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Key Economic indicators and key messages
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Historic information/ Trends Key Macroeconomic Variable
2007
2008
2009
2010
2011
2012
2013
2014
2015
4
4.3
4.6
Growth
Nominal GDP
(% change)
Nominal GDP
(€m)
GNP
(%
change)
GNP (€m)
Exports
% change
€m
Labour Market
Unemployment
Rate (%)
-3.6
1.4
3.1
153,950 156,075 160,900 167,400 174,650 182,725
-2.1
0.3
2
2.5
2.5
2.6
9.4
157,573
6.8
5.7
5
4.5
4.1
14.4
13.7
12.7
11.5
10
1
0.9
1.5
1.7
1.8
Unemployment
Price Developments
HICP
Comparison of Growth Forecasts
Table 8: Comparison of macroeconomic projections for Ireland
Annual % change
2011
GDP
GNP
HICP
April
'11
0.8
0.3
1.0
Department of Finance
April '11
0.9
0.0
0.8
Central Bank of Ireland
January '11
1.5
0.3
1.0
ESRI
February '11
0.9
n.a
0.4
European Commission
April '11
0.5
n.a
0.5
IMF
End-March '11
0.5
0.2
1.0
Consensus (Reuters poll)
Employment
-1.6
-1.4
-1.4
-0.8
n.a
n.a
Annual % change
GNP
HICP
2.0
0.9
1.6
0.5
1.5
1.0
n.a
0.6
n.a
0.5
1.5
1.3
Employment
0.5
0.1
0.3
0.5
n.a
n.a
2012
Department of Finance
Central Bank of Ireland
ESRI
European Commission
IMF
Consensus (Reuters poll)
Source: Institutions cited.
April '11
April '11
January '11
February'11
April '11
End-March '11
GDP
2.5
2.2
2.3
1.9
1.9
2.0
Key messages

Following an extremely sharp downturn, the broad consensus is that the
Irish economy will return to growth this year.

The Department’s latest forecasts, published in the Stability Programme
Update on 29 August 2011, anticipate real GDP growth of 0.8% in
2011, 2.5% in 2012 and 3% per annum over the period 2013 to 2015.

Growth will primarily be driven by the external sector over this period,
reflecting significant competitiveness improvements and a stronger
global economy.

Labour market conditions remain weak, and as a result the government
is giving priority to job creation, and the Jobs Initiative will be a key
platform in this regard

Ireland remains an attractive destination for foreign direct investment in
high value-added sectors.
A return to growth is expected this year…

The pace of the economy’s contraction slowed significantly last year; real
GDP declined by 1% compared to a fall of 7.6% in 2009;

There is now a broad consensus that the economy will return to growth this
year. Notably the IMF, EU Commission and Reuters’ private sector
consensus forecast all anticipate an increase in GDP in 2011;

The Department’s latest projections – published on 29 April - expect real
GDP growth of 0.8% in 2011, 2.5% in 2012 and 3% per annum over the
period 2013 to 2015 (see Table 1);

This represents a downward revision in 2011 and 2012 from the Budget day
forecasts reflecting weaker than expected data, interest rate increases and
higher oil prices;

Typically recovery in a small open economy begins in the external sector
before filtering through to investment and finally consumer spending;

In line with this, growth will primarily be driven by net exports over the
forecast horizon;


Given the impact of fiscal consolidation and the necessary unwinding of
private sector imbalances, a recovery in domestic demand will take longer
than normal to emerge;
Nevertheless, by the end of the forecast horizon activity is expected to be
relatively broadly based.
Growth is being underpinned by significant competitiveness improvements…

The Irish economy has adapted positively to the very severe economic
conditions, with major improvements in competitiveness having taken place;

Consumer prices have fallen; in our competitor countries consumer prices
have remained on an upward path;

Wages and other costs have adjusted downwards; the EU Commission
estimate that Irish unit labour costs declined by 6% in 2009 and 2010,
compared to a 3% increase in the euro area as a whole;
o Public sector wages have been reduced by an average of 14%
(sending clear demonstration effects to the ‘traded’ sectors);
o IBEC (Irish Business and Employers Confederation) surveys have
found that nominal pay rates have fallen by an average of 5% since
mid-2008.
Exports are at an all time high…

The improvement in competitiveness, coupled with the global recovery, is
having the desired impact on exports;

The IMF now expects global growth of around 4½% in the next two years;

Exports rose by 9.4% in 2010 and have continued to expand at a rapid pace at
the start of 2011, growing by 14.1% in nominal terms in February;

The export performance is broad-based – the pharmaceuticals, software,
financial services, business services, and food sectors are all performing well;

Exporters are also changing their main focus away from the traditional UK
market towards new export opportunities in North and South America and
Asia.

Exports to the US grew by 18% in the year, and to Canada by 27%. Irish
exporters also increased sales to Germany by 42%;

Exports to Brazil, Russia, India and China rose by 12% and are expected to
continue to underpin growth and new opportunities for Irish exporters;

Reflecting the robust export performance the current account moved into
surplus in the second half of 2010 and is forecast to move into surplus this
year so the country as a whole is paying its way;

Our key objective must be to build on this – if sustained, strong export
growth will filter down into domestic demand, paving the way for a more
broad-based recovery later on.
High-frequency data suggests that this trend will continue…

The manufacturing and services PMI indicators have remained above the 50
threshold that represents expansion in recent months;

The manufacturing PMI averaged 56.0 in the first quarter, reflecting strong
increases in the output and export orders components;

The services PMI averaged 53.4 in the first quarter, again driven by new
export business and improving expectations about the outlook;

The PMIs – and the manufacturing PMI in particular - are encouraging and
suggest that positive developments in industrial production and exports will
continue.
Labour market conditions remain weak…

The Q4 Quarterly National Household Survey (QNHS) data revealed that the
Irish labour market remained very weak at the end of 2010 and highlighted
the significant challenge faced in getting the country back to work;

The unemployment rate increased to 14.7%, while the numbers in long-term
unemployment increased once again and now represent more than half of
those out of work;

More recent data have revealed that the unemployment rate stabilised in the
first quarter of 2011. Nevertheless, with recovery in the labour market
lagging that in the economy as a whole, further net job losses are expected
this year;

Recognising this challenge, the Government is giving priority to job
protection, job creation and supporting unemployed people.

Accordingly a Jobs Initiative was announced earlier this month - it focuses
our limited resources on measures that offer the greatest potential for
expansion and employment creation in the domestic economy. It focuses on
labour intensive areas that will generate jobs quickly.

Employment is expected to increase from 2012 onwards with around 100,000
net jobs created by 2015;

As a result, the unemployment rate is forecast to fall from 14½% this year to
10% by 2015;

We still have over 1.8 million people at work, vs 1 million in the mid-1990’s
Ireland continues to attract inward FDI...

Almost 1,000 companies – including household names such as Google, eBay
and Facebook – have chosen Ireland as the hub of their European networks;

Eight of the top ten global medical technology companies have a
manufacturing base in Ireland;

Eight of the top ten pharmaceutical companies have operations in Ireland;

Employment in the sector on a per capita basis is the highest in Europe;






So Ireland remains open for business and is still the destination of choice for
many of the world’s leading firms;
IDA Ireland companies created 10,897 new jobs in 2010, resulting in net new
jobs of 1,352 in 2010. A total of 126 foreign direct investments were secured
last year;
Companies investing in Ireland for the first time rose by 20% and included
the likes of Telefonica, Warner Chilcott, LinkedIn, EA, Riot Games,
Genband, Aspect and FC Stone;
Investment in research, development and innovation came to over €500m.
Over 60% of corporation tax in Ireland is paid by IDA-supported companies
while exports from these firms account for over 75% of total Irish exports;
Throughout the last decade, Ireland invested substantially in infrastructure
and achieved major improvements, particularly in the quality of road, rail, air
and sea transportation;
Ireland is still an attractive place to do business. Ireland’s position in World
competitiveness rankings:
o 1st for corporate taxes;
o 4th for the availability of skilled labour;
o 4th for being open to new ideas;
o 6th for labour productivity;
o 7th for the availability of financial skills;
o 7th for the flexibility and adaptability of people.
Ireland is a highly entrepreneurial society…

Ireland is a highly entrepreneurial society; established entrepreneurs make up
9% of Ireland’s population;

Ireland has a higher proportion of established entrepreneurs than Germany
(4%) the UK (6.1%) and the US (8.3%) and about the same level as Finland;
(9.2%) (Global Entrepreneurship Monitor Report 2008 – 2009 figures not
available for Ireland);

A straightforward regulatory system coupled with the low financial costs
attached to starting a business in Ireland have worked to encourage
entrepreneurs to establish new and innovative start ups in Ireland; 2,800
individuals set up a new business in Ireland every month;

In 2010 Ireland ranked 7th in the world (171 countries) for Ease of Doing
Business and 9th in the world for Ease of Starting a Business. (World Bank
Ease of Doing Business Rankings).
Ireland is an innovation led economy…

Ireland’s dynamic Research Development & Innovation sector is driven by
an exceptional level of collaboration between industry, academia,
government agencies and regulatory authorities;


Almost 50% of all enterprises in Ireland are engaged in innovative activity;
placing Ireland 7th across the EU and considerably above the EU average
of 39%. (Community Innovation Survey);
Ireland has trebled economy-wide R&D spend in the last decade. The Irish
government is committed to increasing R&D spend across the economy to
2.1% of GDP by 2013.
Public finances trends and projections
CURRENT
BUDGET
Expenditure
Gross Voted
Current
Expenditure
Non-Voted
(Central Fund)
Expenditure
Gross Current
Expenditure
2007
2008
2009
2010
2011
€m
2012
€m
2013
€m
2014
€m
2015
€m
36,959
40,757
40,256
40,517
52,825
50,915
49,415
48,030
48,030
3,937
3,936
4,992
6,505
7,235
9,760
10,615
11,410
11,990
40,895
44,693
45,248
47,021
60,060
60,675
60,030
59,440
60,020
11,145
11,250
11,605
11,965
11,965
48,915
49,425
48,425
47,475
48,055
less Expenditure
Receipts and
Balances
Net Current
Expenditure
Receipts
Tax Revenue
Non-Tax Revenue
Net Current
Revenue
CURRENT
BUDGET
BALANCE
CAPITAL
BUDGET
Expenditure
Gross Voted
Capital
Non-Voted
Expenditure
47,249
638
40,777
847
33,043
838
31,753
2,669
34,900
1,980
37,535
1,105
39,850
870
42,320
885
44,290
770
47,887
41,624
33,881
34,421
36,880
38,640
40,720
43,205
45,060
6,992
-3,069
-11,367
-12,600
-12,035
-10,785
-7,705
-4,270
-2,995
7,650
8,556
6,907
5,918
4,675
4,300
3,900
3,500
3,500
2,368
2,487
7,829
2,046
3,905
3,910
3,910
3,905
3,920
Gross Capital
Expenditure
less Capital
Receipts
Net Capital
Expenditure
10,019
11,043
14,737
7,963
8,580
8,210
7,810
7,405
7,420
943
910
890
1,180
335
320
320
320
320
9,076
10,133
13,847
6,783
8,245
7,890
7,490
7,085
7,100
466
488
573
617
2,115
1,635
1,790
1,860
1,760
CAPITAL
BUDGET
BALANCE
-8,610
-9,645
-13,274
-6,165
-6,130
-6,255
-5,700
-5,225
-5,340
EXCHEQUER
BALANCE
-1,619
-12,714
-24,641
-18,765
-18,165
-17,040
-13,405
-9,495
-6,885
-15,665
-10.00%
-13,905
-8.60%
-12,130
-7.20%
-8,130
-4.70%
-5,035
-2.80%
Capital Resources
GENERAL
GOVERNMENT
BALANCE
% of GDP
Expenditure Trends
Gross voted public expenditure for the period 1997 to 2011 is summarised in the table
below. This figure covers all current and capital spending by Government Departments
and agencies, including spending from the Social Insurance Fund, but does not include
spending directly from the Central Fund such as debt-servicing costs. All figures are
actual outturn figures, apart from the figure for 2011 which is in line with the Revised
Estimates published in February 2011, and the 2010 figure which is the provisional
outturn as published in February 2011. The year-on-year percentage increase is also
shown.
year
Total (€ 000)
y-o-y %
Current (€ 000)
y-o-y %
Capital (€ 000)
y-o-y %
1997
18,857,510
8.1%
16,851,253
8.0%
2,006,257
8.9%
1998
20,512,307
8.8%
17,978,231
6.7%
2,534,076
26.3%
1999
22,810,786
11.2%
19,737,677
9.8%
3,073,109
21.3%
2000
25,924,737
13.7%
21,994,293
11.4%
3,930,444
27.9%
2001
31,303,197
20.7%
26,327,524
19.7%
4,975,673
26.6%
2002
35,808,391
14.4%
30,224,518
14.8%
5,583,873
12.2%
2003
38,364,387
7.1%
33,003,582
9.2%
5,360,805
-4.0%
2004
40,750,645
6.2%
35,546,468
7.7%
5,204,177
-2.9%
2005
45,095,031
10.7%
39,212,152
10.3%
5,882,879
13.0%
2006
50,016,307
10.9%
43,355,262
10.6%
6,661,045
13.2%
2007
56,426,010
12.8%
48,606,873
12.1%
7,819,137
17.4%
2008
62,395,041
10.6%
53,383,957
9.8%
9,011,084
15.2%
2009
63,051,261
1.1%
55,718,650
4.4%
7,332,611
-18.6%
2010
60,522,141
-4.0%
54,266,425
-2.6%
6,255,716
-14.7%
2011
57,503,410
-5.0%
52,826,910
-2.7%
4,676,500
-25.2%