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The Economy

The Economy . April 2012. Ireland – The Basics. Size: 70,282 km 2 Population: 4.5 million GDP: € 161bn GDP per Capita: € 36k Eurozone Average = €28k Exports: €161bn Imports: €123bn English Speaking Currency: Euro EU Member Population 500m 28% of world GDP.

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The Economy

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  1. The Economy April 2012

  2. Ireland – The Basics • Size: 70,282 km2 • Population: 4.5 million • GDP: €161bn • GDP per Capita: €36k • Eurozone Average = €28k Exports: €161bn Imports:€123bn • English Speaking • Currency: Euro • EU Member • Population 500m • 28% of world GDP

  3. Ireland’s underlying strengths • Ireland ranks 10th out of 183 economies in terms of ease of doing business , • making it the highest ranked euro area country, and the third highest-ranked • country in the European Union.* • According to the World Competitiveness Report 2011 Ireland is…. • 1st for helpful corporate taxes • 1st terms of attractiveness for foreign investors • 1st for availability of skilled labour • 4th for labour productivity • 5th for overall productivity • 4th for exports of commercial services • 6th most attractive place in the world for researchers and scientists • 8th for percentage of population with 3rd level education • 3rd in the world for the number of patents in force *World Bank’s 2012 Ease of Doing Business Index, World Competitiveness Yearbook 2011

  4. The Entrepreneurial Island • Ireland has a high rate of entrepreneurial activity • Ireland ranks 2nd of 13 EU-15 countries for early stage entrepreneurs and 4th of 13 EU-15 countries for established entrepreneurs. • Established Entrepreneurs as a percentage of population • Ireland 8.6% • OECD average 6.8% • Australia 8.5% • US 7.7% • UK 6.4% • Israel 3.1% • Irish entrepreneurs are the most innovative of advanced economies, offering innovative and novel products and services to global consumers • 64% of early stage businesses set up in Ireland have an international orientation (i.e. are exporting); above the rate in Germany, the • UK and the majority of other advanced economies. Source: The Entrepreneurship in Ireland 2010 Global Entrepreneurship Monitor 2010 and Global Entrepreneurship Monitor, 2010

  5. The Entrepreneurial Island • The 2009 Index of Economic Freedom ranks Ireland 7th in the World and 1st in Europe. (Heritage Foundation and Wall Street Journal) • International recruiters believe that Ireland produces the most highly-employable graduates in the world (2010 European Commission study of third-level education) • Ireland ranks fifth in the world for protecting investors and seventh for creative products and services and export earnings of creative industries. (Global Innovation Index Report 2009-2010) • Start-ups do not pay tax on any profits made in the first three years • Significant R&D tax credits are available which can be carried forward in future financial years • Tax write offs for the capital cost of acquiring qualifying Intellectual Property assets

  6. The Irish Economy in Perspective • Explaining….. • The history of industrial policy • Ireland’s Rapid Growth from the mid-1990s • Economic downturn: Collapse of a Housing Bubble • Economic recovery: Government Policy • Export led recovery: The role of Enterprise Ireland

  7. Ireland – Industrial Policy

  8. Ireland’s Rapid Growth……. 1988 1997 2004 MAY 1997

  9. Explaining Ireland’s Rapid Growth… • Costs were competitive; • Successfully attracted foreign direct investment; • Infrastructure investment, with EU assistance; • Reforming the tax system to promote growth and employment; • Pro-enterprise culture; • Favourable demographics & investment in education and skills; • Social partnership approach to economic development • Innovation and R&D • Participation in EU / EMU.

  10. Explaining Ireland’s Downturn….. • Lost competitiveness slower export growth • Shift in drivers of growth: • away from exports • towards domestic demand • Domestic demand driven by a housing boom • house building reached unsustainable levels • employment in construction unsustainably high • living standards were artificially inflated • Unbalanced growth • International Financial Crisis • Irish Banking Sector very exposed to Construction Industry

  11. External AssistanceJoint EU / IMF assistance programme… • Up to €85 billion of financial support available: • Based on strong conditionality drawn from Ireland’s own Programme • Key objectives: • Return our economy to sustainable growth • Fiscal consolidation • Ensure that we have a properly functioning healthy banking system • Main elements of strategy: • structural reforms to raise growth potential • ensure fiscal sustainability through fiscal consolidation and reform • restore financial stability • Programme is on track: • Troika have concluded five quarterly reviews • External funding partners: ‘Policy implementation has continued to be strong’

  12. Government Strategy for the Recovery of Ireland’s Economy.. The economic strategy of the Irish Government is based on 3 essential elements: • Correct Public finances - reducing the interest rate for Government debt by cutting the government deficit and reforming the public sector • Repair the banking sector - building the banking system’s capacity to extend credit into the economy • The Action Plan for Jobs - increase the number of people at work in Ireland by 100,000 by 2016

  13. Restoring sustainability to public finances and improving employment • Irish Government fully committed to: • reducing deficit below 3% of GDP by end-2015 was 31.3% in 2010*, 10% in 2011, forecast at 8.6% in 2012 • The stock of total public debt is expected to peak at 118% of GDP in 2013 before declining to 112% by 2016. • Reforms to enhance competitiveness and support growth and job creation are moving forward: • The Governments Action Plan for Jobs 2012 aims to create an additional 100,000 jobs by 2016 • *Including banking support

  14. Repairing the banking system • Banks are following deleveraging plans agreed as part of the Programme • Loan to deposit ratios are improving, largely as a result of deleveraging • The IBRC (Irish Bank Resolution Corporation) and NAMA continue to manage down their balance sheets through selected asset disposals

  15. Recovery in a small open economy… As a small open economy, the sequencing of recovery in Ireland can be categorised into 5 phases. In terms of the current juncture, the Irish economy appears to be between Step 1 and 2. Source: Department of Finance

  16. The importance of Exports in a small open economy • Due to the small size of Ireland’s domestic economy, Irish companies must export to create sustainable employment and wealth creation at home. • EMPLOYMENT • Exports and Tourism directly account for over 25% of employment in Ireland. • GENERATING INCOME • Exporting companies spend approximately €38bn in the Irish economy annually while tourists generate revenue of over €4.6bn on an annual basis. • Together this totals approximately 27% of Ireland’s GDP.

  17. World Growth Rates Growth prospects for Ireland’s main trading partners revised downwards in 2012… Source: IMF World Economic Outlook April 2012. *Forecast

  18. Ireland Remains A small island punching above its weight globally • 2nd Largest exporter of Infant food in the world behind the Netherlands • (Source: http://faostat.fao.org/site/342/default.aspx) • Largest exporter of Cider in the world – Korea is a distant 2nd • (Source: http://faostat.fao.org/site/342/default.aspx) • 6th largest exporter of beef in the world and 2nd in Europe after the Netherlands. • (Source: http://faostat.fao.org/site/342/default.aspx) • 15% of the world’s infant food exports come from Ireland • (Source: http://faostat.fao.org/site/342/default.aspx) • 7 of the world’s top 10 aircraft leasing companies are head quartered or have a significant presence in Ireland. 50% of the world’s leased aircraft are estimated to be managed from Ireland. • (Source: http://www.collegeireland.org/media/AndyCarlisllepresentation1.pdf) • €1.9 trillion euros in funds administered from Ireland • 50% of world’s leading financial services companies based in Ireland • (Source: Irish Funds Industry Association) • Ireland ranks 9th worldwide in the 2012 Global Cleantech Innovation Index and 4th for the commercialisation of cleantech innovation (Source: The Global Cleantech Innovation Index 2012, cleatech group llc and WWF) The FAO Statistical Yearbook

  19. Enterprise Ireland Clients account for: • Exports: • Total Exports €13.9bn, Sales €29.6bn (2010) • Jobs • Direct Employment 141,228 (FT) & 21,464 (PT); • Indirect Employment 100,000 + • 67% jobs outside Dublin; • Spend in Ireland • Annual spend c €17.6bn in Ireland: €5.5bn payroll, €8bn raw materials & €4bn services • Similar to FDI Sector

  20. Client Exports 2010 Enterprise Ireland Client Exports recover to 2007 levels (€Bn) € Billions Source: 2003-2010 – ABSEI

  21. Growth in R&D performance ofEI client companies €100k R&D Spend €2m R&D Spend Source: ABSEI 2010

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