table

    • National Account – Current Prices (€ bn)

      2018

      2019

      2020

      2021

      2022

      20231

      Gross Domestic Product (GDP)

      335

      364

      382

      449

      521

      510

      minus Net Factor Income

      -82

      -90

      -104

      -129

      -165

      -122

      = Gross National Product (GNP)

      253

      273

      278

      320

      356

      388

      add EU subsidies minus EU taxes

      1.1

      1.1

      1.1

      0.8

      0.7

      0.3

      = Gross National Income (GNI)

      254

      274

      280

      321

      357

      388

      minus factor income of re-domiciled companies

      -5

      -5

      -4

      -10

      -4

      -8

      minus depreciation on foreign owned IP assets

      -48

      -53

      -67

      -70

      -75

      -78

      minus depreciation on aircraft leasing

      -9

      -10

      -10

      -10

      -10

      -11

      = Nominal GNI*

      192

      207

      198

      231

      267

      291

      GNI* (y-o-y growth)

      7.8

      -4.1

      16.3

      15.7

      9.0

      Real GNI*

      225

      230

      224

      255

      267

      280

      Real GNI* (y-o-y growth)

      2.2

      -2.8

      13.9

      4.6

      5.0

      1 Preliminary results