Fact Book Ireland‏

The Irish economy’s long journey to recuperation continues with the Irish economy continuing to outperform euro area peers.

Ireland has suffered from the biggest boom and bust property bubble in the EU. House prices have dropped 50% since the peak in 2007 but house prices have been stabilising since mid-2012. Ireland suffered a collapse of confidence as the twin costs of a rising deficit and expensive bank bailout were increasingly seen as being unsustainable, forcing Ireland to go to the EU/IMF for support. Ireland is recovering and is often put forward as the role model among the aid receiving countries. Improved investor confidence has allowed the Irish sovereign to return to the market with issuance of both bonds and bills.

The government achieved a budget deficit of 7.6% of GDP in 2012 -- a percentage-point better than the EU programme target. The target this year is a budget deficit of 7.4% of GDP and Ireland is planning to reduce the deficit to below 3% by 2015. The government debt is set to peak at around 123% of GDP this year.

Ireland’s large export sector, which stands above 100% of GDP, continues to perform well. The sector is dominated by large, foreign-owned multinationals, with the majority coming from the US to access EU markets. Ireland has a good spread of firms, with the most important sectors being services, pharmaceuticals and food. The inward flow of these firms has been boosted by Ireland’s success in maintaining the very low 12.5% corporation tax rate. Since Ireland is an export-driven economy, the future recovery depends to a large degree on how the global economy evolves over the next couple of years. Irish labour costs have adjusted significantly and ULC has now dropped more than 20% since the peak.

Ireland has the youngest population in Europe, with a median age of 35.0 years (2012). However, the return of net emigration due to high unemployment has sharply lowered the population growth rate. Unemployment remains high after having tripled during the financial crisis. Recently unemployment has been declining and is currently just below 14%. The rapid growth of short-term unemployment is now seeping through to long-term unemployment. The high unemployment has lowered wage pressure and hence also inflation expectations.

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