Daily Management Review

Ireland's GDP growth is fastest in the EU


03/09/2017


Economy of Ireland has remained the fastest growing in the European Union for the third consecutive year in 2016, although with a smaller margin than before.



Mith
Mith
According to data published by the country's statistical agency on Thursday, Ireland's GDP in 2016 grew by 5.2% compared with 2015. GDP also increased by 2.5% in the last three months of the year compared to the third quarter of 2016.

Ireland was one of five members of the Eurozone that received financial assistance from the International Monetary Fund (IMF) and the EU during the debt crisis in the euro area. Since then, the Irish economy has demonstrated the strongest recovery in EU, although Spain's economy has also been growing extremely rapidly in 2016.

Nevertheless, another year of rapid economic growth is unlikely to reduce level of concern of government officials and businesses about long-term impact of the UK's June decision to leave the European Union.

None of the remaining EU members will be more affected by Brexit than Ireland. The country's farmers export half of their production to Britain, while a quarter of all Irish supplies to Europe go to the United Kingdom.

It is widely recognized that GDP data do not provide a clear picture of growth of the Irish economy. The total picture us distorted by a large number of international companies operating in the country.

Scale of these distortions was clarified in July 2016, when the Central Statistical Office published new data for 2015. The report showed that during the year the economy increased by 26%. This largely reflects so-called inversions, in which US corporations merge with overseas-based companies to take advantage of lower tax rates. 

Last month, the statistical office announced a new method of measuring production to filter out some of these distortions and provide a clearer picture of growth. The new reporting will be published at the end of 2017.

However, there are other more reliable activity indicators that also indicate strong growth in 2016. The unemployment rate fell to 6.7% in January compared to 8.5% a year earlier, which indicates that a significant part of the growth in production, recorded in the GDP indicators, was real.

Once a classical agrarian country known only for butter, beer and whiskey, Ireland, after joining the European Union in 1973 and carrying out a large-scale reform of the education system, managed to embark on an industrial track. Now, the country is focusing on knowledge-intensive industries and high technologies. The pharmaceutical industry is the largest branch of the Irish economy, which provides almost 60% of exports. On the other hand, the IT industry, primarily represented by American companies, has become one of the most important employers on the island.

Computer giant Intel produces microchips in Ireland; the country hosts European headquarters of Microsoft, Facebook, Google, Twitter, Linkedin, and Apple has already created about 6,000 jobs on the island.

The Green Island looks so attractive for foreigners not only because of a very low corporate tax rate of 12.5%, which Dublin was able to defend in negotiations with the "three" creditors. Favorable investment climate is promoted by excellent transport infrastructure created largely with financial support of the EU, a large number of qualified personnel, low level of corruption and an effective state apparatus. Besides, Ireland is the only country in the euro area where English is a state language. 

source: ft.com






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