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On whole, Ireland’s economy is quite impressive. As a member of the Organization for Economic Co-operation and Development (OECD), Ireland’s economic credentials certainly embody OECD’s mission to promote the economic and social well-being of people around the world through policy implementation.
Ireland is a well-oiled economic machine with a current unemployment rate at 5.9 percent which is lower than the European average of roughly 8.5 percent. Ireland’s currently employment rate is 68.4 percent, which is slightly above the OECD average. The average wage in Ireland is roughly $47.7 thousand US Dollars which ranks Ireland number 11 in the world, between Australia and Canada. On a national level, Ireland’s inflation is .34 percent which is among the lowest in the world.
Gross Domestic Product (GDP) is the typical indicator used on the national economic stage when determining total value of goods and services produced within a nation’s economy over time. Ireland reached an all-time high in GDP with $333.73 billion US Dollars in 2017. According to Ireland’s Central Statistic’s Office (CSO), its GDP rose 2.5 percent in the second quarter of 2018 to $75,304 US Dollars per capita. This number becomes quite impressive when realizing that it represents an increase of nine percent in real GDP compared to the second quarter of 2017. Ireland’s strong GDP places it ahead of the United States and all other countries with the exception of Luxembourg per capita.
When breaking Ireland’s GDP down, personal consumption, net exports, and government expenditures each grew during the past fiscal year, but capital investment did not. In fact, it witnessed a decline by 3.7 percent. When comparing 2017 second quarter numbers with 2018’s second quarter, the following sectors experienced positive growth: Information and communication, construction (11.5 percent), distribution, transport, hotels and restaurants (7.6 percent respectively), financial and insurance activities
While Ireland’s GDP is impressive on paper, there are a few imperatives that shed a different light on its reality. The most salient issue identified by the Department of Finance is that Ireland’s GDP was seeing exponential growth (26 percent in 2015) because a large portion of its income is from foreign owned assets based in Ireland. This becomes a deceptive number because the income in reality flows to non-Irish residents This is a direct result of Ireland’s corporate tax laws which will be discussed in greater detail later in this brief. As a result, Ireland’s GDP represented a larger aggregate economy that was illustrating economic trends that were not nearly as beneficial to the Irish government in the form of taxes or its citizens in the form of income.
In 2017, Ireland’s CSO published a modified version of the GDP, now referred to as modified Gross National Income (GNI). This new GNI did not include retained earnings for re-domiciled firms in Ireland, depreciation of foreign-owned intellectual property assets located in Ireland, and the depreciation of aircraft owned by leasing companies. After re-calculating the 2017 GDP data, CSO published that the nominal modified GNI was €190.2 billion, which was one-third lower than its nominal GDP of €289.1 billion. The last few years denotes a widening of the gap which is mainly due to multinational firms inverting their headquarters to Ireland.
With modified GNI being relatively new, and not yet published on a quarterly cycle, there are still more economic trends to discover. For example, determining the appropriate debt-to-GDP ratio, 89 percent in 2016, is skewed because the larger GDP denotes a larger denominator and it also represents a feasible and sustainable debt re-payment capacity. As a result, Ireland is re-aligning its fiscal policies to bring its debt-to-GPD target even lower to create a “…safety buffer for future downturns”. Thus, instead of a 60 percent threshold, Ireland has self-imposed a 45 percent ratio. While re-defining what the real debt-to-GDP ratio looks like, Ireland’s current public debt amount is quite high at €200 billion at the end of 2016. This places public debt amounts to nearly €42,000 per Irish resident.
Other fiscal policies Ireland plans to implement will deal with boosting domestic employment and income levels, balancing the budget over the economic cycle, and retiring debt with windfall gains to name a few. From a monetary policy perspective, Ireland’s National Treasury Management Agency (NTMA) has allowed matured debt to earn favorable rates when rolling over.[footnoteRef:14] Additionally, the cost of servicing Irish debt is reduced thru the eurosystem (European and National Central Banks of euro area Member States) which by the end of April 2017 will have purchased nearly €21 billion of Irish sovereign debt.
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