Impact of Economic Recovery on Irish Business

1
Impact of Economic Recovery on Irish Business

• Fergal OBrien, 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
Irelands 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