Benchmarking Irelands g Competitiveness 2010 p Annual - - PowerPoint PPT Presentation

Benchmarking Ireland’s g Competitiveness 2010 p

Annual competitiveness reports p p

Volume 1: Benchmarking Ireland’ s Performance Ireland s Performance Volume 2: Ireland’s Compet it iveness Compet it iveness Challenge

What is competitiveness?

C i i ll h f Compet it iveness encompasses all t hose fact ors which impact on t he abilit y of firms in Ireland i i l k i t o compet e on int ernat ional market s in a way which provides our people wit h t he opport unit y t i t h i lit f lif t o improve t heir qualit y of life.

Key findings y g

► Competitiveness is improving: ► Competitiveness is improving: costs are falling; skills availability has improved;

y p ;

pressures on infrastructure have weakened as demand has fallen

and as maj or proj ects are completed; and ti t f i l ti l ll

some exporting sectors are performing relatively well. ► However significant challenges remain: ► However significant challenges remain: high levels of unemployment; high private and public debt levels; a high cost base; weak productivity performance; and

li it d t dit

limited access to new credit.

• 1. Ireland’s Competitiveness – where we stand

S t i bl S ustainable Growth: Growth:

► national income, ► quality of life and ► quality of life, and ► environmental sustainability

Despite the sharp decline in Irish living standards, national income levels (GNP based) remain close to euro area average

Levels of GDP per capita in constant prices (US $ PPP)

$50,000 $55,000 2010 F 2005

Levels of GDP per capita in constant prices (US $ PPP)

$40,000 $45,000 $30,000 $35,000 $20,000 $25,000 $10,000 $15,000 re US nd ds 28 DP en rk UK ny ce nd an 16 NP in ea ly el nd ry nd Singapor U Switzerlan Netherland OECD-2 Ireland GD Swede Denmar U German Franc Finlan Japa euro area-1 Ireland GN Spai South Kore Ita Israe New Zealan Hunga Polan

S

• urce: IMF, World Economic Out look, April 2010

Strong positive contribution from net exports… but driven by large decline in imports driven by large decline in imports.

Contribution of Net Exports to GDP Contribution of Net Exports to GDP

S

• urce: Forfás calculat ions, CS

O Nat ional Account s.

Public debt is growing rapidly

G l G t D bt ( % f GDP) 2000 2011F

90% 100% Euroarea Ireland UK

General Government Debt (as a %

• f GDP), 2000-2011F

80% 90% 60% 70% 40% 50% 30% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

S

• urce: Eurost at , Economy and Finance; and European Commission, S

pring Economic Forecast s May 2010

Very high levels of household debt are moderating but remain a drag on recovery moderating but remain a drag on recovery

Household Borrowing Per Capita, 2010 Q1 g p , Q

€60,000 €70,000 2010 Q1 2005 €50,000 €30,000 €40,000 €10 000 €20,000 €0 €10,000 nia aly ce um gal ce 13 ria ny nd ain ds nd urg Sloven Ita Greec Belgiu Portug Franc euro area- Austr Germa Finlan Spa Netherlan Irelan Luxembou

S

• urce: European Cent ral Bank, Aggregat ed Balance S

heet of euro area Monet ary Financial Inst it ut ions

Ireland has demographic advantages but ageing population will put pressure on public finances population will put pressure on public finances

Gross Public Expenditure on Pensions (as a %

• f GDP) 2007-2050

16% 2007 2020 2030 2040 2050

Gross Public Expenditure on Pensions (as a %

• f GDP), 2007 2050

12% 14% 10% 8% 6% 4% Ireland UK Denmark Germany Euroarea Poland France

S

• urce: European Commission, DG EcoFin, Pension schemes and pension proj ect ions in t he EU-27 members, Oct ober 2009.

Ireland has made real improvements in quality of life over the past decade life over the past decade

Ranking in the United Nations Human Development Index 2007

45 50

2007 2000

e Ranking

Ranking in the United Nations Human Development Index, 2007

30 35 40 Worse 20 25 30 10 15 king 5 and nds den nce and pan and US ain ark taly and UK any

• re

rea ael and ary

Better Rank

Irela Netherlan Swed Fran Switzerla Jap Finla Spa Denm It New Zeala Germa Singapo South Kor Isr Pola Hunga

S

• urce: S
• urce: UN Human Development Indices, A S

t at ist ical Updat e, 2009

Ireland’s environmental performance is marginally below the OECD average marginally below the OECD average

Environmental Performance Index 2010 S cale (0-100) Environmental Performance Index 2010, S cale (0 100)

95 100 85 90 70 75 80 60 65 50 55 and den nce and UK and any aly pan ain

• re

ark ary CD and nds US and ael rea Switzerla Swed Fran Finla New Zeala Germa Ita Jap Spa Singapo Denma Hunga OE Irela Netherlan Pola Isra South Kor S

• urce: Yale Cent re for Environment al Law and Policy

Essential Conditions Essential Conditions Business Performance:

T T d d I t t T Trade and Investment

Private sector investment has collapsed

• from an average of 24.6%
• f GNP over the 2005-2008 period to 13.4%

in 2009 Gross Fixed Capital Formation by the Private sector (as %

• f GDP)

25% 30%

2009 2005-2008

p y ( )

20% 25% 15% 5% 10% 0% 5% n d n e y d 6 k y y d 5 s n P S K P Spain Switzerland Japan France Hungary Finland euro area-16 Denmark Italy Germany Poland OECD-25 Netherlands Sweden Ireland GNP US UK Ireland GDP

S

• urce: European Commission, AMECO Dat abase

Irish exports held up well during the crisis… but countries which experienced sharp falls in 2009 are rebounding in 2010

Annual Growth in Exports Goods and S ervices 2005- 2010F

10% 15%

Ireland euro area 13 OECD-28

Annual Growth in Exports Goods and S ervices, 2005 2010F

5% 0%

• 10%
• 5%
• 15%
• 20%

2005 2006 2007 2008 2009 2010

S

• urce: OECD Economic Out look 86, December 2009

FDI performance remains strong, but our scores are falling

Rate of Return to US

• Owned Companies,

S tock of Inward Direct Investment (as % 2009 GDP), 2008

S

• urce: Forfás Calculations, UNCTAD World Investment Report, 2009

S

• urce: US

Bureau of Economic Analysis

Essential Conditions Essential Conditions Productivity

Significant room for improvement in Ireland’s productivity performance productivity performance

Average Annual Growth in Out put per hour Worked, 2001 -2009

5% 6%

2005-2009 2001-2005

g p p ,

3% 4% 1% 2% 0% 1%

• 2%
• 1%

rea nd ain US ary CD UK DP an ce nd nd ny nd ds en NP aly ark South Kor Pola Spa U Hunga OEC U Ireland GD Japa Fran Finla New Zeala Germa Switzerla Netherlan Swed Ireland GN Ita Denma

S

• urce: Groningen Growth & Development Centre, Total Economy Database, January 2010

Essential Conditions Essential Conditions Prices and Costs

Ireland’s cost competitiveness is improving Ireland s cost competitiveness is improving

Harmonised Competitiveness Index, 2005 =100

Ireland experienced a 7.7%

loss in cost competitiveness (real HCI) between January 2005 and HCI) between January 2005 and April 2008 .

Ireland has regained some of its

competitiveness since then p because of falls in relative prices and favourable exchange rate movements vis-á-vis key y trading partners.

In May 2010, Ireland’s real HCI

was 6.1% below the January 2005 value. However, the real HCI remains 19% above the January 2000 level.

S

• urce: Cent ral Bank,

Labour costs - unit labour costs are falling but f i b t performance varies by sector

Annual Change in Unit Labour Costs Annual Change in Unit Labour Costs

S

• urce: OECD, Unit Labour Cost, Quarterly Indicators

Property - still amongst the most expensive d it i ifi t f ll i i despite significant falls in prices

Cost of Renting a Prime Office, 2006 -2009

The cost of renting a

prime office fell by 18% prime office fell by 18% in Ireland in 2009 making us cheaper than the US and Italy. the US and Italy.

However, larger price

falls in S ingapore and g p S pain in 2009 mean they are now cheaper than Ireland.

S

• urce: Cushman & Wakefield

Energy costs fall significantly but likely to be cyclical

Industrial Energy Prices for Large Energy Users, 2007 -2009

The price of electricity

for large energy users for large energy users, decreased by more in Ireland (24% ) than in any other any other benchmarked location.

This downward

adj ustment is largely due to the steep decline in global fuel i ( d l) prices (gas and coal) and temporary rebates which are to be phased t b th d f 2012

23

S

• urce: Eurost at , Environment and Energy
• ut by the end of 2012

Business services costs decline

S ervices Price Index 2006 100 S ervices Price Index, 2006=100

S

• urce: CS

O S ervices Price Index S

• urce: CS

O, S ervices Price Index

Not e: This indicat or is based on experiment al CS O dat a

Accountancy costs fall significantly but only i l d li i l l i t marginal declines in legal services costs

Accounting and Legal S ervices Index 2006=100 Accounting and Legal S ervices Index, 2006 100

S

• urce: CS

O, S ervices Price Index

Not e: This indicat or is based on experiment al CS O dat a

Essential Conditions Essential Conditions Labour S upply

The steep rise in unemployment is affecting all parts of society… but those with lower educational attainment are more likely to be unemployed

Unemployment S tandardised Rates Unemployment (% ) by Educational Attainment

18% 20% Q1-2010 2005

Unemployment, S tandardised Rates Q1 2010 Unemployment (% ) by Educational Attainment 2007 Q1 – 2010 Q1

25% Lower secondary Higher secondary Post leaving cert Third level degree or above

14% 16%

20% Post leaving cert Third level degree or above Overall

8% 10% 12%

15%

4% 6% 8%

10%

0% 2% ds ea nd an nd UK ny rk 28 ly nd en nd US ce ry nd in

5%

Net herland S

• ut h Kore

S wit zerlan Japa New Zealan U German Denma OECD-2 It a Finlan S wede P

• lan

U Franc Hunga Irelan S pai

S

• urce: OECD S

tat.Extracts, Labour; CS O QNHS S

• urce: CS

O, Quarterly National Household S urvey

0% 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1

Policy Inputs Policy Inputs Business Environment:

d Taxation and Finance Finance

Despite stabilisation measures, budget deficit remains highest in the EU in 2010 remains highest in the EU in 2010

Total Government Revenue and Expenditure (as %

• f GDP) 2010F

p ( )

60% 65% R evenue 2010F Expenditure 2010 F 50% 55%

Budget Deficit 11 7%

45% 50%

11.7%

35% 40% 25% 30% n d y y y rk s a n d e n S K P P Sweden Finland Hungary Germany Italy Denmar Netherland euro area Japan Poland France Spain US UK Ireland GDP Ireland GNP S

• urce: European Commission, DG EcoFin, S

pring Economic Forecasts, May 2010

Tax wedge on labour has risen over the last three budgets

• Fig. 5.06 Married Couple, 2 children

Fig 5 07 S ingle Person on 167%

• f Average Wage

167%

• f Average Wage (combined)

60%

2009 2008

• Fig. 5.07 S

ingle Person on 167%

• f Average Wage

60% 2009 2008 40% 50% 50% 30% 40% 30% 40% 20% 20% 30% 10% rea w nd an nd US nd UK nd 28 ain nds nd ark en aly ny ce ary 10% d ea d nd US an UK 28 nd ds n rk d en ly ny ce ry S

• ut h Kor

New Zeala Jap S wit zerla P

• la

U Irela OECD- S pa Net herlan Finla Denma S wed It a Germa Fran Hunga New Zealan S

• ut h Ko re

Irelan S wit zerlan U Japa U OECD-2 P

• lan

Net herland S pai Denmar Fi nlan S wede It al German Franc Hungar

S

• urce: OECD Taxing Wages 2009

S

• urce: OECD Taxing Wages 2009

Cost of credit and access to credit remain more h ll i th i th challenging than in the euroarea average

Fig 5 10 Overdraft Interest Rates Fig 5 12 Change in Credit S tandards for

• Fig. 5.10 Overdraft Interest Rates,

2005-January 2010 Fig 5.12 Change in Credit S tandards for Loans for Enterprise (1-5)

10% Ireland euro area 3 8 4 euro area Ireland 8% 9% 3.4 3.6 3.8

Easing

7% 3 3.2 5% 6% 2.6 2.8 4% 2 2.2 2.4

Tightening

S

• urce: European Central Bank, MFI Interest Rate S

tatistics S

• urce: Central Bank, European Central Bank, Euro area Bank Lending S

urvey

3% Jan-05 May-05 S ep-05 Jan-06 May-06 S ep-06 Jan-07 May-07 S ep-07 Jan-08 May-08 S ep-08 Jan-09 May-09 S ep-09 Jan-10 2 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10

Policy Inputs Policy Inputs Physical y Infrastructure

Infrastructure investment remains strong Infrastructure investment remains strong

Government Gross Fixed Capital Formation (as %

• f GDP), 2009

5% 6%

2009 2005-2008

p ( ),

4% 3% 1% 2% 0% 1% NP nd DP in ds en ce an 25 nd ry UK US ly rk d ny Ireland GN Polan Ireland GD S pai Netherland S wede Franc Japa OECD-2 Finlan Hungar U U Ita Denmar S witzerlan German

S

• urce: European Commission, AMECO Database, May 2010

Improving broadband infrastructure is essential to t I i h t ( ti l l i ) support Irish exporters (particularly services)

Fixed Broadband Lines by S peed January 2010 Fixed Broadband Lines by S peed, January 2010

25% 23% 22% 20% 19% 18% 16% 13% 9% 8% 6% 4%

90% 100% <2 Mb/ s 2-10 Mb/ s >10 Mb/ s

18% 45% 0% 29% 61% 61% 45% 41% 35% 33% 25% 23% 22%

70% 80%

87% 59% 33% 61% 77% 59% 61% 70% 45% 60% 68% 91%

40% 50% 60%

34% 64% 31% 23% 66% 35% 38% 42% 52% 59%

10% 20% 30%

4% 2% 13% 7% 6% 0% 19% 18% 11% 23% 3%

0% 10% Bulgaria Portugal R

• mania

Belgium enmark Sweden ermany R epublic Slovakia area-14 Spain Slovenia Finland Austria Ireland Italy UK Poland B P R B De S G Czech R S euro S S

• urce: European Commission, Digital Competitiveness Report, May 2010

Policy Inputs Policy Inputs Knowledge g Infrastructure

Educational attainment of younger people is a key strength… but performance is relatively y g p y average

Population by Age Cohort that has third S cientific Mathematical and Reading Literacy Population by Age Cohort that has third level education

55-64 45-54 35-44 25-34

400 420 440 460 480 500 520 540 560 580

F in la n d

In d e x o f L it e r a c y R a n k e d b y O v e r a ll A v e r a g e

S cientific, Mathematical and Reading Literacy

• f 15 Y

ear Olds, 2006

US

F in la n d S o u th K o r e a N e w Z e a la n d N e th e r la n d s J a p a n

OECD-28

J a p a n S w itz e r la n d Ir e la n d G e r m a n y S e d e n Reading Literac

Ireland UK

S w e d e n U K D e n m a r k S in g a p o r e O E C D cy Scientific Litera

euro area-14 Ireland

O E C D F r a n c e H u n g a r y P o la n d U S acy Mathematica

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

U S S p a in Ita ly al Literacy

S

• urce: OECD, PIS

A Database, 2006 S

• urce: OECD, Education at a Glance, 2009

Business R&D has grown significantly. Most business expenditure on R&D is undertaken by foreign owned companies.

Business S ector R&D Expenditure by Firm Type 1995-2007

€1,600 €1,800 All (€M) Foreign-owned €M) Irish-owned (€M)

Business S ector R&D Expenditure by Firm Type, 1995 2007

€1,200 €1,400 €800 €1,000 Millions € €400 €600 €800 €0 €200 €400 €0 1995 1997 1999 2001 2003 2005 2007

S

• urce: Forfás, Research and Development Performance in the Business S

ector, 2005/ 06; CS O, Business Expenditure on Research and Development, 2007/ 2008

www competitiveness ie www.competitiveness.ie www forfas ie www.forfas.ie