Regional GVA (GDP)[1] figures for 2015, and preliminary figures for 2016, were published recently by the CSO. The 2015 figures are of particular interest as that year (the year of leprechaun economics), there was a level shift in the size of the economy. The relocation to Ireland by significant Multi National Enterprises (MNEs) of some or all of their business activities and assets (in particular valuable Intellectual Property) alongside increased contract manufacturing conducted abroad (which is included in Irish accounts), all contributed to the very significant growth in GDP.
There has been much discussion of the issue (see here, here and here) and a review of the statistics used to produce the data. In addition the CSO recently held a seminar on the impact of globalisation on Ireland’s accounts, with papers available here). The significant change in GDP in 2015 (a 26% rise on 2014) is, of course, played out at a regional levels and is evident in the regional GDP and GVA data. However, because of the significant impact of a few businesses in some figures, for reason of confidentiality the CSO has not published GVA data at regional level for Dublin or for the South West (the ‘invisible’ regions of the title).
This is, of course, very problematic for those seeking to understand the economies of these regions and for those of us interested in comparing regional economic activity. For regions, measures of progress and disparity and measures of how well they are doing, whether they are catching up or falling behind are all key issues considered using GVA data. Nationally, other indicators (including GNI*, Modified Domestic Demand and a Modified Current account (CA*)) have been developed to help improve our understanding of growth and change in the domestic economy. It is to be hoped that consideration will be given to producing other regional economic indicators (such as a regional GNI*) which could add to our understanding of changing regional economies.
This post focuses on the level shift in GVA which occurred in 2015 and its impact in regional statistics, while my next post will examine other (more traditional) aspects of regional GVA in more detail. In this post Dublin, and the South West are considered together.
The size of the Regional Economies
Much of the dramatic increase in GVA was concentrated in Dublin and the South West (although, as discussed below, it was not confined to these regions), so it is useful to look at how much these regions contributed to Irish GDP in 2015 (See Figure 1). The two regions of Dublin and the South West together accounted for more than two thirds (67%) of Irish GVA, although, interestingly this was not a dramatic increase on 2014 when the two regions contributed 63% of GVA. This is partly because most regions experienced level shifts in their GVA between the two years.
Figure 1: Regional contribution to Ireland’s GVA in 2015
*Dublin and South West are not a ‘region’ but are shown together as data not available for these two regions (own calculation from data).
Source: CSO, 2018, County Incomes and Regional Accounts Table 9 GVA per Region at Current Market Prices (GDP), 2007 to 2016
Output from these regions over time
It is also useful to look at the changing contribution of the two regions with the largest economies over a longer time period (Figure 2). In 2000, Dublin and the South West contributed 57% of national GVA. This has been rising, particularly since 2010, and it reached 67% in 2015 (and remains 67% in the 2016 estimate). This indicates the very significant concentration of high value added activity in these two regions, a concentration which has been increasing over time.
Figure 2: Percentage of National GVA from Regions 2000-2015
Source: CSO, 2018, County Incomes and Regional Accounts table RAA01
Of course, before 2015, these two regions could be considered separately, and in 2014 Dublin contributed 45% of national GVA while the South West contributed 18%. In 2002 the South West accounted for 20% of GVA and Dublin 37% (figures for the South West generally varied between 18 and 20% of national GVA over this period).
GVA per person in Regions
While the above discussion has focused on the amount of GVA contributed by the regions it is, in general, more useful to consider GVA per person as a means of comparing regions (because of different regional sizes). Given the lack of data for two of the NUTS 3 regions, it is easiest to look at (Figure 3) NUTS 2 level regions i.e. the Border, Midland and West (BMW) region and the Southern and Eastern (S&E) region (which includes both Dublin and the South West). GVA per person has always been significantly higher in the S&E region than in the BMW. In 2000 it was €28,490 in the S&E and €19,148 in the BMW, a difference of €9,342 per person. The figures followed a similar pattern (with some minor variation in the disparity) over the year to 2012 when the trends began to diverge, most dramatically in 2015. In that year GVA per person in the S&E was €63,179 (up from €44,464 per person in 2014), and was only €23,606 in the BMW. This is a very significant difference of €39,573 in GVA per person.
Figure 3: Gross Value Added (GVA) per person at Basic Prices (Euro) by NUTS2 Region and Year (2000 to 2015)
Source: CSO, 2018, County Incomes and Regional Accounts table RAA01
While the difference in GVA is dramatic, it should be remembered that, in relation to household income, which is what is relevant to most people, differences in income from economic activities are, to some extent, smoothed out by taxation and social transfers (see here for discussion of 2015 Household incomes at regional level). However, the very different output levels among regions are significant and deserve attention. If high value added activity remains concentrated in a few regions, disparities will continue to widen and there will be an ongoing perception that some regions are ‘dependent’ on others for transfers. Indeed, without growth in higher value added activity and better quality employment this would become inevitable. A focus on growing weaker regional economies and increasing higher value added activities (and not just from MNEs) is essential to growing our national economy.
Which regions are most affected by the 2015 level shift?
Although the data for Dublin and the South West has been supressed for reasons of confidentiality, it is clear that these regions experienced a level shift in their GVA between 2014 and 2015 (see Figure 4 below). But most other regions also experienced a significant increase, or level shift.
It should be noted that, in this post, we are looking at GVA rather than GDP (see footnote 1)[2]. While there was a startling 26% increase in GDP in Ireland in 2015 (published in July 2016), the increase GVA for the State was even bigger in 2015 (37%). See here for more information on this and on the MNE components of GVA.
As expected, the largest increase (46%) in GVA was in Dublin and the South West (again, these are combined as data for these regions was not published[3]). But the other regions in the S&E also experienced a significant increase, with the Mid East, Mid West and South East all showing increases in GVA of more than 30%.
Figure 4: Increase in GVA in NUTS 3 regions between 2014 and 2015
Source: CSO, 2018, County Incomes and Regional Accounts Table 9b GVA per Region at Basic Prices
In contrast, the three regions which together make up the NUTS2 BMW region had much smaller increases in GVA. Between 2014 and 2015 GVA in the Midland region increased by 17%, in the West by 10% and in the Border region by only 6%. The impacts of globalisation on GVA statistics are significantly less in the BMW region, which is much less dependent on the globalised sectors (though consequently they also have much lower economic output).
Preliminary data for 2016 shows a return to more normal GVA growth rates between 4% (Mid East and West) and 7% in the Border region. The ‘Dublin and South West group’ shows a modest 5% increase in GVA.
Manufacturing and other sectors affected
Manufacturing is key sector experiencing the level shift in GVA between 2014 and 2015. Looking at the manufacturing sector in the NUTS 3 regions (Figure 5 below), it is clear that most regions experienced a level shift in GVA from Manufacturing. Only the Border region showed no discernible change, with a growth of only 5% in Manufacturing GVA. The West also had a more modest (though still significant) growth in GVA of 25% from Manufacturing in 2014-2015. With two NUTS regions (Mid West and South East) showing growth in GVA from manufacturing of more than 100% and Dublin and the South West combined showing a 172% increase in GVA from Manufacturing, this is clearly the sector where most of the significant changes between 2014 and 2015 took place.
Figure 5: Increase in GVA in the Manufacturing Sector in NUTS 3 regions between 2014 and 2015
Source: CSO, 2018, County Incomes and Regional Accounts Table 9d and e GVA by sector
However, in a number of other sectors different regions showed quite significant changes. As would be expected these are in the high value sectors with global value chains. There were significant increases in ‘Professional, Scientific and Technical Activities etc.’ in the Border (43%), the Mid East (50%) and South East (48%), while the Border also showed a 31% increase in GVA from Financial and Insurance Activities in 2014-2015. Finally, the South East experienced a 39% increase in GVA from Information and Communication. Not all of these increases are necessarily related to the relocation of IP assets, or to the other factors which underlie the level shift in GVA between 2014 and 2015 but these are all very significant growth figures (the detail of other sector changes in GVA will be discussed in a forthcoming post.)
Manufacturing is the sector where data is suppressed for reason of confidentiality in Dublin and the South West. It is a key sector in these regions. In 2014 (the first year for which such regional data was available) the South West accounted for 34% of Ireland’s Manufacturing GVA and Dublin accounted for 29% (63% in total). In 2015, as shown in Fig. 6, the two combined accounted for 73% of Ireland’s GVA from Manufacturing.
Figure 6: Regional contribution to Manufacturing GVA in 2015
Source: CSO, 2018, County Incomes and Regional Accounts Table 9d GVA by sector
The dominance of these two regions in the high value manufacturing sector is evident when the contribution of different sectors to regional GVA is considered at NUTS 2 level (Figures 7 and 8 below). In the Southern and Eastern region manufacturing accounted for 38% of the Region’s GVA, and other high value areas (‘Information and Communications’ (10%), ‘Financial and Insurance Activities’ (7%) and ‘Professional, Scientific and Technical Activities’ (11%) also relatively important (28% of GVA in the S&E came from these three sectors combined).
Figure 7: Gross Value Added by Sector in the Southern and Eastern Region
Source: CSO, 2018, County Incomes and Regional Accounts Table 9d GVA by sector
In the Border, Midland and Western region the Manufacturing sector contributed 28% of GVA and the other high value sectors were much less significant in GVA terms. ‘Information and Communications’ (2%), ‘Financial and Insurance Activities’ (5%) and ‘Professional, Scientific and Technical Activities’ (6%) combined only accounted for 13% of GVA in the BMW region. In contrast ‘Public Administration and Defence’ accounted for 24% of GVA in the BMW region and only 10% in the Southern and Eastern region.
Figure 8: Gross Value Added by Sector in the Border, Midland and Western Region
Source: CSO, 2018, County Incomes and Regional Accounts Table 9d GVA by sector
Conclusions
GVA is essential regional data, despite its limitations. It is one of the key variables for national and international regional comparisons and, given the paucity of other regional economic data, it is particularly important. While understanding the necessity of ensuring data confidentiality, the lack of GVA data for two regions limits discussion of regional development significantly.
Given the focus on regional development in government policy (Project Ireland 2040) we need to be able to measure how regions are doing. Income, Wealth and Consumption data would give a good picture of how households in regional economies are doing, but while we have regional income data, there is no longitudinal data on wealth and consumption for regions. Similarly we have Survey on Income and Living Conditions (SILC) data at regional level giving a broader picture of income and poverty, and Labour Force Survey data on employment and unemployment. However, although these are important, each region also needs to have an indicator of economic activity and growth.
Potentially the issue of confidentiality will not affect data for every year, and 2015 (and 2016 preliminary data) might prove to be exceptions, with full regional GVA data available again in the future. Nonetheless, the difficulties with regional GDP need to be addressed. Should new NUTS2 regions be agreed with Eurostat (to align with the regional assemblies) GVA data will published for these. Currently as both Dublin and the South West are in the NUTS2 Southern and Eastern Region, it is only necessary to withhold data for both of these NUTS3 regions and the NUTS 2 data can be published in full. In future, if Dublin and the South West will be in different NUTS 2 regions (Dublin in the Eastern and Midland Region, and the South West in the Southern Region, to ensure confidentiality in relation to these regions, it might become necessary to supress detailed NUTS 3 data for some of the other regions.
It is not clear what solutions might be possible in relation to regional GVA data, but good quality regional data is essential both to understand regional economies and to monito the impact of regional and national policy. Development of the GNI* indicator at regional level could help to understand activities in domestic regional economies.
Improving our understanding of regional economic growth and change is essential if we are to develop policies and actions to ensure that all regions can grow their economies, employment and value add at more comparable rates into the future.
Helen McHenry
[1] GDP is Gross Domestic Product, GDP and GVA are the same concept i.e. they measure the value of the goods and services (or part thereof) which are produced within a region or country. GDP is valued at market prices and hence includes taxes charged and excludes the value of subsidies provided. GVA at basic prices on the other hand excludes product taxes and includes product subsidies. See background notes .
[2] For the purposes of regional accounts GVA is the most common measure of regional growth and regional economic activity. However data in Figure 1 (from Table 9) is GVA at market prices (GDP).
[3] The amount for this ‘combined region’ was calculated by subtracting the other regional data from the total.
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