Transcript Fergal O´Brien

Impact of Economic Recovery on Irish
Business
Fergal O’Brien, Irish Business and Employers Confederation
Danish Industries 2nd April 2008
Ireland past and present
www.ibec.ie
1990
2006
GDP €bn
36
175
GDP per capita €
10,357
41,205
GDP per capita,
% of EU-15 average
79%
119%
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%
2 very different stages of economic recovery
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 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
Phase 1: Export led recovery
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 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
Ireland grasped added Export Opportunity
of “Single Market” ….
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Irish Exports G+S as % GDP
Euro Area Exports as % GDP
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Surge in new FDI jobs supported
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24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Businesses and sectors benefiting most
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 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
Ireland’s share of world trade now falling
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150
140
Index 2000=100
130
120
Merchandise
110
Services
100
Total trade
90
80
70
60
2000
2001
2002
2003
2004
2005
2006
Phase 2: Surge in domestic demand
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 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
Housing completions
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100
86
90
69
70
'000 units
78
77
80
60
88
60
58
48
50
40
30
20
10
0
2002
2003
2004
2005
2006
2007
2008 (f)
20092012 (f)
Personal consumption expenditure
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8%
7%
6%
5%
Euro zone
4%
Ireland
3%
2%
1%
0%
2002
2003
2004
2005
2006
2007
Ireland Denmark: demographics, 2007.
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Ireland Demark: demographics, 2050.
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Net Migration, 1988-2007.
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80
60
'000
40
20
0
-20
-40
-60
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2007
Population trends
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Population growth rates 2002-2006
3.00
%
2.50
2.00
Ireland
1.50
EU 27
1.00
Denmark
0.50
0.00
2002
2003
2004
2005
2006
Importance of immigration, 2006.
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1.8
1.6
Ireland
1.4
%
1.2
1.0
0.8
0.6
0.4
UK
Denmark
0.2
0.0
Net migration flow
(as % of total population)
EU-27
Current challenges
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 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
Medium-term outlook
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 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