Assessment of Macroeconomic For ecasts
5
Ireland, unlike most other countries, the difference between GNP and GDP is very sizeable and also
somewhat volatile. Chapter 4 discusses the implications of using GDP or GNP as the scale variable
in assessing fiscal policy and indebtedness.
Box A: Measures of Output: GDP and GNP
Gross Domestic Product (GDP) measures the total output produced in an economy. Gross
National Product (GNP) measures the output (domestic and foreign) accruing to
residents. The difference between GNP and GDP equals net factor income from abroad
(NFI). For most countries the difference between GNP and GDP is very small but in
Ireland it is highly significant and volatile, with the growth rates of the two variables
varying considerably in some years (Figures A1 and A2). In 2011, the level of nominal GNP
was about 20 per cent (€32 billion) lower than nominal GDP. This has important
implications both in terms of forecasting and in considering the appropriate scale
variable to use in assessing fiscal policy and indebtedness (the latter issue is discussed in
Chapter 4).
Figure A1: Ratio of Nominal GNP to Nominal GDP
Source: CSO, National Accounts Data. Note: Data at current market prices.
The breakdown of NFI by major category is shown in Figure A.3. A large part of NFI is the
profits and dividends of foreign multinationals located in Ireland. Net interest payments,
although minor to date, are beginning to grow in importance due to rising public debt
service payments, which are reflected in Portfolio and Other investment income in Figure
A3.
0.78
0.80
0.82
0.84
0.86
0.88
0.90
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
