Irish Economy: Investec Ireland in its latest 'Irish Economy Monitor' has left its growth forecasts unchanged, with GDP (gross domestic product) still expected to grow by 1.2% this year (GNP - -  gross national product - - +1.0%) and by a further 2.0% in 2014 (GNP +1.6%).

Philip O’Sullivan, chief economist, says: "The Irish economic recovery has been and will continue to be two-tiered. Economic growth will be chiefly driven by the export sector, before multiplier effects fully feed through to the domestic economy. This is helped by the composition of Ireland’s exports: high-value added tech, pharma and agri products."

• PMI (purchasing managers' index) indicators were mixed in April. The Manufacturing PMI registered its second successive decline, while the Services PMI has recorded growth in each of the past nine months;
• This divergence is consistent with other indicators, which may suggest that the services will retain the growth baton over the coming period;
• Ireland is alone among the so-called PIIGS countries in having a Balance of Payments surplus. This outcome has been driven by a resilient export performance (particularly on the services side) and a decline in imports from peak levels;
• Ireland has seen a significant improvement in its cost competitiveness since the onset of the recession both in absolute and relative terms.

Our alternative view which is divergent from what could be termed the consensus is:

• The surge in services exports is mainly fake, reflecting tax-related revenue transfers from other countries that have been getting a lot of international attention in recent weeks;
• There would have been no growth to report in 2012 but for these intra-company accounting transactions;
• About €40bn of the total services exports value of €91bn in 2012, is effectively fake - - sales made by Google Australia today are Irish exports but this is as solid as a leprechaun's gold;
• Services PMI data is also not reliable because the big services companies on the panel are the likes of Google, Microsoft and Facebook;
• Only around one-third of pharmaceutical export revenues count towards GDP. The value added of the pharmaceutical sector was €13.8bn in 2011 or just 8.7% of GDP;
• Richard Bruton, jobs minister, in recent months has been highlighting that the Irish private sector added 12,000 jobs last year. However, the CSO's Q4 2012 Quarterly National Household Survey (QNHS) data [pdf] also shows that private sector jobs classified as 'Self employed/Assisting relative' grew by almost as much, which given the state of the economy, hardly indicates success. Part-time jobs in the whole workforce grew by 13,000. The ESRI estimates that net emigration will be at 32,000 people this year and a further 22,000 net will leave in 2014. 316,000 people or 14.7% of the labour force were jobless in 2012;
• The ESRI (Economic and Social Research Institute) has also   recognises an anomaly in the QNHS in the report of a rise in agricultural employment: "Excluding agriculture entirely, the annual fall in total employment for the fourth quarter of 2012 was 10,600 on a seasonally adjusted basis...The continued underlying fall in non-agricultural employment is a less encouraging finding than the main results suggest."
• Claims on competitiveness should be treated with caution because of distortions caused by the multinational sector: Mario Draghi, ECB president, said in Amsterdam last month in respect of unit labour costs. "Ireland has seen an 18 percentage point improvement relative to the euro area average" - -  this is not reality.
• Research by John FitzGerald, ESRI economist, shows that Balance of Payments surplus data is exaggerated

Investec: Irish Economy Monitor [pdf]

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