impact of economic recovery on irish business fergal o’brien, irish business and employers...
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Impact of Economic Recovery on Irish Business
Fergal O’Brien, Irish Business and Employers Confederation
Danish Industries 2nd April 2008
www.ibec.ie
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%
www.ibec.ie
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
www.ibec.ie
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
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Ireland grasped added Export Opportunityof “Single Market” ….
0%10%20%30%40%50%60%70%80%90%
100%
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Irish Exports G+S as % GDP Euro Area Exports as % GDP
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Surge in new FDI jobs supported
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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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
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Ireland’s share of world trade now falling
60
70
80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006
Ind
ex 2
000=100
Merchandise
Services
Total trade
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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
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Housing completions
58
69
77
86 88
78
48
60
0
10
20
30
40
50
60
70
80
90
100
2002 2003 2004 2005 2006 2007 2008 (f) 2009-2012 (f)
'00
0 u
nits
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Personal consumption expenditure
0%
1%
2%
3%
4%
5%
6%
7%
8%
2002 2003 2004 2005 2006 2007
Euro zone
Ireland
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Ireland Denmark: demographics, 2007.
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Ireland Demark: demographics, 2050.
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Net Migration, 1988-2007.
-60
-40
-20
0
20
40
60
80
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2007
'00
0
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Population trends
Population growth rates 2002-2006
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2002 2003 2004 2005 2006
%
Ireland
EU 27
Denmark
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Importance of immigration, 2006.
UK
DenmarkEU-27
Ireland
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Net migration flow(as % of total population)
%
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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
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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