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Impact of Economic Recovery on Irish Business

Impact of Economic Recovery on Irish Business . Fergal O’Brien, Irish Business and Employers Confederation Danish Industries 2 nd April 2008. Ireland past and present. 1990 2006 GDP €bn 36 175 GDP per capita € 10,357 41,205 GDP per capita, 79% 119% % of EU-15 average

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Impact of Economic Recovery on Irish Business

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  1. Impact of Economic Recovery on Irish Business Fergal O’Brien, Irish Business and Employers Confederation Danish Industries 2nd April 2008

  2. Ireland past and present 1990 2006 GDP €bn 36 175 GDP per capita € 10,357 41,205 GDP per capita, 79% 119% % of EU-15 average Exports € 20 bn 140 bn Total Debt % of GDP 96% 25% Total Labour Force 1.3 m 2.2 m Unemployment 12.9% 4.4%

  3. 2 very different stages of economic recovery • 1993-2000 : economic growth based on strong export performance • Spare capacity in economy • Ireland very attractive to FDI • Competitiveness strong • Tax reform central • 2001-2007: economic growth more reliant on domestic demand • Housing boom • Real incomes growing strongly • Retail sector buoyant • Competitiveness weak

  4. Phase 1: Export led recovery • Eliminated unemployment • Strong employment growth in manufacturing and traded services • Social partnership meant that Government provided generous tax cuts in return for wage moderation • Reform of labour, corporate and investment taxes boosted activity in all sectors • High-tech sectors flourished – pharma, ICT • Spin-offs for domestic enterprise also significant

  5. Ireland grasped added Export Opportunityof “Single Market” ….

  6. Surge in new FDI jobs supported

  7. Businesses and sectors benefiting most • Surge in FDI activity • Major spin-offs for Irish-owned SMEs • Particularly ICT sector / inputs to larger manufacturing • Strong evidence of clustering • ICT / Pharma / medical devices • Emergence of internationally traded services sector • Professional services sector benefited greatly

  8. Ireland’s share of world trade now falling

  9. Phase 2: Surge in domestic demand • Inflationary problems emerged from 2001 • Coincided with US recession / ICT difficulties • Growth momentum saved by flood of cheap money • Construction activity accelerated • Retail sector booming • Public capital investment programme significant • Growth in employment in public sector • Demographic factors very significant

  10. Housing completions

  11. Personal consumption expenditure

  12. Ireland Denmark: demographics, 2007.

  13. Ireland Demark: demographics, 2050.

  14. Net Migration, 1988-2007.

  15. Population trends

  16. Importance of immigration, 2006.

  17. Current challenges • Housing correction was inevitable but has advantages for many business sectors • Combined with global credit crisis makes transition difficult • Export sector under pressure from euro strength • Unemployment likely to rise to circa 6% • Behavioural impact of immigrants will be key • Restoring competitiveness vital

  18. Medium-term outlook • Demographic story remains very positive • Internationally traded services sector key growth area • Lots of work still to do to solve infrastructure deficit • National debt of just 25% GDP • Catch-up period over and stronger focus on cost control needed • Future growth model has challenges for regional development

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