IRELAND FASTEST GROWING ECONOMY IN THE EUROZONE

Ireland’s economy is projected to grow by 4.5% in 2016 the fastest economy in the eurozone.

1. Exports will rise in line with increasing demand in its trading partners.
2. Business investment should remain robust thanks to rising profitability and favourable financing conditions.
3. Growth will provide momentum to job creation and reduce the still high rate of unemployment, thereby spreading the fruits of the recovery mode widely.
4. Household consumption will be supported by labour earnings and growth.
5. The government remains on track towards its medium-term goal of balancing the budget.
6. Fiscal windfall gains from strong economic growth and low interest costs will be used primarily for more rapid reduction of public debt. A fiscal package of EUR 1.5 billion in 2016 (0.7%) will prioritise getting more people back into work by revamping the tax and benefit system and enhancing activation policy.
7. The six-year plan on public investment will revitalize public transport, infrastructure and services.

Success Factors Based on Productivity, Innovation and Competitiveness

Cutting public expenditure and funding new ways of raising taxes and growing the economy.

Improved productivity performance offers the best pathway to prosperity. While cost competitiveness is absolutely essential, only productivity growth offers the opportunity over the medium term to grow incomes and employment sustainably. Productivity performance is, therefore, the crucial determinant of Ireland’s international competitiveness. To achieve the productivity growth necessary

1. There is a need to maintain fiscal stability, ensuring that the State’s finances are prudently managed – this is a crucial element in providing a stable business environment in which enterprise can thrive. A stable and a prudent approach to fiscal policy is also key to ensuring that sufficient public funds are available for investment in productivity-enhancing programmes and infrastructures.
2. The availability of competitively-priced, world-class infrastructure (energy, telecoms, transport, waste and water) and related services is critical to support economic growth and enterprise development.  As the country continues to expand, further targeted and prioritised investment and reform is required to address existing and likely infrastructural bottlenecks which could constrain growth in the economy by dampening productivity growth, increasing costs and limiting sectoral opportunities for foreign direct investment (FDI) and indigenous enterprise development. Capital expenditure, however, is not just about physical infrastructure. Investment and growth is increasingly driven by knowledge-based capital – investing in people and R&D must remain a key strategy to improve productivity and competitiveness.
3. Investment in people is not a new concept – the skills and talent of the work force are essential determinants of labour productivity. Training and upskilling of talent is associated with large increases in both productivity and output. From a national competitiveness perspective it is critical that industrial development and skills policies are adequately aligned and that labour/skills mismatches in the labour market are minimised. Issues relating to labour force participation and participation in lifelong learning also need to be addressed urgently to support competitiveness.
4. While Irish export performance remains robust, much of the Irish recent performance is dependent on a relatively small number of sectors selling a narrow range of products into a narrow range of markets. To minimise the adverse consequences from any potential external shocks, there is a need to broaden out into new products, markets and sectors, whilst maintaining the competitive advantages Ireland enjoys in existing ones. Ireland must also look to the domestic market, and ensure that it develops the most supportive environment possible to support entrepreneurship and enterprise development. A range of policy actions are likely to be required in this space, including improving access to finance for enterprise.
5. Finally, innovation is an important source of growth. While Ireland’s overall innovation performance has improved in recent years, performance lags innovation leaders such as Denmark, Finland, Germany and Sweden with whom Ireland aspires to compete.