A Tale of Three Regions: GDP in the new NUTS2 Regions

Regional GDP for 2017 has recently been published by Eurostat for 281 NUTS2 regions in the EU28.  This data shows how the different EU regions compare in terms of GDP and how they rank in relation to each other and to the EU average.  This data is of particular interest in Ireland as it is the first data on regional GDP available for the new Irish NUTS 2 regions.  As discussed here and here, instead of two NUTS2 regions in Ireland (the Border, Midland and West (BMW) region and the Southern and Eastern (S&E) region) there are now three regions: Northern and Western, Southern, and Eastern and Midland.  The Northern and Western region is very similar to the Western Region under the remit of the WDC[1].  While this is the first GDP data available for the three regions it is expected that the CSO will shortly publish regional GDP data in Ireland for the same years, at both NUTS2 and NUTS3 level, though there may be some issues relating to confidentiality at NUTS3 level which could delay the publication.

Regional GDP over the last decade

Eurostat has published the data for 2006 to 2017 (although for Ireland the 2017 data is an estimate) allowing for a good examination of the changing output of the three regions, as measured by GDP.  Figure 1 below shows regional GDP (€million) in three NUTS2 regions for that period, highlighting the very different growth trends in the regions in the last decade.

Figure 1: Regional GDP (€m) for Ireland’s NUTS2 regions, 2006-2017.

In 2006 the Northern and Western region accounted for 12% of the national economy, but by 2017 it was estimated to account for only 8%.  GDP in the region had grown by only 5% in that period.  In contrast the Eastern and Midland region economy grew by 47% between 2006 and 2017, while the Southern region’s economy had more than doubled in size (101% growth).  The Irish economy as a whole, as measured here, grew by 59% over that time. The Eastern and Midland has the largest regional economy, accounting for 56% of the national economy in 2006.  This fell to 51% in 2017.  The Southern region accounted for 32% of the economy in 2006 and 41% by 2017.

The level shift in the size of the economy Ireland in 2015 discussed in detail here, is shown clearly in the chart.  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 this shift in GDP.  It is evident that the most significant shift was experienced in the Southern region, previously with the Southern and Eastern regional data combined this was less obvious.  Nonetheless growth in the Eastern and Midland region from 2013 onward was also very significant while the Northern and Western region GDP does not appear to have been affected by the factors which gave rise to the level shift, or to have achieved steady economic growth.

While Figure 1 shows the actual GDP, Figure 2 below shows GDP per person in each of the regions, a format which is more comparable across regions within Ireland and Europe and highlights the very significant widening of disparity among Ireland’s regions.

Figure 2: Regional GDP per inhabitant in PPS for Ireland’s NUTS2 regions, 2006-2017

It should be noted that Figure 2 shows the data from 2006 to 2017 in terms of in terms of purchasing power standards (PPS)[2] rather than euro.  The disparity in GDP per person has grown significantly since 2006.  In 2006 GDP (PPS per inhabitant) in the Northern and Western region was 69% of the national average, by 2017 it was only 46%.  Meanwhile, in 2006 in the Eastern and Midland region GDP per person was 115% of the national average and 104% in 2017.  The most rapid change has been in the Southern region where GDP per person was 95% of the state average in 2006 and 122% in 2017.

Data for 2017 was also provided in euros.  The GDP per person in 2017 for the Northern and Western region was €28,400, for the Southern region it was €74,700 (163% higher), for the Eastern and Midland it was €64,000 per person, 125% higher than the Northern and Western region.  Nationally GDP was €61,200 per person.

Comparison with EU28 Regions

The GDP per person in the Southern region is 3rd highest (63,000 PPS) of the 323 regions for which there is NUTS2 regional GDP 2016 data, after Inner London West (185,100 PPS) and Luxembourg (76,200 PPS).  The Eastern and Midland region is 8th (54,000 PPS) while the Northern and Western Region lags considerably, in 181st place (23,900 PPS).

Given that the eligibility for the European Regional Development Fund (ERDF) and the European Social Fund (ESF) is calculated on the basis of regional GDP per inhabitant (in PPS and averaged over a three year period) this rank is important.  The NUTS 2 regions will again be split into three groups for the programming period 2021–27:

  • less developed regions (where GDP per inhabitant was less than 75% of the EU average);
  • transition regions (where GDP per inhabitant was between 75% and 100% of the EU average); and
  • more developed regions (where GDP per inhabitant was more than 100% of the EU average).

For the programming period 2021-2027, the Commission envisages the continued use of the NUTS classification for determining the regional eligibility and co-financing rates for support from the ERDF and the ESF.

In the Southern region in 2017 GDP was 220% of the EU28 average (see Figure 3 below) and the Eastern and Midland region GDP was 189% of the EU average neither region will qualify as transition regions for the ERDF or the ESP, but would be classified as ‘more developed regions’.

Figure 3: NUTS2 Regional GDP per person as percentage of the EU average (EU=100)

Source: Eurostat Table tgs0005 Regional Gross Domestic Product (PPS per inhabitant in % of the EU28 average) by NUTS 2 regions. 2017 estimated. https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tgs00006

The Northern and Western region, however, had a GDP of 82% of the EU average in 2016.  It was more than 90% of the EU average in only two of the last ten years (2011 and 2012), although in 2006 it was greater than the EU average at 102%.  It is estimated at 84% of the EU average in 2017 and so the Northern and Western region would qualify as a ‘transition’ region in the programming period 2021-2027.

Edited to add: Despite publication of GDP data for the new NUTS2 regions it appears that for the next round of cohesion policy funding (2021-2027) the old NUTS 2 regions will be used (BMW and S&E) rather than the three new regions (including the NW).  This means the BMW will have Transition Region status and the Southern and Eastern Region will be classified as a ‘more developed region’.

Conclusion

There are of course difficulties with the use of GDP as a measure of regional disparities and regional well being (see here and here) but despite these concerns it remains the most important statistic for regional economic activity.  It is essential to our understanding of the changes taking place in Irish regions, although, in order to fully understand regional growth and change, it is important to use GDP in combination with other data such as that on employment, enterprise activity, income, wealth and consumption.

The rapid growth in GDP in the Southern region and in the Eastern and Midland region contrasts sharply with the very significantly slower growth in the Northern and Western region.  The substantial differences in regional GDP per person in 2017 in the three regions, when compared to that in 2006, should be of great concern for Ireland as a whole and for the Northern and Western region in particular.

 

 

Helen McHenry

[1] The WDC remit covers Donegal, Sligo, Leitrim, Roscommon, Mayo, Galway and Clare.  The Northern and Western region is similar, but includes Cavan and Monaghan and excludes Clare (which is part of the Southern Region).

[2] PPS is the technical term used by Eurostat for the common currency in which national accounts aggregates are expressed when adjusted for price level differences using PPPs.  Basic figures are expressed in PPS, i.e. a common currency that eliminates the differences in price levels between countries allowing meaningful volume comparisons of GDP between countries.

About WDC Insights

WDC Insights is the blog of the Western Development Commission Policy Analysis Team. The WDC Policy Analysis team analyses regional and rural issues, suggests solutions to regional difficulties and provides a regional perspective on national policy objectives. Policy Analysis Team Members are: Deirdre Frost, Helen McHenry and Pauline White. We will all be posting here. You can contact us here, or use our firstnamelastname at wdc.ie Follow us on Twitter @WDCInsights
This entry was posted in Disparity, Economic Sectors, Economy, Regional GDP, Regional Statistics and tagged , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s