Ireland’s Economy

21 April 2017

Hard as it may be for those still experiencing recession related problems to believe, Ireland’s economy is the strongest growing in the EU.  Our GDP grew by just over 5% in 2016 compared to the EU overall which had growth of just under 2%.  Projections from the Central Bank and the ESRI are for further growth of about 4% in 2017 and 3.5% in 2018.  But while the domestic economy is doing well at the moment, there are still clouds in the sky.

Employment

Employment is still rising with a 10,000 drop in the number of unemployed in the first 3 months of this year. Employment in Dublin continues to rise ahead of the rest of the country but the regions are catching up.  The South East remains behind Dublin, however, it is making ground having experienced 15% improvement in the past 4 years compared to Dublin’s 13% and the just under 10% of the country as a  whole. 

Unemployment is now running at 6.7% nationally and it is hoped that it will fall to around 5% by the end of 2018. However, unemployment in the South East is still at 9.4%, a big improvement from 2011 when it was the highest in the country at almost 20%, but nonetheless still high. Remarkably, only half the jobs the Department of Jobs and Enterprise had hoped to bring to the region in the last two years actually happened.

Consumer Confidence

Consumer confidence has been bolstered by rising employment and growth in the construction industry is now almost at a 15-year high resulting in continued growth in consumer spending. Spending rose by 3% last year with a dip towards the end of the year, this has been offset by a rise in the January sales giving a growth of 3.3% for 2017 so far.

Housing

Housing or lack of it is still a major concern for a lot of people.  Rents are high and rising, that’s if one is able to find a suitable place to rent in the first place.  The situation is worst in Dublin and urban areas but is also felt to some extent in the South East as parts of the region have become simply dormitories for Dublin. 

Construction is increasing and around 19,000 homes are expected to be built this year.  House prices are rising but are expected to level out as supply increases thus averting another property bubble.  Mortgage approvals were up by 50% in the first 3 months of the year on the same period last year.  On the other hand there is still a lot of debt unresolved since the recession, and still there are many people unable to pay their rent and mortgages and losing their homes.

Infrastructure

Road projects, natural gas and improved broadband are all in the pipeline for the South East.  Also, last week plans were unveiled for a 3rd level campus at Saint Senans hospital in Enniscorthy.  Not only would this give a new lease of life to a fine old building, but would increase employment in the area, bring more people to Enniscorthy thereby increasing commerce in the town and provide further education. This would lead to better opportunities for people from Enniscorthy and the surrounding areas.

External Economic Threats

Brexit is of course an ongoing threat, although recently, more constructive talk from both the UK and the EU, gives rise for hope that a deal avoiding the worst risks might now be brokered.  Nonetheless the risks remain, of currency fluctuations, possible tariffs, travel issues, increased competition with the UK at home and abroad and possible disruption of cross-border trade.  Even a soft Brexit would bring about many changes to the way things are done at the moment.

Our links with the UK include:

  • 14% of our goods exports and 18% of our services exports are to the UK
  • 41% of our food and drink exports and 70% of our timber exports are to the UK
  • Two way trade is about €60bn each year and supports around 400,000 Irish jobs
  • We get 85% of our energy requirements from the UK
  • 41% of all journeys and 48% of business journeys to Ireland are from the UK
  • 395,000 Irish people live in the UK and 112,000 UK passport holders live in Ireland
  • There are 12,000 Irish students studying in the UK

So despite the signs of positivity, Ireland must prepare for the worst while hoping for the best.  

The other major external  threat to Ireland’s and indeed the world’s economy, the Trump presidency, may not be as extreme as feared either, as it is proving difficult for the new administration to put all the hype into practice.  However even tax reform in the US, if/when it does happen could be damaging to our exports as 25% of our exports are to the US.

Global growth has increased over the past 6 months, which suits Ireland’s open economy, and the eurozone economy seems to be heading towards more sustainable growth.  But, while global trade may be improving, the 3.4% annual average growth rate over the last 4 years is only half that of the previous 50 years.

Tourism, which has been successfully growing in recent years, (2016 saw 10.5m overseas visitors come to Ireland, delivering revenue of more than €5.5bn) is expected to face new challenges this year from;  Brexit, depending on currency fluctuations, the threat of terrorism reducing the numbers of people holidaying abroad, and the influence of President Trump.  While Wexford and the South East has a lot going for it as a tourist destination, more needs to be done to manage trade more effectively in peak times and grow trade off season.  And a long overdue upgrading of Rosslare Europort would not go amiss as it is the first impression of Ireland a lot of visitors to the South East get.

Agri-food is at significant risk, especially from Brexit, in fact it is already being effected, resulting in a drop in exports of €300m or 7% last year.  New markets are needed but take time to establish so supports need to be available now for marketing and product development.  The many food producers of the South East, especially the smaller ones will have to figure out how Brexit may affect their business and how they can alleviate any negative impacts.


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