Everything you need to know about the Irish economy
The Irish economy outperforms most other eurozone countries with near full employment and rising real wages. So why are Irish consumers among the most pessimistic in Europe?
Despite being among the countries hardest hit by the economic crisis of 2007/8, the Irish economy has rebounded. The European Commission provide in February that the Irish economy would grow by 4.1% this year, the second highest growth rate in Europe.
Income inequality has fallen by 8% in recent years thanks to a sharp increase in the national benchmark minimum wage two years ago. Ireland has also been successful in promoting gender equality, ranking ninth in the World Economic Forum Gender Gap Index ahead of France, Denmark, Germany and the United Kingdom.
Last year Ireland was ranked 24th out of 137 countries in the World Economic Forum’s Global Competitiveness Index. However, the report underlined the need to improve infrastructure and reduce bureaucratic burdens on businesses. A OECD last year’s report also highlighted the need to increase productivity.
The OECD has also expressed concern about the level of non-performing loans held by Irish banks and urged the Irish government to reform the process of tackling homeowners’ mortgage defaults. Without reform, Ireland was at risk in a global downturn, he said.
Although life satisfaction scores in Ireland remain above the OECD average, recent to research by the Irish Institute for Economic and Social Research (ESRI) found that Irish consumers are deeply concerned. Topping the list of concerns is Brexit and industrial disputes in the public sector, including a strike by nurses earlier this year.
Austin Hughes, chief economist at KBC Bank Ireland, who wrote the report, said a 12.3% drop in the consumer sentiment index last month was one of the steepest in his 23 years history and the lowest level since November 2014.
Economists I agree that the effects of an unmanaged Brexit could be even more severe in Ireland than in the UK and the rest of Europe. Hughes said that although exports to the UK and UK tourist incomes have both declined, the worst is yet to come if the UK “escapes” from the EU without a deal.
Reading the true state of the Irish economy has been tricky in recent years. Ireland’s favorable tax regime has been controversial. Nobel Prize winning economist Professor Paul Krugman coined the term “sprite economics” to describe the effect on GDP.
In one blog post last year, economist Seamus Coffey, who chairs the state spending watchdog, the Irish Fiscal Advisory Council, allocated a large chunk of GDP growth 25.1% in 2015 for a multinational that transfers its intellectual property rights to Ireland from Jersey to comply with tax rules on profit transfer.
Although the growth rate slowed in subsequent years, it was still 7.21% in 2017, falling slightly to 6.7% last year. The Irish Institute for Economic and Social Research again cited “Multinational activity” as a factor in GDP levels last year.
Consumer spending has risen, but an analysis by the Central Statistical Office of Ireland suggests that much of this has been due to higher rents and mortgages, an increase in local property taxes and water charges.
Saint-Patrick’s Day economic rebound?
So does the celebration of Ireland’s patron saint offer hope for greater economic activity? With the largest Irish community outside of Ireland, a survey for the National Retail Federation of the United States found that Americans planned to spend $ 5.9 billion to celebrate the big day.
In Ireland, the effect is more modest. Organizers of the annual St. Patrick’s Day Parade in Dublin valued that half a million people have joined in the fun this year. Irish National Tourism Development Authority estimates that the event and other festivals nationwide bring 108 million euros ($ 123 million) to the economy each year.