Ireland A Remarkable Economic Recovery? Corden Lecture, University - - PowerPoint PPT Presentation

▶
ireland a remarkable economic recovery
SMART_READER_LITE
LIVE PREVIEW

Ireland A Remarkable Economic Recovery? Corden Lecture, University - - PowerPoint PPT Presentation

Mar 01, 2024 230 likes •702 views

Ireland A Remarkable Economic Recovery? Corden Lecture, University of Melbourne, 22 March 2016 Frances Ruane Research Affiliate, Economic and Social Research Institute, Ireland Honorary Professor, Trinity College, Dublin The Great

slide-1
SLIDE 1

Ireland – A Remarkable Economic Recovery?

Frances Ruane

Research Affiliate, Economic and Social Research Institute, Ireland Honorary Professor, Trinity College, Dublin

Corden Lecture, University of Melbourne, 22 March 2016

slide-2
SLIDE 2

The Great Recession

  • Impact on Ireland
  • Economic
  • Social / Psychological / Political
  • Impact on Europe / Euro Area
  • Short term
  • Medium term
  • Long term
slide-3
SLIDE 3

Outline

  • 1. Historical backdrop
  • 2. The crisis in Ireland
  • 3. Ireland’s economic recovery in context
  • 4. Key drivers of the Irish recovery?
  • 5. Legacy challenges from the crisis?
  • 6. Possible lessons for EU members?
  • 7. Possible lessons for other countries?
slide-4
SLIDE 4
  • 1. Historic Backdrop
slide-5
SLIDE 5

1.1 Picture of Ireland Today

Demography

Population

4.6m (2014)

Non-native born share

12%

Labour and Skills

Unemployment rate 8.8% (2016); 15.1% (2011) Education levels

Tertiary 50%

Key Sectors

ICT Medical Devices Pharma Food & Drink

Key Markets

EU:58% UK:15% USA:23%

slide-6
SLIDE 6

1.2 Key Political Economy Events 1921 - 2001

  • Open market with UK

1921

  • Protection and ban on FDI

1932

  • Move to Open Economy

1950s/60s

  • Promote exports
  • Promote export platform FDI
  • Reduce tariffs incrementally
  • Key Treaties
  • Anglo-Irish Trade Agreement

1965

  • Membership of EEC

1973

  • Member of Euro Area

1997

slide-7
SLIDE 7

1.3 Backdrop

  • Strong growth performance
  • Immediately pre-crash (+)
  • Immediately pre-crash (-)
slide-8
SLIDE 8

1 2 3 4 5 6 7 8 9 10

70-75 75-80 80-85 85-90 90-95 95-00 00-05 05-10 10-15

% Irish GNP Average Irish GNP Source: Irish Fiscal Advisory Council ; Data: CSO, National Income and Expenditure Accounts for historical data. Estimates for 2015 come from Department of Finance Budget 2016 and EC Autumn 2015 forecasts. January 2016

1.4 Irish Growth Rates 1970 – 2015

Average Five Year Growth Rates

slide-9
SLIDE 9

1.5 Strong Pre-Crisis (+) Fiscal Position

20 40 60 80 100 120 140 % of GDP

Government Debt, % GDP, 2000 - 2015

Source: Irish Fiscal Advisory Council calculations; Data: Department of Finance.

EU Rule < 60% 2007

  • 12%
  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% % GDP

2006

Source: Department of Public Expenditure and Reform Data: Department of Finance including Budget 2016 projections

Primary Fiscal Balance, % GDP 1995 - 2015

EU Rule < -3%

slide-10
SLIDE 10

1.6 Pre-Crisis (+) Low Unemployment Rate

Source: Economic and Social Research Institute; Data: CSO Quarterly National Household Survey

Note: Rate is calculated on the basis of individuals aged 15-74.

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Q2 04 Q2 05 Q2 06 Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15

Ireland's Unemloyment Rate: 2004-2015 (Q2) 2015 2004

slide-11
SLIDE 11
  • 1. Pre-Crisis (-) Unsustainable Tax Pattern

Composition of Tax Revenues 1997 - 2014

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

percentage of total tax

Income Tax VAT Excise Corp’n Tax Capital Other Source: Irish Fiscal Advisory Council; Data: Dept of Finance

1997 2014

slide-12
SLIDE 12
  • 1. Pre-Crash (-): Growth of Household

Indebtedness from 2003…

  • 200,000
  • 150,000
  • 100,000
  • 50,000

50,000 100,000 150,000 200,000 2003M01 2003M05 2003M09 2004M01 2004M05 2004M09 2005M01 2005M05 2005M09 2006M01 2006M05 2006M09 2007M01 2007M05 2007M09 2008M01 2008M05 2008M09 2009M01 2009M05 2009M09 2010M01 2010M05 2010M09 2011M01 2011M05 2011M09 2012M01 2012M05 2012M09 2013M01 2013M05 2013M09 2014M01 2014M05 2014M09 2015M01 2015M05 2015M09 2016M01

€ million

Deposits Loans Source: Irish Fiscal Advisory Council; Data: Central Bank of Ireland

2008

2003 2016

Deposits Loans

slide-13
SLIDE 13

Banks Construction

Crisis

Fiscal Revenues Households / SMEs Financial Markets Weak Regulation

  • 2. Key Elements

in the Irish Crisis

slide-14
SLIDE 14

2.1 Impact of Euro on Interest Rates, 1992-2015

Source: Presentation by German Council of Economic Experts to the Institute of International and European Affairs Dublin, March , 2016 Data: Eurostat

1 2 3 4 5 6

slide-15
SLIDE 15

2.2 Ireland’s Loss of Creditworthiness

2 4 6 8 10 12 14

1993Jan 1995Jan 1997Jan 1999Jan 2001Jan 2003Jan 2005Jan 2007Jan 2009Jan 2011Jan 2013Jan 2015Jan

10-Year Bond Yield

10-Year Bond Yield, Ireland and Germany, Monthly Averages, January 1993-July 2011

Source: Irish Fiscal Advisory Council. Data: ECB

Germany Ireland

1993 2015

slide-16
SLIDE 16

2.3 Irish borrowing from Euro-system in Crisis

  • 20

40 60 80 100 120 140 160 180 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

€ billion

Central Bank of Ireland “Other Assets” plus “Other Claims on Euro Area Credit Institutions” [ELA] Borrowing from the Euro- system for Monetary Policy Operations, Domestic Banking Group

Source: Irish Fiscal Advisory Council. Data: Central Bank of Ireland

2003 2015

slide-17
SLIDE 17

Banks Financial Markets Fiscal Revenues Construction

Weak

Regulation Households /SMEs

Government

  • 2. Outcome:

Full blown Crisis 2011

slide-18
SLIDE 18
  • 3. Irish Recovery in Context

3.1 Irish and EU-15 growth rates 3.2 GDP 3.5 Exports 3.4 Domestic demand 3.5 Employment 3.6 Irish unemployment and migration 3.7 Legacy debt

slide-19
SLIDE 19

1 2 3 4 5 6 7 8 9 10

70-75 75-80 80-85 85-90 90-95 95-00 00-05 05-10 10-15

% Irish GNP EU 15 GDP Average Irish GNP Average EU 15 GDP Source: Irish Fiscal Advisory Council ; Data: CSO, National Income and Expenditure Accounts for historical data. Estimates for 2015 come from Department of Finance Budget 2016 and EC Autumn 2015 forecasts. January 2016

3.1 Ireland Vs EU-15 Growth 1970 – 2015

Average Five Year Growth Rates

slide-20
SLIDE 20

3.2 GDP Index 2007 - 2015

60 70 80 90 100 110 120 2007 2008 2009 2010 2011 2012 2013 2014 2015

2007=100

GDP

Ireland

Source: Irish Fiscal Advisory Council; Data: EC AMECO database

*

60 70 80 90 100 110 120 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

GDP

Ireland Greece Spain Portugal

Ireland Greece

slide-21
SLIDE 21

3.3 Exports Index 2007 - 2015

60 70 80 90 100 110 120 130 140 150 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

Exports

Ireland

Source: Irish Fiscal Advisory Council; Data: EC AMECO database

60 70 80 90 100 110 120 130 140 150 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

Exports

Ireland Greece Spain Portugal

Greece Ireland

slide-22
SLIDE 22

3.4 Domestic Demand Index 2007 - 2015

Source: Irish Fiscal Advisory Council; Data: EC AMECO database

60 65 70 75 80 85 90 95 100 105 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

Domestic Demand

Ireland

60 65 70 75 80 85 90 95 100 105 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

Domestic Demand

Ireland Greece Spain Portugal

Greece Ireland

slide-23
SLIDE 23

3.5 Employment Index 2007 - 2015

Source: Irish Fiscal Advisory Council; Data: EC AMECO database

70 75 80 85 90 95 100 105 2007 2008 2009 2010 2011 2012 2013 2014 2015

2007=100

Employment

Ireland

70 75 80 85 90 95 100 105 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007=100

Employment

Ireland Greece Spain Portugal

Greece Ireland

slide-24
SLIDE 24

3.6 Gradual Decline in Unemployment Rate

Source: Economic and Social Research Institute; Data: CSO Quarterly National Household Survey Note: Rate is calculated on the basis of individuals aged 15-74.

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Q2 04 Q2 05 Q2 06 Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15

Ireland's Unemployment Rate: 2004-2015 (Q2) 2004 2015

slide-25
SLIDE 25

3.6 Migration

  • 80
  • 60
  • 40
  • 20

20 40 60 80 100 120

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousands

CONTRIBUTIONS TO CHANGE IN NET MIGRATION

Net Migration

Source: Irish Fiscal Advisory Council; Data: Central Statistics Office Note: Gross flows were not available earlier than 1987

1989

2010

2007 1951 2014

slide-26
SLIDE 26

3.6 Migration

  • 150
  • 100
  • 50

50 100 150 200

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousands

CONTRIBUTIONS TO CHANGE IN NET MIGRATION

Immigrants Emigrants Net Migration

Source: Irish Fiscal Advisory Council; Data: Central Statistics Office Note: Gross flows were not available earlier than 1987

2007

slide-27
SLIDE 27

3.7 Legacy Debt Comparisons

Source: Presentation by German Council of Economic Experts to the Institute of International and European Affairs Dublin, March , 2016 Data: Eurostat Greece Debt to GDP Ratio 1991-2014 Primary Fiscal Balance 1991-2014

Greece

Ireland

Ireland 60%

  • 3%
slide-28
SLIDE 28
  • 4. Key Drivers of Irish Recovery?
  • 1. Scale of Ireland’s internationalisation
  • 2. Support from European Union
  • 3. Return of local confidence
  • 4. Relative political stability 2007-2014...
slide-29
SLIDE 29

4.1 Internationalisation – Exports

Exports, % of GDP (2014)

112

50 100 150 200 250

US Japan Australia Turkey UK France Italy Spain Canada Greece Mexico Albania Finland Norway Portugal Montenegro Romania EU-15 EU Serbia Euro area Sweden Germany Croatia Poland Macedonia FYR Korea Austria Iceland Denmark Cyprus Latvia Bulgaria Switzerland Slovenia Lithuania Netherlands Belgium Czech Rep. Estonia Hungary Slovakia Ireland Malta Luxembourg

Exports as % of GDP

slide-30
SLIDE 30

4.1 Internationalisation - Favourable External Context for Ireland

60 65 70 75 80 85 90 95 100 105 110 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Index: 2007 = 100

IE UK US EA

MARKET GROWTH RATES: REAL GDP PC 2016 1998

slide-31
SLIDE 31

4.2 ECB Assistance from 2011 (H2)

2 4 6 8 10 12 14

1993Jan 1995Jan 1997Jan 1999Jan 2001Jan 2003Jan 2005Jan 2007Jan 2009Jan 2011Jan 2013Jan 2015Jan

10-Year Bond Yield

10-Year Bond Yield, Ireland and Germany, Monthly Averages, January 1993-August 2015

Source: Irish Fiscal Advisory Council; Data: ECB

Germany Ireland 1993 2015

slide-32
SLIDE 32

4.2 Troika Programme - Return of Reputation

0.3

  • 7.0
  • 11.5
  • 11.0
  • 8.4
  • 7.9
  • 5.7
  • 3.9
  • 2.1
  • 1.2
  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % of GDP

Primary Balance Interest General Government Balance EDP Ceiling

Source: Irish Fiscal Advisory Council; Data: CSO; Budget 2016.

GENERAL GOVERNMENT BALANCE (% GDP) 2007 - 2016

slide-33
SLIDE 33

4.3 Confidence - Recovery in Investment and Consumption 2007 - 2015

  • 40
  • 30
  • 20
  • 10

10 20 30 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 % change y-y

Underlying M&E Total B&C

Underlying Investment (ex planes and intangibles)

  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 2007 2008 2009 2010 2011 2012 2013 2014 2015 % change y-y

Goods Services Total

Consumer Spending

Source: Irish Fiscal Advisory Council; Data: CSO

Investment

slide-34
SLIDE 34

4.4 Relative Political Stability

‘Grey Protest’, Autumn 2008 Trade Unions, Autumn 2012

slide-35
SLIDE 35
  • 5. Crisis Legacy Challenges?

5.1 Taxation 5.2 Public expenditure cuts 5.3 Other legacies ? 5.4 Other challenges ?

slide-36
SLIDE 36

5.2 Capital Expenditure 1983 - 2021

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f 2020f 2021f growth in spending

Central Government Capital Expenditure, % of GDP

Capital spending, % of GDP Average 1983-2015

Source: Budget 2016; Data: Budget and Economic Statistics (Department of Finance).

2021 1983 2008

slide-37
SLIDE 37

5.3 Household Mortgages in Arrears 2009 - 2015

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

% in arrears

Thousands of Mortgages In arrears over 180 days % in arrears over 90 days (RHS axis)

Source: Irish Fiscal Advisory Council; Data: Central Bank of Ireland. Note: Chart shows the number of mortgage accounts on principal dwelling homes (PDH) that are in arrears equivalent to at least 90 days past due.

slide-38
SLIDE 38

5.3 Legacy of Long-term Unemployed

2 4 6 8 10 12 14 16

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

%

UNEMPLOYMENT AS % OF LABOUR FORCE 1999 - 2014

All 1yr+ 4yr+

Sources: Irish Fiscal Advisory Council; Data: CSO and Eurostat.

slide-39
SLIDE 39

5.3 Economic Recovery and Politics

10 15 20 25 30 35 40 45 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 € ,000

National Income/Consumption per Head 1995 - 2021

Consumption GNP

Source: Irish Fiscal Advisory Council ; Data: CSO and Department of Finance forecasts.

slide-40
SLIDE 40

5.3 ‘Anti-Austerity’ Protests

slide-41
SLIDE 41

5.4 Among the other challenges are:

National

  • Pensions
  • Climate change

European

  • BREXIT
  • Migration and governance challenges

Global

  • Geo-politics and globalisation patterns
  • International taxation debates
slide-42
SLIDE 42
  • 6. Lessons for EU countries in crises?
  • Focus on jobs, growth, public-sector efficiency
  • Pay attention to distribution – cohorts, spatial,

sectoral

  • Manage expectations and social unrest
  • Provide post-crisis ‘vision’
  • Engage (+) with EU governance
slide-43
SLIDE 43
  • 7. Lessons for countries seeking to recover

from crises?

  • Focus on growth and distribution
  • Don’t over-promise
  • Maintain public support
  • Recognise people connect with micro > macro
  • translate concepts/numbers
  • watch distribution and not averages
  • provide for ‘vision’ beyond crisis/recovery
  • Have reliable national statistics
slide-44
SLIDE 44

Crises can emerge quickly and political economy really matters

“Ireland's economic success story is one that many OECD countries would like to emulate” OECD June 2008 “We all know what to do, we just don’t know how to get re-elected after we’ve done it” J.C. Juncker

slide-45
SLIDE 45

Appendix

slide-46
SLIDE 46

Confidence: Sources of Growth

  • 15
  • 10
  • 5

5 10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Percentage Point Contributions

Stocks Underlying Net Exports Government Underlying Investment Consumption Real GDP

Source: Irish Fiscal Advisory Council Data: Department of Finance; CSO. Notes: "Underlying" investment and net exports strip out intangibles and aircraft purchases which ave little impact on real GDP.

Contribution of Consumption to Real GDP Growth (Yr-on Yr)