The Phantom Wealth of Ireland
Is Ireland’s GDP an Economic Miracle or Statistical Smoke?
Hezamary Paul
Ireland’s economy appears to be booming: over the past decade, its GDP has grown by an average of about 9% per year, outpacing nearly every other European country. On paper, it sounds like an economic fairytale—businesses are thriving, wages are rising, and prosperity seems to be everywhere. But if you ask the average Irish person whether they genuinely feel 9% richer each year, you are likely to get a skeptical response. So, is Ireland’s rapid growth truly an economic miracle, or might it simply be statistical smoke?
To understand why some people doubt these rosy numbers, consider this analogy: it is like a landlord who rents out property in Ireland while the bulk of the profits flow back to the tenants—many of whom are not local. In a similar way, Ireland’s headline GDP is boosted by global corporations whose profits largely leave the country. This can inflate the official figures yet provide relatively little benefit to ordinary Irish residents.
Why do we use GDP as a measure of wealth in the first place?
In simple terms, an increase in real GDP is seen as an improvement in an economy’s well-being. GDP is given importance as an economic wealth metric because it provides information about the size of an economy and how it is performing. However, this is a perilous metric to use in the case of Ireland; a significant proportion of Ireland’s wealth does not belong to the Irish.
Irish GDP gets a major boost from multinational corporations (MNCs) that use the country as a base for their operations. The low corporate taxes, moderate wages, and a skilled workforce attracted big names like Apple, Google, and Facebook. In 2023, the Central Statistics Office (CSO) found that foreign-owned MNCs generated 71% of total turnover, even though they made up less than 4% of the Irish business economy—a striking imbalance.
These foreign-owned corporations bring in massive capital investment and generate profits. In the last quarter of 2024 alone, foreign direct investment (FDI) jumped by €11.3 billion, and 87% of Ireland’s corporate tax revenue came from MNCs. However, much of that revenue is not tied to the local economy. Instead, a large portion of the profits are repatriated to other countries or funnelled through global tax avoidance schemes. As a result, Ireland’s GDP swells with foreign income which has little to do with domestic economic activity. Here we face the illusion of a thriving economy while masking the reality of lower local wealth generation.
To see through this inflated picture, economists rely on GNI* (Modified Gross National Income), a more accurate measure of Ireland’s true wealth. With this indicator, we can better measure the size of the Irish economy by excluding the effects of globalisation. In 2023, while Ireland’s GDP was near €510 billion, GNI* stood at just €290 billion. By simple subtraction, about €220 billion (43% of GDP) effectively left the country. While GDP accounts for the profits from the intellectual property of MNCs and leased aircraft, GNI* includes neither of these benefits. GNI* strips away the illusion, revealing Ireland’s true economic reality.
Comparison of Gross Domestic Product, Modified GNI from 2015 to 2023. Source: CSO Ireland Annual National Accounts 2023.
What does this mean for the average Irish person?
The difference between GDP and GNI* highlights the economic paradox: the high GDP paints Ireland rich while the low GNI* explains the struggle of many citizens with high living costs and stagnant wages. Housing is one of Ireland’s major crises with soaring rent and property prices. At the same time, wages have not kept up with inflation, meaning that even a steady job is not enough to cover basic expenses. This creates a financial strain as people watch their purchasing power erode while the cost of living soars.
As the Irish population suffers from a cost of living crisis, the inflated GDP can hinder public policy decisions to resolve the issue. Policymakers use GDP as a key metric to guide decisions on taxation, government spending, and infrastructure investment. However, Ireland’s inflated GDP creates a misleading sense of wealth. Ireland’s GDP makes it appear wealthier than it is which can reduce eligibility for European Union funding and encourage tighter fiscal policies. FDI and GDP growth may reduce the urgency to address underfunded public services, further exacerbating affordability issues.
Some may argue that although FDI disproportionately inflates Irish GDP, it also plays an indispensable role in the growth of the Irish economy. FDI has created significant employment with close to 275,000 people working in foreign-owned enterprises. A large proportion of this job creation is in regional areas leading to economic growth across the country. FDI has also driven investment in research and development, bringing not only capital but also advanced technologies and knowledge. These investments could help Irish businesses scale and compete globally. Even still, one cannot deny that an overarching dependence on FDI is bound to be unsustainable.
Despite the advantages of FDI, the issue lies in long-term stability. If MNCs decide to relocate, the economic gains credited to them could disappear almost overnight, leaving domestic businesses underdeveloped. What will happen if we suddenly stop receiving FDI? A massive economic contraction would arise, where GDP would quickly shrink toward GNI*. Ireland would witness a sharp drop in corporate tax revenue, leading to budget shortfalls, job losses, and overall economic stagnation.
How then can we build a sustainable economy without an overarching dependence on FDI?
Given these risks, Ireland must explore alternative methods of domestic wealth generation. We must focus on strengthening our GNI* metric. Policy solutions should focus on boosting income that remains within the country. Ireland’s over-reliance on corporate tax from a few MNCs is incredibly risky. Policymakers could consider a diversified tax system which ensures MNCs contribute fairly while keeping Ireland competitive. Profits from multinational tax revenue could be stored as windfall tax reserves in case of economic shocks. This will prevent external money from seeping into our GDP. It is also advisable to provide tax incentives for domestic firms and encourage reinvestment in them. In these ways, Ireland will witness increased domestic tax revenue leading to sustainable public investment.
Apart from simply encouraging domestic production, Ireland must take bold steps in diversifying its economy. One of its greatest untapped benefits lies in green energy. With strong renewable energy resources, Ireland has the potential to become a global leader in green energy. In 2024, Ernst & Young (EY) named Ireland as the fifth most attractive country in the world to invest in green energy products. Already a world leader in onshore wind generation, and having significant offshore wind resources, Ireland has the potential to drive notable economic growth. By investing in green energy, Ireland could create a new pillar of economic strength: one that generates domestic wealth rather than relying on foreign profits. A thriving renewable energy industry would anchor investment within the country, boosting GNI* and ensuring long-term economic sustainability.
Ultimately, the only way to close the widening gap between Ireland’s GDP and GNI* is by having the courage to rebuild the economy’s foundations. If we truly wish for an economic miracle to appear from statistical smoke, we must look within rather than beyond. It is high time for Ireland to shift its focus from GDP to using metrics like GNI* as the standard for measuring economic success. Long-term economic sustainability can only be achieved through intrinsic improvement. In a world where wealth is measured by numbers, it’s time we built an economy that truly enriches its people, not just its statistics.
