Monday, March 26, 2012

26/3/2012: QNA Q4 2011 - Part 5



In the first post on QNA results for 2011 I covered data for annual GDP and GNP in constant prices terms. The second post focused on GDP/GNP gap and the cost of the ongoing Great Recession on the potential GDP and GNP. The third post focused on quarterly sectoral decomposition of GDP and GNP in constant prices terms. And a short digression from QNA results here showed how difficult it is, really, to reach any consensus on some of Ireland's economic performance parameters. Following these, Part 4 of QNA analysis focused on nominal (current prices) quarterly data. 


In this and subsequent posts I will provide some brief snapshots of specific points of interest arising from the QNA data. This post will focus on capital investment decline during the crisis.



As chart above clearly shows, in real terms (controlling for inflation):

  • Gross fixed capital formation stood at €16,924 million in 2011, which was 10.87% below the levels of gross investment in 2010 and 57.17% below the levels of investment at the peak of pre-crisis activity in 2007.
  • Cumulated gross fixed capital investment in the ten years of 2001-2010 was €311,111mln, which at 8% annual amortization & depreciation rate implies demand for €24,889mln in gross financing to maintain. Thus gross fixed capital formation came in some €7,965mln short of amortization & depreciation requirements of the economy.
  • Current level of gross fixed capital formation is consistent with €16,852mln attained in 1996 - remember, these are in constant prices.

In current market prices terms, Gross fixed capital formation in Q4 2011 was 1.9% below that in Q4 2010 and 66.8% below Q4 2007 levels. In Q3 2011, capital investment was down 18.3% yoy.


These figures show that Irish economy is equivalent to a body that consumes itself. It also shows that the alleged 'huge FDI inflows' are not sufficient to offset for domestic capital investment collapse.

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