|Economic Growth||Inflation||International Trade||Government Finances||Unemployment|
Economic growth is commonly measured as the percentage growth in Gross Domestic Product (GDP) or Gross National Product (GNP) over a period. GNP differs from GDP by the net amount of incomes sent to, or received from abroad. In an open economy like Ireland, where multinational corporations play an important role (particularly via exports), the difference between GDP and GNP can be significant. This is due to the fact that profit outflows from multinationals can be much higher than income received from abroad by Irish companies.
Would you expect GDP to be higher than GNP? In Ireland’s case, GDP is actually larger than GNP. This is because the net factor income from abroad is usually negative due to the following reasons:
- Repatriation of profits by companies resident in Ireland
- Repayments on the foreign elements of our national debt
- The remittances of immigrants in Ireland sent abroad
Therefore, GDP is a better indicator of the level of economic activity in the country, while GNP is a better indicator of the standard of living in the country.
GDP v GNP Quarterly (% change on corresponding period of previous period)
Source: CSO – Quarterly National Accounts
Nominal GDP stood at around €256 billion at the end of 2016 increasing from the €244 billion figure in 2015, suggesting a 5.2% increase in GDP between 2015 and 2016. This compares to average growth rate of 1.9% in the EU 28 in 2016. Irish economic growth has outpaced the average EU growth rates in the past 4 years making Ireland the fastest growing economy in the EU.
Value added has increased in all of the main sectors of the economy, however main contributors to the growth in GDP in 2016 were industry (2.4%), building and construction (11.4%), distribution, transport, software and communications (7.8%) and agriculture (6.2%).
GDP v GNP Annually
Source: CSO – Quarterly National Accounts Dec 2016