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GDP and Modified GNI – Explanatory Note
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Globalisation presents significant challenges in terms of measuring economic activity. While this is the case in most advanced economies, the issues are particularly acute in an Irish context, given the large multinational footprint.
For policy-makers, there are additional challenges, most notably related to interpreting the real-time information embedded in standard, internationallyrecognised metrics such as Gross Domestic Product and Gross National Income. Movements in these aggregates have become increasingly disconnected from actual trends in living standards in Ireland.
New Irish-specific measures of activity – most notably ‘modified Gross National Income’ – attempt to control for (part of) the impact of globalisation on Irish macro-economic statistics. While this is an important step forward, the data are not yet available in ‘real’ terms nor at a sufficiently high frequency (the data are currently published on an annual basis).
In these circumstances, it is important that short-term cyclical analysis is cognisant of a wide suite of indicators: no single indicator provides a fully comprehensive overview of ‘true’ economic trends at present. The Department of Finance will continue to monitor all relevant metrics in order to fulfil its role in providing economic and budget advice to the Minister.
Finally, it must be stressed that, notwithstanding statistical innovations, Ireland’s legal obligations (in the area of fiscal rules, for instance) are assessed on the internationally-agreed methodologies and there is little prospect of any change to this.
