Transcript Economy 2012

The Economy
April 2012
Ireland – The Basics
Size: 70,282 km2
Population: 4.5 million
GDP: €161bn
GDP per Capita: €36k
―Eurozone Average = €28k
Exports: €161bn Imports:€123bn
English Speaking
Currency: Euro
EU Member
• Population 500m
• 28% of world GDP
Ireland’s underlying strengths
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Ireland ranks 10th out of 183 economies in terms of ease of doing business ,
making it the highest ranked euro area country, and the third highest-ranked
country in the European Union.*
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According to the World Competitiveness Report 2011 Ireland is….
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1st for helpful corporate taxes
1st terms of attractiveness for foreign investors
1st for availability of skilled labour
4th for labour productivity
5th for overall productivity
4th for exports of commercial services
6th most attractive place in the world for researchers and scientists
8th for percentage of population with 3rd level education
3rd in the world for the number of patents in force
*World Bank’s 2012 Ease of Doing Business Index, World Competitiveness Yearbook
2011
The Entrepreneurial Island
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Ireland has a high rate of entrepreneurial activity
Ireland ranks 2nd of 13 EU-15 countries for early stage entrepreneurs and
4th of 13 EU-15 countries for established entrepreneurs.
Established Entrepreneurs as a percentage of population
Ireland 8.6%
OECD average 6.8%
Australia 8.5%
US 7.7%
UK 6.4%
Israel 3.1%
Irish entrepreneurs are the most innovative of advanced economies,
offering innovative and novel products and services to global consumers
64% of early stage businesses set up in Ireland have an international
orientation (i.e. are exporting); above the rate in Germany, the
UK and the majority of other advanced economies.
Source: The Entrepreneurship in Ireland 2010 Global Entrepreneurship Monitor
2010 and Global Entrepreneurship Monitor, 2010
The Entrepreneurial Island
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The 2009 Index of Economic Freedom ranks Ireland 7th in the World and
1st in Europe. (Heritage Foundation and Wall Street Journal)
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International recruiters believe that Ireland produces the most highlyemployable graduates in the world (2010 European Commission study of
third-level education)
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Ireland ranks fifth in the world for protecting investors and seventh for
creative products and services and export earnings of creative industries.
(Global Innovation Index Report 2009-2010)
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Start-ups do not pay tax on any profits made in the first three years
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Significant R&D tax credits are available which can be carried forward in
future financial years
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Tax write offs for the capital cost of acquiring qualifying Intellectual
Property assets
The Irish Economy in Perspective
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Explaining…..
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The history of industrial policy
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Ireland’s Rapid Growth from the mid-1990s
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Economic downturn: Collapse of a Housing Bubble
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Economic recovery: Government Policy
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Export led recovery: The role of Enterprise Ireland
Ireland – Industrial Policy
1922 – 1960
1960 – 1990
1990 – mid 2000s
Agrarian economy; 50% of
population involved in
Agriculture
1960s: Free 2nd level
Education
Free Trade & FDI
encouraged
Celtic Tiger
Economic War with Britain
Investment in education &
increased female
participation
1973: Entry into EEC
Protectionism; restrictions on
foreign ownership of Irish
companies, high tariffs on
imported goods.
1950s: Move away from
protectionism
Social Partnership
1980s: High Unemployment
& mass emigration.
Mid 1980s: Let dying firms
disappear
1987: Tallaght Strategy led
to economic reform focused
on deficit reduction
EU structural Funds:
€10bn EU investment in
infrastructure
Low corporate tax rate to
attract FDI
High-tech export focused
enterprise base
Ireland’s Rapid Growth…….
1988
1997
MAY 1997
2004
Explaining Ireland’s Rapid Growth…
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Costs were competitive;
Successfully attracted foreign direct investment;
Infrastructure investment, with EU assistance;
Reforming the tax system to promote growth and employment;
Pro-enterprise culture;
Favourable demographics & investment in education and skills;
Social partnership approach to economic development
Innovation and R&D
Participation in EU / EMU.
Explaining Ireland’s Downturn…..
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Lost competitiveness
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Shift in drivers of growth:
away from exports
towards domestic demand
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Domestic demand driven by a housing boom
house building reached unsustainable levels
employment in construction unsustainably high
living standards were artificially inflated
Unbalanced growth
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International Financial Crisis
Irish Banking Sector very exposed to Construction Industry
slower export growth
External Assistance
Joint EU / IMF assistance programme…
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Up to €85 billion of financial support available:
Based on strong conditionality drawn from Ireland’s own Programme
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Key objectives:
Return our economy to sustainable growth
Fiscal consolidation
Ensure that we have a properly functioning healthy banking system
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Main elements of strategy:
structural reforms to raise growth potential
ensure fiscal sustainability through fiscal consolidation and reform
restore financial stability
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Programme is on track:
Troika have concluded five quarterly reviews
External funding partners: ‘Policy implementation has continued to be strong’
Government Strategy for the Recovery of Ireland’s
Economy..
The economic strategy of the Irish Government is based on 3 essential
elements:
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Correct Public finances - reducing the interest rate for
Government debt by cutting the government deficit and reforming
the public sector
Repair the banking sector - building the banking system’s
capacity to extend credit into the economy
The Action Plan for Jobs - increase the number of people at work
in Ireland by 100,000 by 2016
Restoring sustainability to public finances and improving
employment
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Irish Government fully committed to:
reducing deficit below 3% of GDP by end-2015
was 31.3% in
2010*, 10% in 2011, forecast at 8.6% in 2012
The stock of total public debt is expected to peak at 118% of GDP
in 2013 before declining to 112% by 2016.
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Reforms to enhance competitiveness and support growth and job
creation are moving forward:
The Governments Action Plan for Jobs 2012 aims to create an
additional 100,000 jobs by 2016
*Including banking support
Repairing the banking system
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Banks are following deleveraging plans agreed as part of the
Programme
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Loan to deposit ratios are improving, largely as a result of
deleveraging
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The IBRC (Irish Bank Resolution Corporation) and NAMA continue
to manage down their balance sheets through selected asset
disposals
Recovery in a small open economy…
As a small open economy, the
sequencing of recovery in Ireland
can be categorised into 5 phases.
In terms of the current juncture,
the Irish economy appears to be
between Step 1 and 2.
Source: Department of Finance
The importance of Exports in a small open economy
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Due to the small size of Ireland’s domestic economy, Irish companies must export to
create sustainable employment and wealth creation at home.
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EMPLOYMENT
Exports and Tourism directly account for over 25% of employment in Ireland.
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GENERATING INCOME
Exporting companies spend approximately €38bn in the Irish economy annually
while tourists generate revenue of over €4.6bn on an annual basis.
Together this totals approximately 27% of Ireland’s GDP.
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World Growth Rates
Growth prospects for Ireland’s main trading
partners revised downwards in 2012…
2007
2008
2009
2010
2011
2012*
2013*
US
1.9
0.0
-3.5
3.0
1.7
2.1
2.4
Eurozone
2.9
0.4
-4.3
1.9
1.4
-0.3
0.9
UK
2.7
-0.1
-4.9
2.1
0.7
0.8
2.0
China
14.2
9.6
9.2
10.4
9.2
8.2
8.8
Japan
2.4
-1.2
-6.3
4.4
-0.7
2.0
1.7
Russia
8.5
5.2
-7.8
4.3
4.3
4.0
3.9
Brazil
6.1
5.2
-0.6
7.5
2.7
3.0
4.1
India
9.9
6.2
6.8
10.6
7.2
6.9
7.3
Ireland
5.2
-3.0
-7.0
-0.4
0.7
0.5
2.0
Source: IMF World Economic Outlook April 2012. *Forecast
Ireland Remains
A small island punching above its weight globally
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2nd Largest exporter of Infant food in the world behind the Netherlands
(Source: http://faostat.fao.org/site/342/default.aspx)
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Largest exporter of Cider in the world – Korea is a distant 2nd
(Source: http://faostat.fao.org/site/342/default.aspx)
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6th largest exporter of beef in the world and 2nd in Europe after the Netherlands.
(Source: http://faostat.fao.org/site/342/default.aspx)
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15% of the world’s infant food exports come from Ireland
(Source: http://faostat.fao.org/site/342/default.aspx)
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7 of the world’s top 10 aircraft leasing companies are head quartered or have a significant presence in
Ireland. 50% of the world’s leased aircraft are estimated to be managed from Ireland.
(Source: http://www.collegeireland.org/media/AndyCarlisllepresentation1.pdf)
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€1.9 trillion euros in funds administered from Ireland
50% of world’s leading financial services companies based in Ireland
(Source: Irish Funds Industry Association)
Ireland ranks 9th worldwide in the 2012 Global Cleantech Innovation Index and 4th for the commercialisation
of cleantech innovation (Source: The Global Cleantech Innovation Index 2012, cleatech group llc and WWF)
The FAO Statistical Yearbook
Enterprise Ireland
Clients account for:
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Exports:
Total Exports €13.9bn, Sales €29.6bn (2010)
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Jobs
Direct Employment 141,228 (FT) & 21,464 (PT);
Indirect Employment 100,000 +
67% jobs outside Dublin;
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Spend in Ireland
Annual spend c €17.6bn in Ireland: €5.5bn payroll, €8bn raw materials & €4bn
services
Similar to FDI Sector
Client Exports 2010
Enterprise Ireland Client Exports recover to 2007 levels (€Bn)
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13.88
€ Billions
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13.93
12.60
12.31
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10.51
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14.25
9.63
10.03
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8
2003
2004
Source: 2003-2010 – ABSEI
2005
2006
2007
2008
2009
2010
Growth in R&D performance of
EI client companies
55
750
49
650
705
715
51
624
45
601
600
50
42
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40
550
515
500
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33
30
450
2005
Source: ABSEI 2010
2006
2007
2008
2009
Number of Clients Engaged in Meaningful R&D (€100k p.a.)
Number of Clients Engaged in Significant R&D (€2m p.a.)
2010
€2m R&D Spend
700
€100k R&D Spend
52
707