The gross domestic product (GDP) in the OECD area rose by only 0.3% quarter-on-quarter in the final three months of 2022.
Quarterly growth rates have been weak throughout the year against the backdrop of high inflation and rising interest rates.
The picture was mixed among G7 countries, which saw 0.4% quarterly growth.
Economic growth rates were negative in Germany (-0.2%) and Italy (-0.1%) and slowed in Canada (0.4%), France (0.1%) and the US (0.7%).
Japan, on the other hand, followed a contraction in the third quarter (-0.3%) with 0.2% growth in the final quarter of last year. In the UK, economic growth was flat after a contraction in the third quarter (-0.2%).
Ireland’s distorted growth figures
Of all OECD countries, Ireland recorded the strongest GDP growth in the quarter of 3.5%.
But as The Irish Times reported, the country’s economic data should come with “a health warning” as it was a “meaningless” indicator of how well the economy is doing.
Since 2015, Irish GDP data has been distorted by the relocation of intellectual property assets to Ireland, belonging mainly to US tech and pharma companies, and other factors like contract manufacturing, which sees overseas production undertaken on behalf of multinational companies’ Irish subsidiaries.
Last week, Central Bank governor Gabriel Makhlouf defended the country’s annual estimated growth rate of 12.2% in 2022 “as real”, telling the Financial Times much of Ireland’s growth comes from “real factories with real people”.
He said it was wrong to think that most of the growth data was the result of intellectual property shifting to take advantage of Ireland’s low corporate tax rate.
“This stuff, especially in pharma, it’s made in Ireland. There are people in Ireland. There’s a remarkable proportion of the top ten medicines in the world [that] are made in Ireland,” he said. “One of the oldest multinationals in Ireland is Intel and they also make stuff.”
Economist Paul Krugmann, who coined the term ‘leprechaun economics’ when Ireland recorded a GDP of 26% in 2015, said in a Twitter post about the statement that Irish officials were in denial.
Irrespective of the debate, Ireland’s fourth-quarter growth prevented, statistically at least, the EU’s economy from contracting. Economic activity shrank in countries closest to the war in Ukraine, including Poland (-2.4%), Lithuania (-1.7%) and Hungary (-0.4%).
OECD estimates of annual GDP growth indicate that OECD area economies expanded by 2.9% last year, following 5.7% in 2021.
Merchandise trade declines
Merchandise trade activity in G20 countries in terms of US dollar value fell in the final quarter of 2022, “marking a gloomy end to a challenging year”, the OECD said.
Continuing the downward trend from its peak in the second quarter of last year, exports and imports declined by 3.5% and 3.1%, respectively, reflecting sluggish global demand and decreasing energy prices.
Falling oil prices weighed especially heavily on merchandise trade in North America, with exports contracting by 6.7% in Canada, 5.4% in the United States, and 3.1% in Mexico.
In contrast, merchandise exports grew by 0.9% in the European Union, as strong sales of machinery and transport equipment in Italy, France and Germany partly offset lower shipments of chemical and metal products.
Chinese exports and imports declined by 7.1% and 2.5%, respectively, as strict COVID-19 containment measures weighed on trade, especially in electronics.
Weak demand from China placed further strain on trade in East Asia. Korean exports dropped by 8.3%, largely due to falling semiconductor prices, while Japanese exports declined by 1.4%.
Related Videos
