In 2007 Stock markets had begun to creak, the international financial system was showing signs of strain, and the Irish housing market had started to cool down. After an unprecedented period of Irish economic expansion, in 2008 it was clear the cycle had turned as the country entered a deep recession.
The stock market and property market corrections were almost as severe as each with sectors of each market down as much as 80%. The period between 2007 to 2010 were some of the darkest ever seen in the country.
There’s a lot to be said for the fact that just three years after entering the bailout in 2010, Ireland was the first stricken eurozone state to stand on its own two feet again. We exited the bailout with an economy growing faster than many had anticipated. Thankfully, it hasn’t stopped since.
The last 10 years have proved difficult on many levels. The harsh austerity measures of the troika hit hard and issues such as housing demand and managing the public debt mean there’s a lot more work to be done – but Ireland has turned a corner.
The latest data from the Central Statistics Office (CSO) number crunchers show an economy in rude health. The recent years of uninterrupted growth has seen the net worth of households surpass the previous heights of a decade ago.
The value of the Irish economy hit a record €294 billion last year. In terms of GDP, the economy was up more than 60% from the low recorded in early 2013.
As a country providing a pro-business environment for multinationals, we are reaping the rewards of the most sustained expansion of the global economy in a decade. This looks set to continue with the OECD forecasting an increase of 3.6% in global GDP for 2018.
The Recovery: getting more people working
The key indicator has been employment. The large job losses across the economy post-2008 caused a big hit to the economy. In the first quarter of 2012, employment numbers fell to 1.82 million from a high of 2.17 million in the first quarter of 2007.
The recovery in employment has been hugely encouraging – a reversal in fortune for workers laid off in their thousands during the downturn. The Europe-wide Labour Force Survey shows Ireland has the sixth highest rate of jobs growth in the EU in Q2 2018 (compared to previous quarter). Year-on-year Ireland ranked fourth among the 28 EU economies.
Figures from the CSO show that the level of unemployment this September was the lowest level since February 2008. Ireland’s popularity with multinationals for basing their EMEA hubs along with its many strategic advantages have had a large part to play in this decrease. We are not quite back to the pre-crisis highs, but we are not far off.
The upswing in construction in recent times has seen core investment grow by 13% year on year in the first quarter of 2018. Within this, construction spending was up by 11% while new residential construction was up by 27%. This is good news, but the number needs to increase more rapidly to provide for new households and clear the backlog of recent years. In EY’s Economic Eye summer forecast construction was predicted to be the industry with the largest employment growth. In the five-year-period from 2017 to 2022, EY estimates almost 35,000 new positions in the building sector will be created.
The regulatory system is far more robust today than what it was in 2008. EU member states are working on a banking union to insulate taxpayers from any future financial shocks. The introduction of the BRRD (The Bank Recovery and Resolution Directive) safeguards against future failing banks – a framework sadly lacking pre-crisis. In terms of banking, it looks like the era of light-touch regulation is over, which can only serve the economy well going forward.
Brexit and the ‘unknown’ unknowns
In the past year a weakening sterling has given Irish exporters a taste of the damage a hard Brexit could bring. New tariffs on our trade with Britain would certainly impact on the bottom line for many companies. While the dangers of Brexit are clear, many UK companies are choosing Ireland as the location for their EU operations since the Brexit vote. Assuming that the negative impact of Brexit is mitigated by a workable deal concluded between the EU and Britain, Ireland is projected to remain one of the fastest-growing developed nations in the world.
Spending on the increase
The rise in incomes has led to higher consumer spending, a key factor in the wider recovery. This growth is driven by strong wage growth and the fall in unemployment. Figures for the second quarter of 2018 show that spending grew at its second fastest rate since the crash on a year-on-year basis. personal consumption is up 2.8% on 2017, and 14.3% since the first three months of 2013.
Both private and public debt levels are still high and need to remain a focus for government fiscal policy. Ireland can currently borrow at historically low interest rates which has enabled The National Treasury Management Agency (NTMA) to reschedule much of the debt at low fixed rates. Ten years on the Exchequer’s coffers are certainly looking healthier.
Housing demand remains a huge concern and must be tackled as a matter of urgency. The government has pledged to rebuild our housing stock through initiatives such as Project Ireland 2040 and the Land Development Agency. High rent levels impact discretionary spending and the wider economy as a whole. The government must look at this issue, not simply in social terms, but also as a possible constraint to future economic growth.
With rising incomes and increasing employment people’s lives are improving and if we can learn from the mistakes of the past then everyone can share in a prosperous future.