Economic and Political Overview

flag Ireland Ireland: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Since the end of the EU-IMF bailout in late 2013, Ireland has enjoyed steady economic growth, and positioned itself as the fastest growing European economy. The national economy has been supported by strong domestic demand and by the activities of multinational companies operating in the country. However, due to the COVID-19 pandemic, GDP growth recently slowed down to reach 5.9% in 2020 (IMF). According to IMF estimates, the economy grew vigorously in 2021 (+13%) supported by the fiscal stimulus, a rebound in domestic activity and dynamic exports from multinational-dominated sectors. The IMF expects GDP growth to ease in 2022 (3.5%) and 2023 (3.9%).

Although the Irish economy suffered from the successive lockdowns put in place to contain the COVID-19, headline GDP figures remained positive due to the resilience of multinational corporations (The Economist Intelligence Unit). In 2021, supported by the largest fiscal package in Irish’s history (equivalent to 10% of the GDP), the economy recovered quickly. Consumption was stimulated by the gradual lifting of restrictions and increased household confidence following a successful vaccination rollout (OECD). As the no-deal Brexit was avoided, the outlook for investment improved (IMF). However, the recovery remained uneven, with output in many contact-intensive sectors such as hospitality still below pre-pandemic levels (OECD). At the end of 2021, as contamination cases and hospital admissions increased again, limitations were re-introduced. As a result of the support measures, Ireland's previously balanced budget was pushed into high deficit in 2021 (-3.3% GDP), and it should stay at the same level in 2022 before declining to -2.2% GDP in 2023 (IMF). More optimistic, the OECD forecasts the budget deficit to almost vanish by 2023. Public debt slightly increased since the crisis and is expected to reach 58.8% GDP in 2022, compared to 57.4% GDP in 2021. It is expected to decline to 58% GDP in 2023 (IMF). After an episode of deflation in 2020 (-0.5%), increased supply chain delays and strong domestic demand triggered inflationary pressures in 2021. Inflation rate amounted to 1.9% and is expected to remain at around the same level in 2022 (1.9%) and 2023 (2%) (IMF). Ireland is expected to get around 5% of GDP in EU grants and loans until 2023, to mitigate the economic and social impact of the Covid-19 crisis and facilitate the green and digital transitions. In 2022, in light with the markedly improved situation, emergency support will be phased out but the fiscal stance will remain supportive (OECD). The Budget 2022 aims at consolidating the recovery and supporting growth, job creation and entrepreneurship. Among the topics covered are support for the aviation industry, introduction of an international tax reform following the OECD agreement, as well as measures to respond to housing demand and tackle climate change (PwC). The main challenge in the short term is to contain the spread of a new variant of COVID-19, as infections rates were soaring at the end of 2021 despite 92% of the adult population being fully vaccinated. Moreover, the Irish economy remains very volatile due to the weight of multinationals in the economy. In the medium term, higher corporate tax rates and tensions around the implementation of the agreement between the European Union and the United Kingdom could deteriorate business climate (OECD).

According to data from the National Statistics Office (CSO), the unemployment rate fell to a historic low of 4.7% in December 2019, but it soared due to the effect of the COVID-19 pandemic. In November 2020, the COVID-19 Adjusted Measure of Unemployment (considering all claimants of the Pandemic Unemployment Payment (PUP) classified as unemployed) indicated a rate as high as 20.4% (CSO). This indicator fell to 6.9% in November 2021. IMF figures indicate an unemployment rate of 7.8% in 2021, and forecast a decrease to 7% in 2022 and 6% in 2023.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 425.51504.52519.78549.09594.18
GDP (Constant Prices, Annual % Change) 6.213.69.04.04.0
GDP per Capita (USD) 85100102106114
General Government Balance (in % of GDP) -1.40.41.50.50.7
General Government Gross Debt (in % of GDP) 58.455.347.042.839.2
Inflation Rate (%) -0.52.48.46.53.0
Unemployment Rate (% of the Labour Force) 5.86.34.74.84.8
Current Account (billions USD) -29.1171.7963.5053.8656.44
Current Account (in % of GDP) -6.814.212.29.89.5

Source: IMF – World Economic Outlook Database, Latest available data

Note: (e) Estimated Data

 

Main Sectors of Industry

Agriculture remains a key sector as the government seeks to strengthen its role in the economy by modernising it and transforming the food processing industries (beef, dairy, potatoes, barley, wheat). The beef and dairy categories are the largest and account for nearly 70% of Gross Agricultural Output (GAO). Other sectors to have a share in GAO include pig, sheep and cereals. Agriculture represents 1.6% of GDP and employs 4% of the labour force (World Bank, 2020).

Ireland's recent industrial development was achieved through a deliberate policy of promoting advanced export-oriented enterprises, and partly through attractive offers for investors. The sector accounts for 38% of GDP and employs 19% of the active population. Textiles, chemicals and electronics perform particularly well.
The service sector accounts for nearly 54.8% of GDP and employs more than three-quarters of the labour force (77%). Banking and finance have grown to such an extent that Dublin counts now as an important international financial centre, while tourism has become an important source of foreign exchange earnings. In 2020, tourism accounted for EUR 9.2 billion, with 265,000 people employed according to the Irish Tourism Industry Confederation (ITIC).

Since 2020, most Irish economic sectors have been affected by the COVID-19 pandemic. If the pharma-chemical and technology firms have been resilient, the most impacted sectors include retail, travel and hospitality. According to ITIC, as of November 2020, the accommodation and food service activities were the sectors with the highest number of people in receipt of the Pandemic Unemployment Payment (PUP), with 98,233 recipients, followed by wholesale and retail trade (51,921), and arts, entertainment and recreation (11,400). The recovery was uneven in 2021, with output in many contact-intensive sectors still below pre-pandemic levels (OECD).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.4 18.8 76.8
Value Added (in % of GDP) 0.9 38.0 54.8
Value Added (Annual % Change) -1.9 20.2 -3.5

Source: World Bank, Latest available data.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
81,4/100
World Rank:
5
Regional Rank:
2

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.48/10
World Rank:
22/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President: Michael D. Higgins (since 29 October 2011, re-elected in October 2018)
Prime Minister: Micheál Martin (since 27 June 2020)
Next Election Dates
Presidential elections: November 2025
Senate: 2025
House of Representatives: 2025
Current Political Context
General elections were held in February 2020, in which no party secured a majority but Fianna Fáil won the most seats. After months of coalition negotiations disrupted by the COVID-19 pandemic, traditional rival parties Fianna Gail and Fine Gael formed a coalition government for the first time, along with the Green Party. The Fianna Fáil leader Micheál Martin was elected as Ireland’s Taoiseach (prime minister) in June, succeeding to Fine Gael’s leader Leo Varadkar. In 2021 the COVID-19 pandemic continued to dominate the political scene, with numerous protests against the restrictions measures such as mandatory lockdowns, hotel quarantine, masks-wearing, vaccine passports and the reopening of indoor dining.

After three years of conflict, the British Parliament voted in December 2019 in favor of the plan to leave the EU proposed by Prime Minister Boris Johnson. The last of the many deadlines for reaching a trade agreement was set for December 31, 2020, with no possibility of extending this transition period. Finally, on Christmas Eve, a 'thin deal' was signed, leaving much topics unsettled, to avoid a catastrophic exit without a deal. The stakes were crucial for Ireland because of its privileged trade relations with the United Kingdom and its land border with Northern Ireland. Besides the Brexit issue, Ireland introduced in the Budget 2022 the international tax reform increasing the corporate tax rate, as agreed with the OECD.

Main Political Parties
Historically, the Fianna Fail and Fine Gael parties have dominated politics.
- Fine Gael: centre-right, socially moderate and fiscally conservative
- Fianna Fail: centre/centre-right, populist
- Labour: centre-left
- Sinn Fein: left-wing
- Green Party: centre-left, driven by green politics.

-Renua Ireland
-Social Democrats
-Socialist Party

- Aontú


-Workers and unemployed Action: left

-Independents 4 Change: left

Type of State
Ireland is a sovereign, independent, democratic state with a parliamentary system of government.
Executive Power
The President, who serves as the Head of State in a largely ceremonial role, is elected for a 7-year term and can be re-elected only once. The Prime Minister (Taoiseach) is the Head of the Government. He is appointed by the president after being appointed by the lower house.
Legislative Power
Bicameral national Parliament (Oireachtas): House of Representatives (Dail) and Senate (Seanad). The Chamber of Deputies has 166 members elected by universal suffrage and the Senate is composed of 60 members (one part elected by the national universities and the other part by a representative panel of the civil society).
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
12/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the Republic of Ireland, please visit the Irish government website COVID-19 (Coronavirus) with the official data, as well as the "Latest updates on COVID-19" section on the platform Gov.ie.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in the Republic of Ireland and the current sanitary measures in vigour, please consult the Irish government webpage Public health measures in place to prevent the spread of COVID-19  including the up-to-date information on the containment measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the dedicated page on the website of the Irish Tax and Customs Authority.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the Republic of Ireland on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Irish government to address the impact of the COVID-19 pandemic on the national economy, please visit the webpage Ireland's response to COVID-19 (Coronavirus) on the gov.ie website. Further details are available on the website of the Central Bank of Ireland.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Irish government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Ireland in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Irish government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the Department of Business, Enterprise and Innovation's website and the webpage of the Central Bank of Ireland. Further information is available on Enterprise Ireland’s Covid-19 Business Response website.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
To find out about the support plan for the Irish exporting companies put in place by the Irish government, please consult Enterprise Ireland’s Covid-19 Business Response website.
 

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Latest Update: November 2022