COMMISSION STAFF WORKING DOCUMENT Country Report Ireland Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention on correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}
Date: 2017-02-22
Institutions: European Commission, Secretariat-General
Subjects: EU employment policy, EU investment, Ireland, economic development, economic recovery, euro area, fiscal policy, macroeconomics, multilateral surveillance, structural adjustment

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 22.2.2017  SWD(2017) 73 final   COMMISSION STAFF WORKING DOCUMENT Country Report Ireland  Including an In-Depth Review on the prevention and correction of macroeconomic  imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP  2017 European Semester: Assessment of progress on structural reforms,  prevention on correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011  {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}    
 
 
CONTENTS 

Executive summary 

1. 

Economic situation and outlook 

2. 

Progress with country-specific recommendations 

3. 

Summary of the main findings from the MIP in-depth review 

4. 

Reform priorities 

4.1.  Public finances and taxation 

4.2. 

Financial sector 

4.3. 

Labour market, education and social policies 

4.4. 

Investment 

4.5. 

Sectoral policies 

A.  Overview table 

B.  MIP Scoreboard 

C. 

Standard tables 

References 

LIST OF TABLES 

1.1. 

2.1. 

Key economic, financial and social indicators — Ireland 

Summary table on 2016 CSR assessment 

3.1.  MIP assessment matrix — Ireland 2016 

4.1.1.  Government's contingent liabilities 

B.1. 

The MIP Scoreboard for Ireland 

C.1. 

Financial market indicators 

C.2. 

Labour market and social indicators 

C.3. 

Labour market and social indicators (continued) 

C.4. 

Product market performance and policy indicators 

C.5.  Green growth 

1 

5 

13 

16 

20 

20 

26 

36 

45 

51 

58 

64 

65 

70 

12 

14 

18 

22 

64 

65 

66 

67 

68 

69 

 
 
 
 
LIST OF GRAPHS 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

1.7. 

1.8. 

Gross value added from domestic production and foreign-owned multinationals 

Core domestic demand and employment 

Consumer sentiment and business prospects 

Recent labour market trends 

Real effective exchange rate 

Goods exports and contract manufacturing 

Total investment and main drivers 

Core investment and its components 

4.1.1.  Government gross debt evolution 

4.1.2.  Debt servicing cost indicator 

4.1.3.  Maturity profile of Ireland’s long-term debt (end December 2016) 

4.1.4.  Change in final and planned expenditure allocation and revenue surprise 

4.2.1.  Banks’ book quality and provisioning 

4.2.2.  Forbearance levels — a euro area comparison 

4.2.3.  Evolution of mortgage loans in arrears 

4.2.4.  Net lending volumes and yearly growth rates 

4.2.5. 

International investment position by asset type (IFSC and non-IFSC) 

4.2.6. 

International investment position by asset type — excluding IFSC 

4.2.7. 

International investment position by institutional sector, non-IFSC 

4.2.8.  Geographic distribution of FDI liabilities, immediate and ultimate ownership (2015) 

4.2.9.  Direct investment abroad end year position by prior domicile location 

4.2.10.  Current account balance, net components 

4.2.11.  (Non-consolidated) private sector debt to GDP 

4.2.12.  Financial assets held by Irish households 

4.2.13.  Total corporate loans by counterparty 

4.2.14.  SME lending – total and new 

4.2.15.  Financing sources for SME fixed investment 

4.2.16.  Interest rates for SME loans 

4.3.1.  Unemployment by duration 

4.3.2.  Relative dispersion of employment rates by education level, 2010, 2014 and 2015 

4.3.3.  Main social indicators 

4.3.4.  Gap between people living in jobless households and unemployment ratio 

4.3.5.  Public expenditure on education 

4.4.1. 

Investment in intellectual property and aircraft 

4.4.2. 

Investment in dwellings and other construction 

4.4.3.  Breakdown of unit labour costs 

4.4.4. 

Total value added per person employed Irish indigenous and foreign firms (2000-2014) 

4.4.5.  Gross Value Added per hour worked, total economy (2006-2015) 

4.5.1.  Overvaluation gap with respect to price/income, price/rent and fundamental model 

valuation gaps 

5 

6 

6 

7 

8 

8 

9 

10 

20 

21 

21 

23 

26 

27 

27 

28 

29 

29 

30 

30 

31 

31 

32 

33 

33 

34 

35 

35 

36 

36 

38 

38 

41 

45 

45 

48 

48 

49 

51 

 
 
4.5.2.  Housing completions and demand 

4.5.3. 

Trends in business R&D intensity and public R&D intensity, 2000-2015 

4.5.4.  Difference between real growth in government budget appropriations for R&D (GBOARD) 

and real growth in GDP, 2007-2015 

LIST OF BOXES 

2.1. 

Contribution of the EU budget to structural change in Ireland 

4.3.1.  Selected highlights: Expert Group on Future Skills Needs 

52 

55 

55 

15 

42 

 
 
 
 
EXECUTIVE SUMMARY 

This report assesses Ireland’s economy in the light 
of  the  European  Commission’s  Annual  Growth 
Survey  published  on  16 November 2016.  In  the 
survey  the  Commission  calls  on  EU  Member 
States  to  redouble  their  efforts  on  the  three 
elements  of  the  virtuous  triangle  of  economic 
policy — boosting investment, pursuing structural 
reforms and ensuring responsible fiscal policies. In 
so  doing,  Member  States  should 
focus  on 
improving social fairness in order to deliver more 
the 
inclusive  growth.  At 
the 
Commission  published 
the  Alert  Mechanism 
Report (AMR) that initiated the sixth round of the 
macroeconomic 
procedure.  The 
imbalance 
in-depth  review,  which  the  2017  AMR  concluded 
should  be  undertaken  for  the  Irish  economy,  is 
presented in this report.   

same 

time, 

Ireland’s  economic  prospects  remain  bright, 
but  risks  have  heightened.  GDP  is  estimated  to 
have  grown  by  4.3 %  in  2016  and  is  projected  to 
further  expand  by  3.4 %  in  2017  and  3.3 %  in 
2018.  The  activities  of  multinationals  remain 
unpredictable  but  this  does  not  disguise  the 
fast-paced,  broad-based  and  employment-rich 
recovery  that  has  taken  place  in  the  country.  Yet, 
the external environment has become increasingly 
uncertain.  Ireland  could  be  subject  to  external 
referendum  on  UK’s 
shocks 
membership  of  the  EU  and  the  international  tax 
environment,  through  its  impact  on  multinational 
location decision. 

linked 

the 

to 

inward migration for the first time since 2009. This 
is in addition to sizeable natural population growth 
of 
about  0.8 %.  However,  very-long-term 
unemployment (over two years) amounted to more 
than 40 % of all unemployment in 2015 and labour 
market participation has increased only marginally, 
recovery.  However, 
despite 
far,  some 
notwithstanding 
households  continue  to  experience  poverty  and 
social exclusion.  

strong 
the  progress  so 

the 

Insufficient  housing  supply  is  a  concern  for 
both  its  economic  and  social  reasons.  House 
prices are increasing and supply constrains persist. 
This  highlights  the  importance  of  coherent spatial 
planning  and 
investment.  The 
the  residential 
is 
government 
property market to support the recovery in supply.  

infrastructure 
intervening 

in 

The  stability  of  tax  revenues  in  the  medium 
term  is  a  concern  for  public  finances.  The 
general  government  deficit  has  continued  to  drop, 
due  largely  to  a  surge  in  GDP  and  strong    tax 
receipts.  However,  the  increasing  reliance  on 
finance 
tax 
buoyant  corporate 
permanent  increases  in  current  expenditure  is  a 
concern.  This  is  because  corporate  tax  receipts 
tend  to  be  a  volatile  source  of  revenue  in  most 
economies  and  particularly  in  Ireland.  The  small 
tax  base  increases  risks  stemming  from  the  still 
elevated  levels  of  public  debt  and  relatively  high 
debt servicing costs. 

receipts 

to 

Domestic  economic  activity  has  expanded 
strongly.  Gross  value  added  in  the  ‘domestic’ 
sectors of the Irish economy expanded by 4.4 % in 
2015, more than twice the rate in the euro area as a 
whole.  Moreover,  core  domestic  demand  —  a 
measure  that  strips  investment  components  linked 
to  the  activities  of  multinationals  —  grew  by 
approximately  5.4 %  in  2015.    Core  domestic 
demand  now  stands  8 %  above  its  2010  level, 
reflecting the breadth of the Irish recovery, which 
has  reached  nearly  all  sectors.  However,  large 
differences  prevail  between 
the  productivity 
growth of the indigenous firms and multinationals 
operating in Ireland. 

Unemployment has continued to fall but labour 
market and social challenges remain. Long-term 
unemployment  has  also  declined  further  and  the 
youth unemployment rate has fallen below the EU 
average.  In  2016,  the  country  experienced  net 

1 

Although  the  domestic  economy  continues  to 
grow at robust rates, there are uncertain times 
ahead.  The  external  environment  is  increasingly 
unpredictable  and 
internal  risks  also  remain. 
Increasing  spending  pressures  to  fund  current 
services  are  emerging,  reducing  the  scope  for 
public  investment.  Reorienting  the  fiscal  policy 
mix towards growth-sustaining capital expenditure 
and  increasing  the  quality  of  current  expenditure 
remain at the forefront of policy issues, also with a 
view  to  reducing  the  vulnerability  of  public 
finances  to  shocks.  A  number  of  factors  continue 
to  drag  on  bank  profitability.  These  include  the 
high 
and 
low-yielding 
tracker  mortgages,  weak  credit 
demand,  difficulties  in  accessing  collateral,  and 
continued pressure on net interest margins. Recent 
price  and  rent  increases  have  drawn  attention  to 
persistent  housing  supply  bottlenecks.  These 

stock  of  non-performing 

loans 

 
 
Executive summary 

job  creation, 
rising  earnings  and  asset 
valuations are expected to support deleveraging 
in the future. Although there are indications of 
credit  demand  picking  up  in  certain  loan 
categories,  existing  debt  repayments  exceed 
new credit. 

  Gross  government  debt 

is  on  a 

firm 
downward  trend,  but  remains  high.  Public 
debt  reached  78.6 %  of  GDP  at  the  end  of 
2015, 32 percentage points below its peak level 
in  2012.  The  risks  associated  with  high  debt, 
such as its future refinancing, are mitigated by 
the  long-term  maturity  of  the  Irish  debt  stock 
and  its  low  interest  rates.  The  government  is 
studying the feasibility of a rainy-day fund as a 
tool to alleviate fiscal risks while continuing to 
reduce public debt. Nevertheless, as Ireland is a 
small  and  very  open  economy,  its  public 
finances  remain  vulnerable  to  external  shocks 
and changes in economic outlook. 

  The  net  international  investment  position 
reversed  its  path  in  2015.  Ireland’s  negative 
net  international  investment  position  had  been 
falling  rapidly  before  2015,  but  it  surged  to 
208 %  of  GDP  in  2015  as  a  result  of  the 
transfer  of 
the 
country.  In  so  far  as  it  is  observable,  the 
external sustainability of domestic sectors does 
not  appear  to  be  deteriorating,  although  it  is 
difficult to assess. 

large  balance  sheets 

into 

  The  stock  of  non-performing  loans  remains 
high.  Banks’  asset  quality  is  improving  and 
profitability  is  recovering  but  remains  fragile. 
The  non-performing  loans  ratio  for  domestic 
banks  fell  to  14.7 %  at  the  end  of  June  2016, 
down from a peak of 27.1 % at the end of 2013. 
Nevertheless,  this  ratio  is  still  among  the 
highest in the euro area. The share of arrears in 
the  total  mortgage  balance  remains  high  at 
14 %.  The  high  ratio  of  non-performing  loans 
is  expected  to  continue  to  weigh  on  domestic 
banks’  profitability  —  as  well  as  on  the 
economic  activity  of  affected  households  and 
firms  —  in  the  short  and  medium  term. 
Carefully balancing the push for credit volumes 
with  prudent  lending  standards  continues  to 
pose a challenge for banks. 

problems  have  greater  implications  for  social 
stability than for financial stability at present. 

the 

2016 

Overall  Ireland  has  made  some  progress  in 
addressing 
country-specific 
recommendations.  Some  progress  was  made 
regarding  the  quality  of  public  expenditure  which 
has improved, but Ireland has taken measures that 
are at odds with broadening the tax base. The use 
of volatile tax revenues to fund current expenditure 
makes public finances more vulnerable to the risk 
of future shortfalls in revenue. Some progress has 
been  made  regarding  labour  market.  The  roll-out 
of labour activation programmes has continued but 
their  effect  has  not  yet  been  assessed  by  the 
government.  Ireland  has  also  taken  steps  to  make 
childcare more affordable and improve its quality, 
but  these  efforts  will  need  to  be  sustained  over 
coming  years  to  meet  existing  needs.  Despite 
recent  progress,  incentives  to  work  within  the  tax 
and benefit system remain a challenge. Ireland has 
also  made  some  progress  in  tackling  the  still 
relatively  high  level  of  non-performing  loans. 
Although the level continues to fall, the long-term 
is 
sustainability  of 
uncertain.  The  central  credit  register  has  been 
delayed  and  is  now  only  expected  to  be  fully 
operational in late 2018.  

restructuring 

solutions 

the  Europe  2020  strategy,  Ireland 

Regarding progress in reaching the national targets 
under 
is 
performing  well  on  employment  rate  and  early 
school  leaving  targets.  More  effort  is  needed  in 
R&D 
reducing  greenhouse  gas 
emissions,  increasing  the  proportion  of  renewable 
energy,  improving  energy  efficiency,  reducing 
poverty  and  attaining  the  already  extremely  high 
and ambitious tertiary education goal. 

investment, 

findings  of 

The  main 
review 
contained  in  this  country  report,  and  the  related 
policy challenges, are as follows:  

in-depth 

the 

  Private  sector  indebtedness  remains  high. 
Non-financial  private  sector  non-consolidated 
debt  stood  at  322.3 %  of  GDP  at  the  end  of 
2015.  Trends  in  private  debt,  especially  for 
non-financial  corporations,  are  difficult 
to 
gauge  due  to  the  strong  influence  of  the 
activities  of  multinationals  on  debt  levels. 
However, there is evidence that domestic firms 
and  households  are  continuing  to  reduce  their 
debt.  Strong  economic  growth,  coupled  with 

2 

 
 
  Property  prices  continued 

to 

increase. 
Residential  property  prices  remain  below 
pre-crisis  peaks  and  overall,  current  prices  do 
not  appear  to  be  overvalued.  Private  rents 
increased  9.7 %  in  the  year  to  December. 
Insufficient housing supply continues to be the 
prime driver of the increase in rents and house 
prices. House price increases are being tackled 
through 
supply-side  and  macro-prudential 
measures  but  it  will  take  time  for  housing 
completions to recover. 

Other key economic issues analysed in this report 
which  highlight  particular  challenges  for  the  Irish 
economy are as follows: 

In 

recent 

finances. 

  Reforms  of  the  fiscal  framework  have 
played  a  key  role  in  repairing  Ireland’s 
public 
years, 
comprehensive  reviews  of  expenditure  have 
primarily  focused  on  reducing  government 
spending to meet overall fiscal targets set over 
the crisis period. However, there has been little 
evaluation  of  the  effectiveness  and  efficiency 
of  expenditure  programmes,  which  ultimately 
weakened  the  multiannual  spending  planning. 
Repeated  discretionary  changes  to  expenditure 
ceilings  have  characterised  Ireland’s  recent 
budget  execution  and  weakened  prioritisation 
of growth-enhancing expenditure. 

  The Irish economy is sensitive to changes in 
international  tax  environment.  The 
the 
weight  of  multinationals  in  overall  GDP  and 
the  growth  in  corporate  tax  receipts  as  a 
proportion  of  government  revenue  increase 
Ireland’s  exposure  to  changes  in  international 
tax  regimes.  In  response  to  the  uncertain 
environment,  the  government  is  engaging  in 
international 
tax  reforms.  More  generally, 
relying on a broader tax base enhances revenue 
stability in the face of economic volatility. As a 
response  to  the  uncertain  environment,  the 
government  is  engaging  in  international  tax 
reform. 

  The 

the 

situation  on 

labour  market 
continues  to  improve  but  social  challenges 
remain, in particular for low work-intensity 
households.  There  are  large  disparities  in 
labour  market  outcomes  for  different  skills 
groups. Recovery in the labour market has not 

Executive summary 

yet  reversed 
low-skilled 
the  prospects  of 
workers.  Low  work  intensity  for  some  groups 
persists,  as  aspects  of  the  tax  and  benefit 
system  lead  to  low  work  incentives.  At  the 
same time, the improving economy is resulting 
in  skills  shortages 
in  several  areas.  The 
availability  and  cost  of  childcare  remain 
barriers  to  female  labour  market  participation 
and hinder efforts to reduce child poverty. 

  Spatial 

and 
become 

planning 
have 

infrastructure 
provision 
increasingly 
important.  There  are  a  number  of  challenges 
for  developing  projects  of  an  economically 
sufficient scale. These include coherent spatial 
planning  and  infrastructure  provision,  such  as 
transport,  water  and  energy,  and  in  their 
efficient 
transport 
integration  with  public 
corridors  in  and  around  main  urban  areas. 
Regulatory issues and building permits are also 
the  uptake  of  construction 
slowing  down 
activity.  The  lack  of  affordable  housing  in 
urban  areas  may  also  be  detrimental 
to 
Ireland’s  continued  ability  to  attract  foreign 
direct  investment,  as  firms  have  difficulties 
finding suitable accommodation for employees. 

  Linkages  between  multinationals 

and 
limited.  Their 
indigenous 
export 
are 
significantly  different,  while  the  productivity 
gap between them is growing wider.  

firms  remain 
and 

performances 

profiles 

to 

  Public R&D expenditure remains low. Public 
R&D  intensity  has  declined  since  2009  and 
continues 
Fully 
cause 
implementing  measures  to  improve  R&D,  in 
particular  those  to  support  the  innovation 
capacity  of  indigenous  SMEs,  depends  on  the 
return to a trend of sustained investment.  

concern. 

  The  cost-effectiveness  and  sustainability  of 
the  healthcare  system  continue  to  pose 
challenges.  In  view  of  a  growing  and  ageing 
population, the cost-effectiveness of the health 
system  remains  a  priority.  Public  healthcare 
expenditure pressures persist which can have a 
negative  impact  in  the  medium  term  for  fiscal 
sustainability.  Specific  strands  of  reforms  are 
progressing  gradually.  Ireland  has  introduced 
some  important  efficiency  measures,  yet  key 
cost-effectiveness gains are still to be achieved, 

3 

 
 
Executive summary 

for  instance  by  strengthening  the  role  and  use 
of  primary  care  as  a  gatekeeper  for  Ireland’s 
overburdened hospitals. 

4 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Graph 1.1:  Gross value added from domestic production 
and foreign-owned multinationals 

The  Irish  economy  has  continued  its  rapid 
recovery but the risks have heightened. The very 
rapid growth in Irish GDP since 2014 reflects both 
the  positive  evolution  of  the  domestic  economy 
and  the  substantial  contribution from  global value 
chains, with limited impact on domestic economic 
activity.  In  2014,  the  volume  of  Irish  GDP  was 
already  at  the  pre-crisis  level  and  just  over  10 % 
higher  than  in  2009  —  the  lowest  point  in  the 
aftermath  of  the  crisis.  GDP  is  estimated  to  have 
grown by 4.3 % in 2016 and is projected to further 
expand  by  3.4 %  in  2017  and 3.3 %  in 2018.  The 
large  operations  channelled  through  Ireland  by 
the 
some  multinationals,  do  not  disguise 
fast-paced,  broad-based  and  employment-rich 
recovery that has taken place in the country at the 
same  time.  In  the  next  few  years,  Ireland’s 
domestic  economy  is  expected  to  continue  to 
expand  at  robust  rates.  But  the  risks  have  also 
increased,  reflecting  the  referendum  on  the  UK’s 
membership  of 
the  uncertainty 
the  EU  and 
surrounding future US tax policies.  

than  doubled 

their  operations 

The  value  added  recorded  in  Ireland  by  some 
multinationals  has  increased  dramatically.  In 
2015,  gross  value  added  (GVA)  —  a  measure  of 
output net of the inputs used for its production  — 
the  economic  sectors 
more 
in 
dominated  by 
foreign-owned  multinationals 
(Graph  1.1) (1).  A  small  number  of  very  large 
in 
multinationals  restructured 
2015. This led to a bigger share of GVA from their 
global  production  chains  being  booked  in  Ireland 
but  had  a  limited  impact  on  domestic  economic 
activity  (European  Commission  2016a,  Box  2.1). 
The evolution of the international tax environment 
appears to have played a role in the changes to the 
operations  of  multinationals  (Section  4.1.3).  As  a 
result, net exports contributed 18 percentage points 
(pps.)  to  GDP  growth  in  2015,  driven  by  the 
production  and  sale  of  goods  abroad  on  behalf  of 
the  Irish  affiliates  of  some  multinationals  — 
known as contract manufacturing (see below).  

(1)  These  are  sectors  such  as  software,  communications, 
reproduction  of  recorded  media,  computers,  electronics, 
pharmaceuticals  and  medical  supplies.  The  precise 
contribution of each sector is not publicly available due to 
statistical confidentiality. 

(1)Gross value added at constant basic prices (chain linked 
annually referenced to 2014) 
Source: Central Statistics Office of Ireland (CSO) 

standards 

compiling 

Headline national accounts indicators therefore 
need  to  be  interpreted  with  caution.  Under 
national 
for 
current 
accounts (2),  GDP  captures  not  only  domestic 
production  but  also  the  value  of  production  and 
income  accruing  to  domestic  entities  from  their 
activities  abroad.  Observers  should  therefore  look 
beyond  headline 
their 
disaggregation.  There  is  also  a  direct  arithmetic 
impact  on  any  indicator  expressed  as  a  share  of 
GDP — used to measure the burden of public debt 
or  the  intensity  of  research  and  innovation,  for 
example.  This  report  uses  disaggregated  and 
complementary  indicators,  whenever  source  data 
allow for their calculation. 

indicators  and 

into 

There  is  abundant  evidence  that  the  domestic 
economic  activity  has  expanded  strongly.  GVA 
in  the  ‘domestic’  sectors  of  the  Irish  economy  — 
the  presence  of  foreign-owned 
those  where 
multinationals is not prevalent — grew by 4.4 % in 
2015  (Graph 1.1),  more  than  twice  the  average  in 
the euro area. Moreover, core domestic demand — 
a  measure  that  strips  out  investment  components 
linked  to  the  activities  of  multinationals  —  grew 
by approximately 5.4 % in 2015 (Graph  1.2). The 
upward  trend  reflects  the  breadth  of  the  Irish 

(2)  The  European  System  of  Accounts  2010,  which 
implements  the  2008  System  of  National  Accounts, 
coordinated by the UN. 

5 

050100150200250199519961997199819992000200120022003200420052006200720082009201020112012201320142015Sectors dominated by multinationalsOther sectorsAll sectorsEURbillion 
 
                                                           
 
                                                           
1. Economic situation and outlook 

recovery,  which  has  reached  nearly  all  sectors  in 
the economy.  

Graph 1.3:  Consumer sentiment and business prospects 

Graph 1.2:  Core domestic demand and employment 

(1) Any reading of the composite purchasing managers’ 
index of more than 50 signals aggregate expansion in 
manufacturing and services. 
Source: Central Statistics Office of Ireland, KBC Bank of 
Ireland, Markit Group 

The  longer-term  impact  of  the  referendum  on 
UK’s  membership  of  the  EU  on  the  Irish 
economy  remains  uncertain.  It  depends  on  the 
precise  shape  of  the  future  relationship  between 
the UK and the EU. The interdependence between 
the Irish and the UK economies declined following 
the  intense  period  of  diversification  and  growth 
that Ireland has undergone since it joined the EU. 
Several  studies  highlight  potential  downside  risks 
for the Irish economy in relation to the referendum 
on  UK’s  membership  of  the  EU.  The  fall  in 
sterling  has  an 
indigenous  Irish 
impact  on 
exporters,  in  particular  in  the  agri-food  sector.  In 
this  regard,  the  National  Competitiveness  Council 
the  export 
has 
destinations 
firms  as  another 
challenge for Ireland.  

the  broadening  of 

for  domestic 

identified 

Labour market 

to 

Unemployment  has  continued 
fall  but 
challenges remain. It stood at 7.3 % in Q4-2016, 
down  from  15 %  at  the  beginning  of  2012 
also 
(Graph 1.4).  Long-term 
declined further and the youth unemployment rate 
fell  below  the  EU  average  to  15.3 %  in  Q4-2016, 
almost  halving  from  its  2012  peak.  In  addition  to 
the  expansion  of  the  economy,  a  number  of 
employment activation policies have played a role 
in improving labour market recovery. The rate for 

unemployment 

(1) Core domestic demand comprises public and private 
consumption and gross fixed capital formation except 
investment in intangible assets and other transport 
equipment (a proxy for aircraft). Data are in constant prices 
(chain linked annually and referenced to year 2014), and 
seasonally adjusted except for other transport equipment. 
Source: European Commission and calculations based on 
CSO data 

Overall,  confidence  in  the  economy  remains 
high  despite  growing  risks  and  uncertainty. 
Monthly  indicators  of  consumer  confidence,  retail 
sales and business prospects have been close to or 
above  pre-crisis  levels  since  2014  (Graph  1.3). 
However, the outlook has become more uncertain. 
Risks  discussed  in  this  report  include  exchange 
rate  developments  and  wage  pressures.  Other 
sources  of  uncertainty  relate 
to  productivity 
developments,  the  volatility  of  certain  sources  of 
public  revenue  and  the  overall  exposure  of  the 
economy  to  global  value  chains  and  taxation 
frameworks.  Further  depreciation  of  sterling  and 
uncertainty  surrounding  the  referendum  on  UK’s 
membership  of  the  EU  could  weigh  on  consumer 
and  business  confidence  and  economic  activity. 
However,  there  is  also  the  upside  potential  from 
further  investment  in  infrastructure  and  housing, 
and  the  continued  attractiveness  of  Ireland  as  an 
entry point to the EU single market. 

6 

1.71.71.81.81.91.92.02.02829303132333435363738Q1-2010Q3-2010Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Core domestic demand (lhs)Employment (rhs)EUR billionMillion people1020304050607020406080100120140Oct-2005Oct-2006Oct-2007Oct-2008Oct-2009Oct-2010Oct-2011Oct-2012Oct-2013Oct-2014Oct-2015Oct-2016Retail sales volume (lhs)Consumer sentiment (lhs)Composite PMI (rhs)Index(January 2015=100) 
 
 
1. Economic situation and outlook 

young  people  not  in  employment,  education,  or 
training  fell  further  in  2015  but  remains  2.3  pps. 
above  the  EU  average.  In  2016,  the  country 
experienced net inward migration for the first time 
since  2009  —  with  an  estimated  net  inflow  of 
8 200  people  in  the  25-44  age  bracket.  This  is 
combined with sizeable natural population growth 
of about 0.8 %. Despite the strong recovery, labour 
market participation has increased only marginally.  

Graph 1.4: 

Recent labour market trends 

in 

reducing 

inequality 

indicator (3)  stood  at  4.5  compared  to  the  5.2  EU 
average. Ireland had one of the highest incidences 
of  market  income  inequality  —  the  inequality  of 
income  before  taking  into  account  taxes,  social 
transfers and pensions — amongst Member States. 
However,  the  tax-benefit  system  is  particularly 
effective  at 
Ireland, 
resulting  in  a  performance  in  line  with  the  EU 
average  in  terms  of  disposable  income (4).  This 
effect  was  even  more  pronounced  in  the  years 
immediately after the crisis (2011-2013). Ireland’s 
system remains effective at containing inequalities 
as  measured  by  income  .  In  terms  of  net  wealth 
(difference  between 
total 
liabilities),  in  2013  many  Irish  households  still 
owed more than they owned. Overall, households' 
net  wealth  inequality  is  relatively  higher  than 
income inequality and among the highest in the EU 
(ECB 2016). 

total  assets  and 

Inflation 

Consumer price inflation has been negative but 
energy  prices  are  starting  to  recover.  The 
harmonised  index  of  consumer  prices  (HICP) 
declined  by  0.2 %  in  2016,  even  lower  than  the 
0.0 %  observed  in  2015.  Energy  prices  continued 
to  drag  down  the  headline  inflation  rate  while 
services inflation was 2.5 % and remains the main 
source  of  upward  price  pressures.  Nationally, 
private  rents  increased  9.7 %  y-o-y  in  December 
and market participants report that private rents in 
Dublin have exceeded their pre-crisis peaks.  

Competitiveness 

External  competitiveness  has  improved.  The 
improvement in Ireland’s external competitiveness 
can  be  seen  by  comparing  the  real  and  nominal 
effective  exchange  rates  (EER)  (Graph  1.5).  In 
2015,  Ireland’s  real  EER  was  back  to  its  2002 
level.  Nominal  exchange  rates  contributed  the 
most  to  improving  Ireland’s  competitiveness  in 
2015. However, this has been partially reversed by 
the  recent  weakening  of  sterling.  In  addition,  the 

(3)  S80/S20 indicator is measured as the ratio of the income of 
the richest 20 % of households to those of the poorest. 
(4)  The  ‘market’  and  ‘non-market’  income  inequality  are 
measured through the Gini coefficients for market income 
before  taxes  and  social  transfers  including  pensions 
(57.5 %  for  IE  vs.  50.2 %  EU  average)  and  for  final 
income,  including  transfers,  pensions  and  net  of  taxes 
(30.8 % for IE and 30.4 % EU average). 

Source: European Commission  

More  jobs  and  recovering  pay  levels  have 
continued  to  support  household  consumption. 
High employment intensity is a continuing feature 
of the recovery of the Irish economy. Employment 
grew by nearly 2.7 % in the first three quarters of 
2016, compared to the same period in 2015. Most 
new jobs are full-time positions and the proportion 
of  temporary  employees  remains  far  below  the 
euro  area  average.  At  the  same  time,  nominal 
earnings per employee grew by 2.8 % in 2015 and 
average hourly earnings continued to go up in the 
these 
three  quarters  of  2016.  Both  of 
first 
developments  explain 
in 
household  consumption  (5 %  in  2015),  combined 
with  the  demand  for  durable  goods,  such  as  cars 
and home appliances, after the crisis.  

the  high  growth 

Social developments 

Income inequality is below the EU average, due 
to  an  effective  tax-benefit  system.  In  2015,  the 
income  inequality  as  measured  by  the  S80/S20 

7 

468101214161820505560657075808590Q1-2010Q3-2010Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Unemployment rate 15-74 (rhs)Activity rate 20-64 (lhs)Employment rate 20-64 (lhs)% of population% of labour force 
 
                                                           
1. Economic situation and outlook 

overall  improvements  in  these  headline  indicators 
hide large differences across sectors (Section 4.4). 

Graph 1.5: 

Real effective exchange rate 

rarely  enter  the  Irish  territory.  The  differential 
between  balance  of  payments  and  customs  data 
narrowed  significantly  in  the  first  nine  months  of 
2016.  The  performance  of  indigenous  firms  in 
international  export  markets  was  also  robust  in 
2015, as reflected by the customs data, and helped 
by positive exchange rate developments. However, 
indigenous  exports  have  suffered  from  the  weak 
sterling exchange rate since July 2016.  

Graph 1.6:  Goods exports and contract manufacturing 

(1) Real EER deflated by the harmonised index of consumer 
prices (HICP). It measures the country’s price 
competitiveness relative to its principal competitors in 
international markets (42 trading partners) 
Source: European Commission 

External position 

activities 

manufacturing 

The external performance of the Irish economy 
has  been  very  positive.  In  2015,  net  exports 
contributed  18  pps.  to  GDP  growth,  driven  by 
contract 
of 
multinationals (5).  Up  until  2014,  the  exports  of 
contract-manufactured  goods  by  Irish-domiciled 
firms  were  compensated  by 
imports  (royalty 
payments) to entities residing abroad. This resulted 
in  an  overall  neutral  effect  on  GDP.  But  since 
2015,  the  volume  of  contract  manufacturing  has 
become  significantly  larger  and  without  royalty 
payments matching the volume of exports. The net 
volume  of  contract  manufacturing  can  be 
approximated  by  comparing  customs  and  balance 
of  payments  data  for  goods  exports  (Graph  1.6). 
is  because  contract-manufactured  goods 
This 

(5)  Contract  manufacturing  refers  to  the  production  of  goods 
abroad  on  behalf  of  Irish-domiciled  entities.  Inputs  to  the 
production of these goods count as Irish imports and their 
sale  abroad  as  Irish  exports,  following  the  economic 
ownership  principle.  Contract  manufacturing  is  largely 
recorded net on a  company level. In the national accounts 
of  Ireland,  they  are  mainly  presented  as  an  adjustment  to 
exports. At the same time, all the service elements relating 
to  contract  manufacturing  are  recorded  in  the  service 
statistics,  including  service  fees,  royalty  payments  and 
other related inter-group payments. 

8 

Source: European Commission 

net 

Risks  and  vulnerabilities  to  Ireland’s  external 
position  have  become  increasingly  difficult  to 
ascertain.  The 
international 
headline 
investment position deteriorated markedly in 2015. 
A more detailed analysis shows that the risk to the 
external position of domestic sectors probably did 
not  deteriorate.  The 
investment 
position  of  domestic  banks  improved.  However, 
the position of domestic non-financial corporations 
cannot  be  fully  determined,  given  the  weight  of 
disaggregated 
multinationals 
lack 
the 
in 
indicators.  The  marked  deterioration 
external  position  of  multinational  companies, 
considered  as  a  whole,  does  not  appear  to  pose  a 
threat to the domestic economy (Section 4.2.2).  

international 

and 

of 

Financial sector 

Banks’  resilience  to  shocks  has 
improved 
further  but  they  continue  to  face  considerable 
challenges. Their capital positions have continued 
to  improve  but  there  are  persisting  vulnerabilities 
(Section 4.2.1). The stock of non-performing loans 

405060708090100110120130140199519961997199819992000200120022003200420052006200720082009201020112012201320142015Ireland, nominal effective exchange rate (EER)Ireland, real EEREuro area, real EEREuropean Union, real EERIndex (1995=100)510152025303540455055Q1-2002Q1-2003Q1-2004Q1-2005Q1-2006Q1-2007Q1-2008Q1-2009Q1-2010Q1-2011Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016Contract manufacturing (proxy)Customs data - Goods exportsBalance of payments - Goods exportsEURbillionEUR billion 
 
                                                           
 
1. Economic situation and outlook 

in  recent  years  (see  above).  Total  investment  has 
also  been  driven  by  aircraft  imports  (Section 
4.4.10). 

Graph 1.7: 

Total investment and main drivers 

Source: European Commission 

Other  investment  components  have  also  been 
intellectual  property  and 
strong.  Excluding 
aircraft, the growth in investment components has 
been  robust  since  their  lows  in  early  2012. 
Construction  investment  has  grown  steadily  since 
2012  by  over  30 %,  albeit  from  low  levels 
(Graph 1.8).  More  recent 
to  a 
deceleration  in  core  machinery  and  equipment 
investment due to the recent completion of a large 
industrial  project.  Significantly  higher  growth  in 
construction investment is expected in the next few 
years, given large unmet demand, in particular for 
housing in urban areas (see below). 

trends  point 

Public  investment  remains  relatively  low  but 
continues  to  recover,  given  the  resources 
available.  After  contracting  sharply  since  2008, 
capital  expenditure  by  the  general  government  is 
expected 
the  future 
(Section  4.4.1).  A  mid-term  review  of  the  Capital 
Investment Plan 2017-2021is expected in 2017.  

to  recover  gradually 

in 

continued  to  decline  but  remains  high.  The  high 
proportion  of  long-term  arrears  is  still  a  concern. 
On  top  of  legacy  issues,  weak  credit  demand  and 
the  low  interest  rate  environment  constrain  the 
banks’ ability to improve their future profitability. 
Growing  uncertainty  in  the  external  environment 
represents an additional challenge. 

New  lending  is  growing  only  gradually,  with 
measures  in  place  to  ensure  it  is  prudent.  Net 
lending  for  both  households  and  companies 
remains  negative.  However,  mortgage  approvals 
are  increasing,  amidst  increased  competition  and 
product  offering  by  banks.  New  credit 
to 
non-financial  companies,  in  particular  SMEs,  is 
also  recovering  (Section  4.2.5).  The  ability  of 
banks  to  substantially  reduce  interest  rates  is 
however  constrained  by  legacy  issues,  including 
the  stock  of  low-yielding  assets  and  persistent 
difficulties in accessing collateral. The government 
continues to pursue a broad range of initiatives to 
facilitate SMEs’ access to credit. 

Domestic  firms  and  households  remain  highly 
indebted but continue to deleverage. The private 
debt-to-GDP  ratio  has  been  affected  by  both  the 
surge in GDP and the debt stock that accompanied 
the  relocation  of  multinationals’  balance  sheets  to 
Ireland.  However,  domestic  firms  and  households 
continue to deleverage but their debt stock remains 
high compared to the rest of the euro area (Section 
4.2.3).  Most  of  the  debt  stock  attributable  to 
foreign-owned multinationals consists of intra-firm 
loans  or 
international  capital 
in 
markets.  The  exposure  of  domestic  banks  to  the 
cluster  of  multinationals  based  in  the  country 
remains very limited in Ireland.  

transactions 

Investment and housing market 

The surge in investment has been driven largely 
by the onshoring of intellectual property assets. 
Total investment (gross fixed capital formation) in 
the  Irish  economy  grew  by  more  than  30 %  in 
2015 and 70 % since 2010 (Graph 1.7). However, 
most  of  this  growth  can  be  explained  by  the 
redomiciliation  of 
intangible  assets,  such  as 
patents,  by  multinationals.  Coming  from  abroad, 
these flows also count as Irish imports and have an 
initial  neutral  effect  on  Irish  GDP  growth. 
However, they also reduce the amount of royalties 
paid abroad for the use of patents — and therefore 
help to explain the surge in value added in Ireland 

9 

-50050100150200250199519961997199819992000200120022003200420052006200720082009201020112012201320142015Euro area (19) - totalinvestmentIreland - total investmentIreland - constructionIreland - intellectualpropertyIndex (2010=100) 
 
1. Economic situation and outlook 

provision  have  become  all  the  more  important  — 
to  enable 
the  development  of  projects  with 
sufficient scale, and their efficient integration with 
public  transport  corridors  in  and  around  main 
urban  areas.  In  February  2017,  the  government 
launched  a  major  national  consultation  for  the 
preparation 
and 
development framework for Ireland. 

planning 

strategic 

of 

a 

Public finances 

The deficit has continued to drop, alongside the 
surge  in  GDP  and  strong  tax  receipts.  Ireland 
has  shown  a  commitment 
to  prudent  fiscal 
policy-making  since  the  onset  of  the  property 
crisis,  especially  during  the  EU-IMF  financial 
assistance  programme.  The  general  government 
deficit has fallen by almost 10 pps. from its peak in 
2010.  Overall,  the  deficit  reduction  was  mostly 
driven  by  expenditure  restraint.  More  recently 
however,  strong  GDP  growth  and  buoyant  tax 
receipts  have  eased  fiscal  achievements.  In  2015, 
the deficit fell to 1.9 % of GDP, down from 3.7 % 
a year earlier, partly due to the level-shift in GDP 
explained  earlier.  The  fiscal  effort  lessened,  as 
better-than-expected  revenue  was  used  to  finance 
additional current expenditure.  

in 

revenues 

stability  of 

the 
tax 
The 
medium-term  is  a  re-emerging  concern  for 
public finances. Past experience in Ireland, during 
the  property  bubble,  demonstrates  the  dangers  of 
over-reliance  on  a  small  number  of  tax  headings 
and  narrowing  the  tax  base.  Cutting  personal 
income  taxes  —  if  not  adequately  supported  by  a 
shift  towards  more  growth-friendly  sources  of 
revenue  —  could  significantly  reduce  revenue 
collection and have a regressive impact on income 
distribution  which  could 
inequality. 
Corporate  tax  receipts  increased  by  50 %  in  2015 
with  multinationals  accounting  for  approximately 
receipts 
80 % 
(Revenue 2016,  p. 6).  The  increasing  reliance  on 
buoyant  and  volatile  corporate  tax  receipts  to 
finance  additional  permanent  increases  in  current 
expenditure is also a concern (Section 4.1). 

corporate 

increase 

total 

tax 

of 

The  government  debt-to-GDP  ratio  has  fallen 
but  the  burden  of  public  debt  remains  very 
significant. It fell to 78.6 % in 2015 from 105.2 % 
a  year  earlier,  with  the  surge  in  GDP  accounting 
for  most  of  this  reduction.  The  burden  of  gross 
government  debt  on  public  finances  and  the 

Graph 1.8:  Core investment and its components 

Source: European Commission 

Insufficient  housing  supply  is  a  concern  for 
both economic and social reasons. The recovery 
in  construction  activity  is  long  in  materialising, 
only picking up gradually and from low levels. At 
the same time, demand for housing is estimated at 
about 25 000 units per year or around 65 % above 
the  completions  expected  in  2016,  contributing  to 
rising  rents  and  houses  prices  (Section  4.5.2). 
Since  the  trough  in  prices  in  2013,  national 
residential  property  prices  have  grown  by  50 %. 
Increases in residential prices have been moderate 
since 
to 
mortgage  lending.  Rents  have  also  increased 
rapidly  and  are  now  straining  affordability.  This 
supply  shortage  is  also  likely  to  have  contributed 
to 
the  growing  number  of  homeless  people 
(Section 4.3.2). It could also postpone the return of 
Irish  migrants  and  weigh  on  foreign  direct 
investment  in  Ireland,  as  firms  have  difficulties 
finding suitable accommodation for employees. 

the  central  bank 

introduced 

limits 

Coherent  spatial  planning  and  infrastructure 
provision  would 
sustainable  and 
support 
balanced  economic  development.  Delays  in  the 
pick-up  in  construction  activity  after  2012  can  be 
explained  by  a  combination  of  factors  —  such  as 
the  collapse  in  construction  production  capacity 
after  the  bust  of  the  property  bubble,  strategic 
behaviour by some firms (including land hoarding) 
and 
institutional  hurdles  (section  4.5.1).  The 
government  adopted  a  revised  strategy  to  enable 
and  promote  construction  in  July  2016  (Section 
infrastructure 
4.5.1).  Spatial  planning 

and 

10 

01234567Q1-2010Q3-2010Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Core machinery and equipmentConstructionCore investmentEUR billion 
 
1. Economic situation and outlook 

economy  has  declined  more  slowly  than  the 
debt-to-GDP ratio would suggest. Complementary 
indicators — such as the weight of the debt stock 
or  debt  servicing  costs  on  total  tax  revenue  — 
show  that  the  burden  of  public  debt  remains 
significant  (Section  4.1.1).  Favourable  market 
conditions  and  the  long-term  maturity  of  the  debt 
stock  are  expected  to  ease  future  refinancing 
operations. 

11 

 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators — Ireland 

(1) Sum of portfolio debt instruments, other investment and reserve assets. 
(2, 3) domestic banking groups and stand-alone banks. 
(4) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(*) Indicates BPM 5 and/or ESA 95 
Source: European Commission, ECB  

12 

2004-20082009201020112012201320142015201620172018Real GDP (y-o-y)3.6-4.62.00.0-1.11.18.526.34.33.43.3Private consumption (y-o-y)4.8-5.80.2-0.9-1.2-0.31.85.02.72.52.5Public consumption (y-o-y)3.9-2.5-4.0-1.3-2.8-1.34.50.35.42.42.0Gross fixed capital formation (y-o-y)4.5-16.9-15.03.711.9-5.718.332.95.06.45.0Exports of goods and services (y-o-y)4.64.65.82.92.43.114.434.42.33.84.2Imports of goods and services (y-o-y) 6.1-1.70.82.65.41.115.321.71.54.04.5Output gap2.3-4.4-2.0-2.1-4.1-4.8-0.31.11.91.40.8Potential growth (y-o-y)3.5-0.7-0.40.10.91.93.524.63.54.03.9Contribution to GDP growth:Domestic demand (y-o-y)3.9-7.5-3.90.01.0-1.54.98.92.72.52.2Inventories (y-o-y)-0.2-0.60.50.70.1-0.11.3-0.90.2-0.20.0Net exports (y-o-y)-0.45.24.80.7-2.12.31.918.31.41.11.1Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.8-2.2-2.0-1.7-1.1-0.10.71.31.51.81.6Capital accumulation (y-o-y)2.00.80.30.30.50.30.618.8-0.30.00.2Total factor productivity (y-o-y)0.70.71.21.51.41.72.34.42.22.22.1Current account balance (% of GDP), balance of payments-4.4-4.9-1.5-2.0-2.62.11.710.2...Trade balance (% of GDP), balance of payments10.013.515.817.917.218.817.931.7...Terms of trade of goods and services (y-o-y)-0.6-1.4-2.82.20.40.0-1.62.5-0.10.20.1Capital account balance (% of GDP)0.10.00.10.10.0-0.5-3.5-0.5...Net international investment position (% of GDP)-44.3-116.8-114.9-138.3-137.3-131.7-162.1-208.0...Net marketable external debt (% of GDP) (1)159.1*158.0*245.6*283.2*323.1320.9366.4353.6...Gross marketable external debt (% of GDP) (1)640.2900.9880.1832.4778.0663.1733.0590.6...Export performance vs. advanced countries (% change over 5 years)6.510.50.6-2.7-6.20.7-5.441.19...Export market share, goods and services (y-o-y)-3.518.6-13.5-9.3-2.72.112.935.8...Net FDI flows (% of GDP)11.50.4-9.2-10.3-10.8-7.21.6-7.8...Savings rate of households (net saving as percentage of net disposable income)0.89.67.64.77.35.66.15.8...Private credit flow, consolidated (% of GDP)28.9-4.62.216.2-0.6-1.52.5-6.7...Private sector debt, consolidated (% of GDP)188.9256.7258.0270.9278.7267.3281.3303.4...of which household debt, consolidated (% of GDP)90.1116.5110.6103.398.893.582.358.5...of which non-financial corporate debt, consolidated (% of GDP)98.8140.2147.4167.6179.9173.8199.0244.9...Corporations, net lending (+) or net borrowing (-) (% of GDP)2.43.627.89.82.97.81.910.18.17.98.0Corporations, gross operating surplus (% of GDP)33.532.035.437.638.238.839.350.350.650.851.6Households, net lending (+) or net borrowing (-) (% of GDP)-7.92.93.11.63.02.11.91.30.90.50.0Deflated house price index (y-o-y)5.0-13.6-11.6-16.9-15.21.115.18.3...Residential investment (% of GDP)11.54.73.02.31.82.02.31.9...GDP deflator (y-o-y)1.7-5.3-3.53.62.71.4-1.24.9-0.31.21.2Harmonised index of consumer prices (HICP, y-o-y)2.6-1.7-1.61.21.90.50.30.0-0.20.91.0Nominal compensation per employee (y-o-y)4.9-1.1-3.60.40.81.41.82.82.92.52.1Labour productivity (real, person employed, y-o-y)0.23.66.30.5-0.5-1.46.723.2...Unit labour costs (ULC, whole economy, y-o-y)4.8-4.5-9.3-0.11.32.8-4.5-16.51.11.30.6Real unit labour costs (y-o-y)3.00.8-6.1-3.6-1.31.4-3.4-20.41.40.0-0.6Real effective exchange rate (ULC, y-o-y)4.6-6.9-12.3-0.5-4.24.8-5.4-22.31.70.0-1.2Real effective exchange rate (HICP, y-o-y)1.9-1.5-7.2-1.1-4.31.6-0.7-6.71.3-1.5.Tax rate for a single person earning the average wage (%)21.321.321.818.917.919.820.219.7...Tax rate for a single person earning 50% of the average wage (%)6.6*6.26.22.92.83.43.73.2...Total Financial sector liabilities, non-consolidated (y-o-y)18.03.96.9-0.5-1.8-3.122.57.0...Tier 1 ratio (%) (2).7.77.716.314.913.415.615.6...Return on equity (%) (3).-68.8-165.0-15.5-27.2-11.37.18.1...Gross non-performing debt (% of total debt instruments and total loans and advances) (4)....16.618.416.311.7...Unemployment rate4.912.013.914.714.713.111.39.48.07.06.7Long-term unemployment rate (% of active population)1.53.56.88.69.07.86.65.3...Youth unemployment rate (% of active population in the same age group)9.724.027.629.130.426.823.920.917.0..Activity rate (15-64 year-olds)71.270.669.469.269.269.869.870.0...People at risk of poverty or social exclusion (% total population)24.025.727.329.430.029.527.6....Persons living in households with very low work intensity (% of total population aged below 60)13.720.022.924.223.423.921.1....General government balance (% of GDP)-0.2-13.8-32.1-12.6-8.0-5.7-3.7-1.9-0.9-0.6-0.6Tax-to-GDP ratio (%)31.529.028.528.629.029.529.924.424.524.524.5Structural budget balance (% of GDP)..-9.9-7.6-5.8-3.5-3.5-1.6-1.9-1.4-1.0General government gross debt (% of GDP)28.861.786.3109.6119.5119.5105.278.675.173.672.6forecast 
 
 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the  last  three  years,  although  their  stock  still 
remains  high.  Long-term 
impaired  mortgages 
remain  the  most  critical  cohort  to  resolve.  The 
Ireland  has  been  closely 
Central  Bank  of 
monitoring  the  banks’  performance  on  mortgage 
arrears restructuring targets and their restructuring 
practices.  Overall, 
of 
the 
restructuring  solutions will  only  be validated over 
time.  Several  policy  measures  have  been 
introduced  to  incite  active  engagement  of  debtors 
in distress, speed up legal procedures and increase 
the  number  of  personal  insolvency  arrangements, 
but their take-up has been limited so far.  

sustainability 

Overall,  Ireland  has  made  some (7)  progress  in 
addressing the 2016 CSRs. Since the publication 
of the CSRs, the quality of public expenditure has 
improved  but  the  country  has  taken  measures  at 
odds  with  broadening  the  tax  base.  Thus  some 
progress  was  made  on  CSR 1.  As  regards  CSR 2, 
the  roll  out  of  labour  activation  programmes  has 
continued  but  their  effects  have  not  yet  been 
assessed by the government. Ireland has also taken 
some  steps  to  making  childcare  more  affordable. 
On  CSR 3,  Ireland  has  also  made  some  progress. 
Non-performing  loans  have  continued  to  fall  but 
the 
restructuring 
solutions  is  sometimes  uncertain.  The  central 
credit  register  is  now  only  expected  to  become 
fully operational from late 2018.  

long-term  sustainability  of 

(7)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

with 

to  Ireland 

implementing 

the 
Progress 
recommendations  addressed 
in 
2016 (6)  has  to  be  seen  as  part  of  a  process 
which  started  with  the  introduction  of  the 
European Semester process in 2014. The country 
has  achieved  considerable  success  in  stabilising 
public  finances  and  has  been  able  to  ensure  a 
durable  correction  of  the  excessive  deficit.  The 
government balance has improved from a peak of 
11 % in 2010 to 1.1 % in 2015, net of one-off and 
temporary bank supporting measures linked to the 
financial  crisis.  The  structural  balance  has  also 
improved but more slowly in recent years. Limited 
progress has been made in broadening the tax base 
and  repeated  changes  to  expenditure  ceilings 
for  budgetary  execution. 
remain  a  concern 
Measures  have  been 
the 
cost-effectiveness of the healthcare system but not 
all  have  been  fully  implemented.  The  fiscal 
sustainability  of the health sector could be further 
improved. Public investment started to increase in 
2014 and the government has outlined some of its 
priorities  until  2021.  The  insufficient  supply  of 
housing,  and  related  deficiencies  in  infrastructure 
and planning, have become more pressing for both 
economic and social reasons. The government has 
announced an array of measures to support supply 
including  an  increase  of  the  provision  of  social 
housing units and a targeted infrastructure fund. 

increase 

taken 

to 

The  recovery  in  the  labour  market  has  also 
been  supported  by  CSR  implementation  since 
2014. Ireland has pursued a range of active labour 
market  reforms  over  recent  years.  Two  support 
programmes  for  jobseekers  (Intreo  and  JobPath) 
have now been fully rolled out. Reforms of further 
training,  aimed  at  promoting 
education  and 
re-skilling  and  up-skilling,  have  also  made  steady 
and continuous progress. Ireland has also achieved 
some  success  in  addressing  child  poverty  by,  for 
example,  enhancing  inclusion  programmes.  The 
Housing  Assistance  Programme  and  Family 
Income Supplement have reduced disincentives to 
return  to  work,  while  access  to  childcare  has 
gradually improved. 

Efforts  to  implement  the  financial  sector  CSR, 
in  place  since  2014,  are  ongoing.  Progress  has 
been made in reducing non-performing loans over 

(6)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular Section 3. 

13 

 
 
                                                           
 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2016 CSR assessment 

Source: European Commission 

14 

Ireland Overall assessment of progress with 2016 CSRs: Some CSR 1: Following the correction of the excessive deficit, achieve an annual fiscal adjustment of 0.6 % of GDP towards the medium-term budgetary objective in 2016 and in 2017. Use windfall gains from strong economic and financial conditions, as well as from asset sales, to accelerate debt reduction. Reduce vulnerability to economic fluctuations and shocks, inter alia, by broadening the tax base. Enhance the quality of expenditure, particularly by increasing cost-effectiveness of healthcare and by prioritising government capital expenditure in R&D and in public infrastructure, in particular transport, water services and housing.(MIP relevant) Some progress1  Limited progress in reducing the vulnerability of public finances to economic fluctuations and shocks.  Some progress in enhancing the quality of expenditure.   Some progress in prioritising government capital expenditure.  CSR 2: Expand and accelerate the implementation of activation policies to increase the work intensity of households and address the poverty risk of children. Pursue measures to incentivise employment by tapering the withdrawal of benefits and supplementary payments. Improve the provision of quality, affordable full-time childcare. Some progress   Some progress in increasing household work intensity.  Some progress in reducing child poverty.  Some progress in incentivising employment.   Some progress in improving the provision of childcare. CSR 3: Finalise durable restructuring solutions to lower non-performing loans, to ensure debt sustainability of households and to encourage lenders to reduce the debt of excessively leveraged yet viable businesses. Accelerate the phasing-in of a fully operational central credit registry covering all categories of lenders and debtors. (MIP relevant) Some progress  Some progress in adopting restructuring solutions sustainable in the long-term.  Some progress in phasing-in the central credit registry.                                                             1 This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact.  
 
 
 
 
2. Progress with country-specific recommendations 

15 

 Box 2.1: Contribution of the EU budget to structural change in IrelandIreland is a beneficiary of significant European Structural and Investment Funds (ESI Funds) support and can receive up to EUR 3.4 billion (all ESI Funds) by 2020. This represents 7 % of national public investment1. Ireland remains open for considering the introduction of EU financial instruments where possible in ESI Funds programmes. By 31 December 2016, an estimated EUR 1.5 billion, which represents about 44 % of the total allocation for ESI Funds, have already been allocated to concrete projects.  Financing under the European Fund for Strategic Investments (EFSI), Horizon 2020, the Connecting Europe Facility  and  other  directly  managed  EU-funds  is  additional  to  the  ESI funds. By end 2016, Ireland has signed agreements for EUR 78.5 million for projects under the Connecting Europe Facility. The EIB Group approved financing under EFSI amounts to EUR 475 million, which is expected to trigger nearly EUR 2.3 billion in total investments (as of end 2016). In addition to that, administrative reforms support is available through targeted financing under the European Social Fund, advice from the Structural Reform Support Service and, indirectly, through technical assistance  All necessary reforms and strategies as required by the ex-ante conditionalities2 for the ESI funds support were already met before programmes adoption. This ensured timely and effective start of the implementation of the ESI Funds. Ireland is already directing considerable domestic resources to address Europe 2020 strategy ambitions. ESI Funds will be helping Ireland implement structural reforms in critical and key areas for its future growth throughout the 2014-2020 period. The structural reforms being implemented also prepare the ground for successful investments from national sources and other EU instruments, in particular EFSI and Horizon 2020.  All relevant CRSs were taken into account when the 2014-2020 programmes were designed. These include prioritising government capital expenditure in R&D and in public infrastructure, incentivising employment and increasing the flexibility of the labour market and labour market access.   In addition to challenges identified in the past CSRs, ESI Funds address wider structural obstacles to growth and competitiveness. These include investing in low-carbon economy, enlarging the coverage of superfast broadband (targeting 100 % of households and SMEs throughout Ireland by 2023); incentivising innovation and private investments; and supporting and training several thousand of Irish enterprises). High take-up levels by end users of rolled out superfast broadband throughout the country will enable e-Commerce and e-Government by SMEs and inhabitants (100% of settlements and SMEs to be covered by 2023), new competitiveness skills in thousands of SMEs after support and training, and hundreds of more RTDI results to come from research institute-company cooperation to make Irish-owned firms more competitive to produce products and services in demand in global markets. Over 500 000 learners, over 275 000 disadvantaged people and 186 000 long-term employed will be successfully supported into work.   Springboard+ 2016 scheme provides free part time and full time opportunities to reskill and upskill up to 5 825 jobseekers, in SMEs and multinationals.The main focus of the ESF to labour mobility is expected to help find jobs for hundreds of thousands of schemes participants. Youth Employment Initiative has yet to produce jobs to all 13 900 young people so far supported under YEI - financed measures. A 10 % raise in more competitive agricultural SMEs is expected; 65 % of rural population is covered by local development strategies, which will lead to improved social inclusion, poverty reduction and economic development.   https://cohesiondata.ec.europa.eu/countries/IE                                                             1 National public investment is defined as gross capital formation + investment grants + national expenditure on agriculture and fisheries 2 At the adoption of programmes, Member States are required to comply with a number of ex-ante conditionalities, which aim at improving framework and investment conditions for the majority of areas of public investments. For Members States that do not fulfil all the ex-ante conditionalities by the end 2016, the Commission has the possibility to propose the temporary suspension of all or part of interim payments  
 
 
 
 
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

The  2017  Alert  Mechanism  Report  calls  for 
further in-depth analysis to monitor progress in 
unwinding  the  imbalances  identified  in  the 
2016 MIP  cycle.  In  spring  2016,  macroeconomic 
imbalances  were  identified  in  five  areas.  These 
relate to the high levels of private and public debt, 
the  negative  net  external  liabilities,  the  high  ratio 
of  non-performing  loans  and  the  rapidly  rising 
property prices and rents. 

the 

This report provides the in-depth review (IDR) 
of  how 
identified  have 
imbalances 
developed. In particular IDR-relevant analysis can 
be  found  in  the  following  sections:  public debt  in 
in 
Section  4.1.1;  financial  sector 
Section 4.2.1, external imbalances in Section 4.2.2, 
private indebtedness in Section 4.2.3, and property 
market in Section 4.5.1. 

imbalances 

3.1 Imbalances and their gravity 

The  debt  stock  of  the  private  sector  is  high. 
Non-financial private sector non-consolidated debt 
stood  at  322.3 %  of  GDP  at  the  end  of  2015,  up 
from  the  301 %  of  GDP  recorded  at  the  end  of 
2014. However, it also represents a decrease from 
early 2015, when private debt surged as a result of 
the  transfer  of  large  balance  sheets  into  Ireland. 
There  is  strong  evidence  that  both  domestic  firms 
and  households  continue  to  reduce  their  debt. 
Although  there  are  indications  of  credit  demand 
picking  up  in  certain  loan  categories,  repayments 
of existing debt exceed new credit. 

Gross government debt remains high. It stood at 
78.7 % of GDP in 2015, 32 pps. below its peak in 
2012.  The  ratio  of  debt  servicing  costs  to  tax 
revenue shows that the public debt still represents 
a significant burden. The risks associated with high 
debt,  such  as  its  future  refinancing,  are  somewhat 
lessened by the long-term maturity of the Irish debt 
stock and its low interest rates. Nevertheless, being 
a  small  and  very  open  economy,  Ireland’s  public 
finances remain vulnerable to external shocks and 
changes in the economic outlook.  

international 

The  net 
investment  position 
(NIIP)  reversed  its  path  in  2015.  Ireland’s 
negative  NIIP,  which  had  been  falling  rapidly 
before  2015,  surged  to  208 %  of  GDP  (Q4-2015) 

as  a  result  of  the  transfer  of  large  balance  sheets 
into  Ireland  (see  Table  3.1  for  a  split  on  various 
sectors).  Insofar  as  they  are  observable,  the 
external sustainability of domestic sectors does not 
appear to be deteriorating. 

a 

are 

high 

stock 

facing 

Banks 
of 
non-performing loans (NPLs). Their ratio for the 
domestic  banks  fell  to  14.2 %  at  the  end  of 
September  2016,  down  from  a  peak  of  27.1 %  at 
the  end  of  2013.  The  high  ratio  of  NPLs  is 
expected to continue to weigh on domestic banks’ 
profitability, as well as on the economic activity of 
affected  households  and  firms,  in  the  near  and 
medium term. Achieving the right balance between 
supporting  businesses’  access 
to  credit  and 
maintaining  prudent  lending  standards  remains  a 
challenge 

Property prices continued to increase but there 
is little evidence of overvaluation in the market. 
Residential  property  prices  increased  by  8.6 %  in 
November  2016  compared  to  the  same  month  a 
year earlier but remain far below pre-crisis peaks. 
Overall,  current  prices  do  not  appear  to  be 
overvalued  and  recent  increases  are  not  currently 
driven  by  an  unsustainable  expansion  of  bank 
credit.  Over 
the  same  period,  private  rents 
increased  by  9.7 %.  Insufficient  housing  supply 
remains  the  prime  driver  of  the  increase  in  rents 
and house prices. An adequate supply of housing is 
essential to protect and expand Ireland’s economic 
future  growth  but  the  recovery  of  residential 
construction will take time.  

3.2 Evolution, prospects and policy responses 

Deleveraging  prospects  are  improving.  Strong 
economic  growth 
support 
deleveraging  in  the  future.  It  is  important  to  keep 
distinguishing  between  trends  for  domestic  firms 
and multinationals.  

expected 

to 

is 

Government debt is projected to decline further 
but  public  finances  remain  vulnerable  to 
shocks.  The  debt  ratio  is  on  a  firm  downward 
trend.  According  to  the  European  Commission 
winter  2017  forecast,  it  is  expected  to  fall  to 
approximately  72.6 %  of  GDP  by  2018, 
conditional  on  robust  economic  growth  and 

16 

 
 
3. Summary of the main findings from the MIP in-depth review 

rules 

remain 

important 

measures (8)  introduced  by  the  CBI  in  2015  have 
reduced  house  price  expectations.  However, 
macro-prudential 
to 
enforcing prudent  lending  standards  —  mitigating 
the  risk  of  a  repeat  of  the  dangerous  property 
bubble  of  the  2000s.  Supporting  housing  supply 
also  appears  to  be  the  best  policy  to  sustainably 
contain the increase in rents, while the government 
is also taking measures to alleviate the immediate 
social  consequences  of  high  rents  (Section  4.5.1). 
However,  proposed  rent  controls  could  provide  a 
disincentive to further investment. 

3.3 Overall assessment 

shocks. 

Ireland  has  broad  based  sources  of  imbalances 
linked  to  large  stocks  of  external,  public  and 
private  debt  as  well  as  a  high 
level  of 
loans,  all  making  Ireland 
non-performing 
vulnerable 
Strong 
adverse 
to 
productivity  growth  in  past  years  has  implied 
improved  competitiveness,  and  a  positive  current 
account  balance  entailing  a  rapid  reduction  in  the 
stock of net foreign liabilities (9). However, even if 
the  negative  NIIP  had  been  falling  at  a  fast  pace 
before  2015,  it  has  reversed  partly  due  to  a  level 
shift  in  2015.  The  external  sustainability  risks  for 
the  domestic  economy  seem  limited  although 
difficult to assess. On the back of a strong growth 
recovery, private debt is falling at a rapid pace, as 
well  as  the  NPL  ratio,  which  remains  however 
elevated.  Government  debt  is  also  projected  to 
remain  on  a  downward  trajectory.  The  stock  of 
NPLs has been declining rapidly but slowing down 
somewhat  by  the  end  of  2016.  Property  prices 
continued  to  increase  over  2015  but  there  is  no 
significant  evidence  of  overvaluation.  Policy 
recent  years 
measures  have  been 
especially 
debt 
sector, 
restructuring,  and 
the  management  of  public 
finances.  As  regards  the  undersupply  in  the 
taken 
housing  market 
measures  repeatedly  but  the  measures  will  take 
time to generate effects.  

the  government  has 

taken 
financial 

the 

on 

in 

(8)  Loan-to-value  and  loan-to-income  limits  to  mortgage 

lending. 

(9)  However,  the  evolution  of  the  underlying  current  account 
and  external  position  are  difficult  to  assess  due  to  the 
statistical impact of the activities of multinationals in 2015. 

primary budget surpluses. Risks to long-term debt 
sustainability  relate  mostly  to  changes  to  the 
contingent 
outlook.  Government 
economic 
to  bank  bailout 
related 
liabilities,  mainly 
operations,  are  rapidly  declining.  The  government 
is also studying the feasibility of a ‘rainy-day fund’ 
as  a  tool  to  mitigating  risks  while  continuing  to 
reduce public debt. 

the 

that 

shows 

The worsening in the NIIP appears to be driven 
by  factors  disconnected  from  the  domestic 
economy.  Analysis 
recent 
deterioration  in  the  NIIP  was  driven  by  the 
activities  of  a  few  very  large  multinationals.  The 
risks  presented  by  the  external  liabilities  of  these 
companies  are  mitigated  by  a  number  of  factors 
their 
(Section  4.2.2.).  Therefore,  many  of 
operations  have  few  implications  for  the  external 
sustainability of the domestic economy. Regarding 
the banking sector, the NIIP of the Central Bank of 
Ireland  (CBI)  took  an  upswing  in  2016,  as 
domestic  banks  restored  their  access  to  market 
funding.  Ireland’s  headline  NIIP  will  continue  to 
be driven by the activities of multinationals. 

is 

to 

Measures to strengthen the banking sector have 
continued,  and  the  stock  of  NPLs  is  declining. 
Banks’  asset  quality  is  improving.  and  their 
profitability is recovering but remains fragile. New 
lending 
increasing 
the  private  sector 
gradually,  albeit  from  low  levels.  While  the 
progress made in loan restructuring is remarkable, 
the  pace  of  the  process  has  slowed  and  the 
sustainability of restructured loans in the long run 
requires  constant  vigilance.  The  legal  procedures 
for  mortgage  arrears 
slow  and 
cumbersome,  while  the  use  of  insolvency  and 
bankruptcy  schemes  remains  limited.  The  central 
credit  register 
to  be  fully 
is  not  expected 
operational until end-2018. 

still 

are 

The  government  has  actively  intervened  to 
address  the  issue  of  housing  shortages  but 
measures will take time to generate effects. The 
government  is  pursuing  a  range  of  measures  to 
support  the  housing  supply  under  its  Action  Plan 
for  Housing 
and  Homelessness.  Housing 
completions  remain  well  below  the  estimated 
demand  as  the  construction  industry  continues  to 
this  context,  demand-side 
slowly  recover.  In 
policies,  such  as  the  ‘help-to-buy’  scheme,  could 
be  counter-productive.  The  macro-prudential 

17 

 
                                                           
3. Summary of the main findings from the MIP in-depth review 

Table 3.1: 

MIP assessment matrix — Ireland 2016 

(Continued on the next page) 

18 

  Gravity of the challenge Evolution and prospects Policy response  Imbalances (unsustainable trends, vulnerabilities and associated risks) Private debt  Private sector consolidated debt stood at 198.4 % of GDP in 2015.  Corporate debt figures are more difficult to interpret due to the strong influence of the activities of multinationals on debt levels (Section 4.2.3). Household debt is continuously decreasing. Active household deleveraging has continued at an accelerated pace in 2016. Deleveraging is aided by strong real and nominal GDP growth. Prospects are improving due to reduced debt and increased value of assets. SMEs have borne the brunt of the deleveraging in the corporate sector, but it is difficult to precisely disentangle the debt held by indigenous Irish firms and the foreign-owned/re-domiciled ones.  The legal procedures for mortgage arrears are slow and cumbersome and the use of insolvency and bankruptcy schemes remains limited.                          Recent policy initiatives aim to increase the use of personal insolvency and bankruptcy schemes.  Progress has also been made on the corporate side, albeit there is less clarity on the nature and pace of debt reduction in SME category, due to significant SME-household debt connections.       Public debt  Gross general government debt remains high at 78.6 % of GDP in 2015. The stock of debt is mostly of a long-term nature and at low interest rates. As of the end of 2015, average debt maturity was 12.4 years. This mitigates the risks and reduces refinancing needs in the near term (Section 4.1.1).  Government contingent liabilities - is estimated to be 4.9 % of GDP in 2015, mainly related to bank bailout operations, implying a large reduction from 2013 (by 26 pps. of GDP). Gross general government debt fell by 26.5 pps. to 78.6 % of GDP in 2015, mostly due to the growth in GDP experienced in 2015. The debt ratio is projected to further fall to 75.1 % in 2016 and to reach 72.6 % in 2018, contingent on still robust GDP growth and the realisation of sizeable primary budget surpluses.  In 2015, the maturity profile and interest burden of government debt has improved further with the refinancing of IMF loans, the maturity extension of EFSM loans and the issuance of longer-term bonds.  The general government deficit fell to 1.9 % of GDP in 2015, down from 3.7 % in 2014. The deficit is projected to have declined to 0.9 % of GDP in 2016 and to further decrease to 0.6 % of GDP in 2017. The structural deficit is expected to decrease to around 1½ % of GDP in 2017 from 1¾ % in 2015. Ireland successfully and timely corrected its excessive deficit in 2015.  The Draft Budgetary Plan for 2017 implies a risk of some deviation from the required adjustment towards the medium-term objective in both 2016 and 2017.  The government used a large part of the over-performing, but partly volatile, tax proceeds to fund additional current spending both in 2015 and 2016.  Financial sector challenges  NPL ratio for the domestic banks fell to 14.7 % at end-June 2016, down from a peak of 27.1 % at end-2013, among the highest in the euro area. At the end of September 2016, 13.9 % of the total mortgage balance was in arrears, down from a high of 19.9 % in 2013.  70 % of the non-performing mortgages balance is past due for more than two years. Legal procedure for mortgage arrears cases that banks cannot restructure is still slow and cumbersome. Repossessions and personal insolvency arrangements remains low, indicating that the contribution of insolvency frameworks could remain relatively low despite recent reforms. The central credit register is to serve as basis for adequate credit risk assessment of borrowers. The relatively subdued SME lending volumes are partly a result of a subdued demand for credit, and the comparatively high interest rates. The high stock of NPLs continues to decline, however at a slower pace. Much less progress with loans in long-term arrears, partly due to these cases being in a long legal pipeline. The number of pending court cases indicates that these will take a long time to reach their conclusion. Bank profitability continues to recover, though it has also been bolstered by one-off provision write-backs (Section 4.2.1).   The domestic banks meet capital requirements, with an average CET 1 ratio of 16.6 % at end-March 2016. New lending to the private sector has been increasing, from a very low base, and repayments exceed new borrowing.   Bank-specific granular monitoring of problematic loans continues. Progress is being made in implementing restructuring solutions. Commercial loan restructuring and disposal is ongoing. A new counselling initiative to assist distressed mortgage debtors has been launched nationally in October, with encouraging initial take-up. The review of the macro-prudential  measures resulted in relatively minor changes to the loan-to-value ratio, leaving the bulk of the framework intact.  The full implementation of a central credit register has been pushed to late 2018. The Strategic Banking Corporation of Ireland involved more on-lenders into its lending scheme, that accounted for 9 % of all SME lending in the period from March to December 2015.  The Central Bank of Ireland introduced macro-prudential measures in 2015 to increase the resilience of households and lenders to adverse shocks and support prudent lending.    
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

(*) The first column summarises ‘gravity’ issues which aim at providing an order of magnitude of the level of imbalances. The 
second column reports findings concerning the ‘evolution and prospects’ of imbalances. The third column reports recent and 
planned relevant measures. Findings are reported for each source of imbalance and adjustment issue. The final three 
paragraphs of the matrix summarise the overall challenges, in terms of their gravity, developments and prospects, policy 
response. 
Source: European Commission 

19 

External sustainability   Ireland had a negative NIIP of 208 % of GDP in Q4-2015. Non-financial companies net liabilities: 176 % of GDP  The International Financial Services Centre negative net position: 48 % of GDP along with gross positions of over 1300 % of GDP.  The general government sector negative net external position: 52 % of GDP.  Non-IFSC financial intermediaries: net assets of 68 % of GDP.  The deterioration in the NIIP was primarily due the very sizeable on-shoring of intellectual property assets to Ireland and is largely related to the activities of a small number of large multinational firms. Some of these companies are very large compared to the Irish economy. The incurrence of these liabilities has only limited implications for the external sustainability of the underlying domestic economy (Section 4.2.2).  The external position of the domestic sectors of the economy improved in recent years. In particular, this reflects the recovery in the banking sector, which has in turn resulted in an improvement in the external position of the Central Bank.  The maturity profile of public debt is generally favourable, in particular for external liabilities vis-a-vis to official creditors. Approximately 40 % of medium/long-term debt maturing from 2026 onwards. Property market  Residential property prices increased by 6.6 % in 2015 but this came after the collapse in house prices between 2008 and 2012. Nationally, residential property increased by 8.6 % y-o-y in November 2016, still 31.5 % lower than the 2007 peak. At this stage, price levels do not look unsustainable according to standard measures (Section 4.5.1). Supply constraints are such that demand for new housing currently exceeds supply by a wide margin in main urban areas. The pace of residential property price increases slowed over the course of 2015, with prices rising by 4.6 % y-o-y in December 2015, compared to 17.1 % in December 2014. Nationally, private rents increased 9.7 % y-o-y in December 2016. If not addressed, constraints limiting the construction sector and the supply of housing could contribute to imbalances building up. The government recently announced additional measures to address housing supply constraints. The Action Plan for Housing and Homelessness includes a 34 % expansion of direct social housing provision over the next 5 years and a EUR 200 million Local Infrastructure Housing Activation Fund to contribute to the delivery of transport, water, and other infrastructure essential to facilitate an increase in housing supply. These measures come on top of previous actions such as revisions to national building standards for apartments.  The Central Bank of Ireland (CBI) introduced macro-prudential loan-to-income and loan-to-value ratios in 2015. These measures reduced property inflation expectations. The CBI’s review of the measures was published in November. It proposes several refinements to better calibrate the loan-to-value limits while preserving the overall framework and, in particular, leaving the loan-to-income ratio unchanged. Conclusions from IDR analysis  Ireland is characterised by a large stock of external, public and private debt (both for households and non-financial corporations) which make Ireland vulnerable to adverse shocks. Banks are still facing a high level of non-performing loans but are well recapitalised and their profitability, still low, is improving gradually. Houses prices are increasing and supply constrains persist.  Non-financial debt stock decreased over 2015, but was still higher than end-2014. Household debt stock decreased in 2015 and public debt is on a firm downward trajectory. Ireland’s negative NIIP had been falling at a fast pace before 2015, but it then reversed partly due to a level shift in 2015. Yet, the external sustainability of the domestic sector does not seem problematic. The stock of NPLs has been declining rapidly over the last year but was slowing down somewhat by the end of 2016. Property prices continued to increase over 2015 but there is no significant evidence of overvaluation.   Policy measures have been taken in recent years to address all imbalances highlighted including in the banking sector (improved regulatory framework, measures to address the high level of NPLs). Regarding the undersupply in the housing market the government has taken measures repeatedly but the measures will take time to generate effects.   
 
 
 
 
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  FISCAL POLICY*(10) (PUBLIC DEFICIT AND 

DEBT DEVELOPMENTS)  

The  government  gross  debt-to-GDP  ratio  is 
firmly  on  a  downward  path. 
Ireland’s 
government  debt-to-GDP  ratio  is  projected  to 
continue  to  decline,  after  peaking  at  119.5 %  in 
2012.  The  European  Commission  winter  2017 
forecast projects the ratio to fall further to 75.1 % 
in 2016 and to reach 72.6 % in 2018, contingent on 
still  robust  GDP  growth  and  the  realisation  of 
sizeable  primary  budget  surpluses  (Graph 4.1.1). 
However, the burden of government debt on public 
finances and on the overall economy can no longer 
be  assessed  solely  on  the  basis  of  GDP  ratios. 
Despite  being  reflected  in  additional  government 
revenues,  the  considerable  impact  of  the  foreign 
activities  of  multinationals  on  Irish  GDP  together 
with  their  inherent  volatility  (Section  1)  calls  for 
complementary debt indicators. 

In  absolute  terms,  public  debt  is  still  high.  The 
stock of debt remains at a historically high level. It 
has, however, one of the most long-term maturities 
in  Europe  and  interest  rates  are  relatively  low. 
According  to  the  2017  Draft  Budgetary  Plan, 
government  gross  debt  is projected  to  increase  by 
nearly  EUR 13 billion  over  2016-2019,  reflecting 
the  projected  increase  in  the  funding  requirement, 
owing  primarily  to  large  bond  redemptions  in 
2019-2020.  This  could  have  an 
impact  on 
borrowing conditions at that time. 

Alternative  measures  of  repayment  capacity 
show 
that  progress  has  been  relatively 
moderate.  Revenue-based  indicators  —  such  as 
the  stock  of  debt  or  debt  interest  expenditure  as 
percentage  of  government  revenue  —  can  give  a 
more  accurate  view  of  the  state’s  ability  to 
generate  resources  to  service  its  debt.  These 
metrics  are  also  more  resilient  to  the  effects  of 
globalisation on Irish economic performance data. 
The proportion of government interest expenditure 
relative 
improved 
significantly since 2013 (Graph 4.1.2). However, it 

revenue  has 

tax 

its 

to 

(10)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
section 3 for an overall summary of main findings). 

remains high compared with other highly indebted 
EU  countries,  also 
tax 
environment  in  Ireland.  It  is  also  twice  the  EU 
average  in  2015.  Comparing  debt  stock  and  tax 
revenue would give a similar picture. 

reflecting 

low 

the 

Graph 4.1.1:  Government gross debt evolution 

(1)Stock-flow adjustments include Irish Bank Resolution 
Corporation consolidation, banks supports funded by the 
National Pension Reserve Fund and bank support measures. 
The remarkable contribution of stock-flow adjustment to 
debt reduction in 2014 is mainly due to the liquidation of the 
Irish Banking Resolution Corporation , which will probably no 
longer have a significant impact on debt reduction in 
subsequent years 
Source: European Commission 

However,  the  sovereign’s  financing  situation 
remains  healthy.  Government  bond  yields  have 
fallen  sharply  since  the  end  of  2013  and  continue 
to  fall,  reflecting  Ireland’s  progress  on 
the 
economic and fiscal fronts, as well as ECB’s bond 
purchases under its quantitative easing programme. 
As of the end of September 2016, EUR 6.5 billion 
had  been  raised  in  bonds  at  a  weighted  average 
yield  of  0.85 %  and  with  a  weighted  average 
maturity  of  close  to  10  years (11).  To  date,  Irish 

(11)  In  January  2016,  the  issue  of  a  new  10-year  benchmark 
bond  via  syndication  raised  EUR 3 billion  at  a  yield  of 
1.16 %. There have also been four separate bond auctions, 
of  the  2022  and  2026  bonds,  raising  EUR 3.5 billion  in 
total.  Yields  ranged  from  1 %  in  the  February  auction  of 
the  2026  bond  to  only  0.18 %  in  the  May  auction  of  the 
2022  bond.  The  National  Treasury  Management  Agency 
has  also  raised  some  ultra-long-term  debt,  issuing  a 
EUR 100 million  100-year  note  at  a  yield  of  2.35 %  in 
March 2016. 

20 

020406080100120-35-30-25-20-15-10-50510152012201320142015201620172018201920202021202220232024202520262027Stock flow adjustmentsInflation effectGrowth effectInterest expenditurePrimary balanceChanges in debt-ratioGross debt ratio (rhs)debt-to-GDP ratio (no-policy change after 2017)% ofGDPy-o-y pp. change 
 
                                                           
 
                                                           
4.1. Public finances and taxation 

government bonds maturing up to 2023 are trading 
at negative yields. 

Graph 4.1.2:  Debt servicing cost indicator 

the  basis  of 

shift in nominal GDP  in 2015, which  carries  over 
into  later  years.  The  latest  debt  sustainability 
analysis  carried  out  on 
the 
Commission’s  winter  2017  forecast  projects  that 
the general government debt-to-GDP ratio will fall 
steadily  until  2024  to  around  65.2 %  and  then 
increase slightly in the following few years, mainly 
on  account  of  increasing  ageing  costs  (Graph 
4.1.1). These baseline-scenario projections assume 
that  existing  policies  will  not  change  from  2018 
on (14). 

Graph 4.1.3:  Maturity profile of Ireland’s long-term debt 

(end December 2016) 

(1) The >100 line is the average of countries with a 
debt-to-GDP ratio higher than 100 % in 2010. The >60 line is 
the average of countries with a debt-to-GDP higher than 
60 % in 2010 
Source: European Commission 

loans  were 

Long  maturities  and  moderate  interest  rates 
ease refinancing operations. At the beginning of 
2016, the average maturity of debt was close to 12 
years — having improved by nearly one year after 
IMF  programme 
replaced  with 
longer-dated  government  bonds (12).  The  next 
significant  bond  maturity  (EUR 6.4 billion)  is  due 
in  the  Q4-2017.  Other  bond  redemptions  are 
significant  over  the  medium  term  (Graph  4.1.3). 
The  current  outstanding  balance  on 
the  six 
benchmark bonds maturing in 2017-2020 is around 
EUR 50 billion.  Bilateral  loans  from  the  UK, 
Denmark  and  Sweden  also  begin  to  mature  in 
2019.  The  next  IMF  maturity,  of  EUR 2.9 billion, 
will be in 2021. 

(1) The Irish programme was the second euro area 
assistance programme, and the first financed by two new 
financial assistance instruments established in 2010, the 
European Financial Stability Facility (EFSF) and the European 
Financial Stabilisation Mechanism (EFSM). EFSF loans reflect 
the maturity extensions agreed in June 2013. EFSM loans are 
also subject to a seven-year extension. It is not expected 
that Ireland will have to refinance any of its EFSM loans 
before 2027. However, the revised maturity dates of 
individual EFSM loans will only be determined as they 
approach their original maturity dates.  
(2) Bilateral loans were provided by the United Kingdom, 
Sweden and Denmark. 
Source: National Treasury Management Agency 

Debt  sustainability  has  improved.  However, 
comparisons  with  previous  debt  sustainability 
analysis (13)  are  very  much  affected  by  the  level 

Yet,  public  finances  remain  vulnerable  to 
shocks,  while  risks  have  increased.  Risks  to 
long-term  debt  sustainability  relate  mostly  to 

(12)  At  the  end  of  2015,  the  European  Financial  Stabilisation 
Mechanism (EFSM) refinanced a EUR 5 billion loan due in 
December  2015.  Other  EFSM  loans  are  expected  to  be 
refinanced as they approach their maturity dates. 

(13)  The  Commission’s  debt  sustainability  analysis  makes  use 
of  both  deterministic  and  stochastic  projections  over  a 
10-year  period.  Alternative  scenarios  are  designed  to 
capture possible future alternative ‘states of the world’. The 
aim  is  to  have  a  comprehensive  set  of  debt  projection 
results  supporting  conclusions  in  a  context  of  future 

uncertainties.  Scenarios  are  designed  to  be  used  in  an 
integrated way to assess debt sustainability. 

(14)  They rely on Commission forecasts for the next two years 
(2017-2018), after which fiscal policy is assumed to remain 
consistent  with  the  last  forecast  year  for  the  remaining  of 
the  projection  period.  This  translates  into  a  constant 
government  structural  primary  balance,  before  cost  of 
ageing. 

21 

0246810121416200620072008200920102011201220132014201520162017EUIE>100>60% oftax revenueforecast0510152025201720182019202020212022202320242025202620272028202920302031-402041-502051-53EUR billionEFSM***EFSF**Bilateral*IMFFloating rate bondsFixed rate/amortising bonds 
 
                                                           
 
                                                                                   
4.1. Public finances and taxation 

connection with public private partnership projects 
—  which  the  government  estimates  at  around 
EUR 4.6 billion  —  and  commitments  to  provide 
capital to international organisations (18).  

Table 4.1.1:  Government's contingent liabilities 

Source: Department of Finance (Ireland) 

4.1.2.  FISCAL FRAMEWORKS AND SPENDING 

REVIEWS 

repeated  discretionary 

Ireland’s  budgetary  and  expenditure  reforms 
played  a  key  role  in  repairing  public  finances. 
In  the  past  years,  comprehensive  reviews  of 
expenditure  have  primarily  focussed  on  reducing 
government spending to meet overall fiscal targets 
set  over  the  crisis  period.  There  has  been  little 
evaluation  of  the  effectiveness  and  efficiency  of 
ultimately 
programmes,  which 
expenditure 
weakened  the  multi-annual  spending  planning. 
Indeed, 
to 
expenditure  ceilings,  which  were  decided  with 
little  or  no  explanations,  have  characterised 
Ireland’s  recent  budgetary  implementation.  These 
took  advantage  of  upward  revisions  to  GDP 
growth  and  government 
revenue  projections 
(Graph  4.1.4)  with  insufficient  prioritisation  to 
growth-enhancing  expenditure.  An  appropriately 
designed review of expenditure could support both 
fiscal 
growth-enhancing 
structural changes in public expenditure by guiding 
a better allocation of expenditures, in particular in 
view of prioritising investment.  

responsibility 

changes 

and 

the 

this 

Against 
ongoing 
background, 
budgetary  reform  could  enrich  the  Irish  fiscal 
framework further. The recent budgetary reform 
incorporates  new  procedures  aimed  at  improving 
communication  on  expenditure  targets,  increasing 
stakeholder  engagement  and  harnessing  public 

(18)  The  most  significant  of  these  commitments  is  Ireland’s 
callable 
approximately 
contribution 
EUR 9.87 billion  to  the  European  Stability  Mechanism 
which  provides  financial  assistance  to  euro  area  Member 
States experiencing or threatened by financing difficulties. 

capital 

of 

changes to the economic outlook — since most of 
the  outstanding  stock  of  debt  pays  fixed  interest 
rates.  Adverse  developments  on  real  GDP  growth 
the  country’s 
—  of  a  magnitude  reflecting 
historical  variability  of  output (15)  —  would 
increase  the  public  debt-to-GDP  ratio  by  22  pps. 
by  2027  to  about  90 % (16).  A  combination  of 
adverse  effects  on  growth,  interest  rates  and 
primary balance — also comparable to past shocks 
in  magnitude  —  would  keep  the  debt  ratio  at 
around 80 % of GDP by 2021. 

Uncertainty  may  further  postpone  plans  to  sell 
bank  shares.  According  to  the  most  recent 
assessment,  the  government’s  total  stakes  in  the 
three  major  domestic  banks  is  valued  at  about 
EUR 13 billion  (around  5.1 %  of  GDP) (17).  The 
sale  of 
the  debt 
these  stakes,  on  which 
sustainability  analysis  does  not  speculate,  could 
accelerate  debt 
further.  However, 
subdued  bank  profitability  could  further  hinder 
government  plans  for  early  sales.  Additional  cash 
over  the  medium  term  can  be  expected  from 
surpluses arising from the closing operation of the 
National Asset Management Agency and the Irish 
Banking Resolution Corporation.  

reduction 

Government  contingent  liabilities  are  rapidly 
declining. State guarantees fell sharply to 4.9 % of 
GDP at the end of 2015, down from 13.2 % in the 
previous  year  (Table  4.1.1).  The  vast  majority  of 
contingent  liabilities  are  linked  to  the  support 
granted  to  financial  institutions.  The  ongoing 
repayment of government-guaranteed bonds of the 
National  Asset  Management  Agency  means  that 
contingent  liabilities  are  rapidly  decreasing  yet 
further.  Other  potential  future  payments  (not 
reflected  in  the  table  below)  might  arise  in 

(15)  This  enhanced  sensitivity  test  is  designed  based  on  a 
reduction/increase  of  real  GDP  growth  by  one  standard 
deviation,  calculated  over  the  last  three  years  of  historical 
data, for two years following the one of last historical data 
available.  After  two  years  of  projections,  -0.5/+0.5  pp. 
permanent shocks on GDP growth would be applied till the 
end of the projections period. 

(16)  In turn, a permanent 1 pp. increase to short- and long-term 
interest  rates  on  newly  issued  and  rolled-over  debt  would 
raise  the  public  debt-to-GDP  ratio  by  3.1  pps.  by  2027  to 
about 70.8 %. 

(17)  The state’s 99 % share in Allied Irish Banks were valued at 
EUR 12.2 billion  at  31  December  2015,  as  per  the  Irish 
Strategic  Investment  Fund.  It  does  not  take  account  of 
negative  market  movements  since  then.  The  contingent 
convertible bonds valued at EUR 1.6 billion, together with 
accrued  interest,  were  fully  repaid  in  July  2016  yielding 
total proceeds of EUR 1.8 billion. 

22 

% of GDP 201320142015Public guarantees 31.213.24.9of which linked to the financial sector Eligible liabilities guarantee 11.15.31.3National Asset Management Agency 19.27.03.2Other 0.80.80.5 
                                                           
 
 
 
                                                           
4.1. Public finances and taxation 

in 

from 

faster  debt 

future  shocks (23). 

against  future  contingencies  but  could  also  divert 
resources  away 
reduction. 
Appropriately  designed  fund  or  buffers (22)  could 
facilitate counter cyclical fiscal policy and help to 
Its  design  could, 
absorb 
however,  also  face  hurdles 
the  form  of 
accounting and fiscal rules, which currently do not 
make specific provision for this type of funds (24). 
The  design  of  the  fund  would  probably  require 
domestic  fiscal  rules  to  specify  a  target  value  for 
the  fund  in  normal  times.  It  would  also  be 
important for a set of rules to define which revenue 
windfalls  would  be  paid  into  the  fund  and  under 
which  circumstances  withdrawals  from  the  fund 
could  take  place  and  with  which  allocation  rules 
across expenditures. This would help the fund play 
a balancing role also in the event of unanticipated 
revenue  fluctuations.  The  experience  with  the 
National  Pensions  Reserve  Fund,  established  in 
Ireland in 2001, is also worth taking into account. 
The  Fund  was  heavily  invested  in  equities  with  a 
long-term  duration  to  pre-fund  pension  liabilities, 
but suddenly had to be repurposed, with significant 
losses, in the context of the 2008 crisis.  

4.1.3.  TAXATION  

The Irish economy is sensitive to changes in the 
international tax environment. Some features of 
tax  system  have  been  used  by 
the 
Irish 
tax  planning25. 
multinationals 
for  aggressive 
Recent changes are a consequence of both public-
policy  initiatives  to  limit  tax  avoidance  and 
growing  corporate  awareness  of  the  reputational 

(22)  Multiannual  buffers  with  some  pre-defined  reallocation 
rules  would  mean  setting  actual  budgetary  targets  below 
the ceilings set according to the numerical fiscal rules. This 
would also limit the need to frequently revise the ceilings. 
(23)  As  discussed  in  Calmfors  (2003),  Finland  set  up  a 
‘rainy-day  fund’  upon  its  entry  to  the  Economic  and 
Monetary  Union  that  accumulates  extra  social  security 
contributions from employers during upswings to enable a 
lower  contribution  rate  to  be  applied  during  downturns. 
This  smoothing  policy  helps  to  stabilise  employment  over 
the cycle.  

(24)  The current accounting rules mean that any transfer to the 
fund  would  not  affect  the  budget  balance,  i.e.  will  not 
reduce  the  surplus.  Conversely  withdrawals  from  the  fund 
would  be  treated  as  additional  expenditure  and  thereby 
increase the deficit (Buti and Giudice, 2002). 

(25) Aggressive tax planning consists in taking advantage of the 
technicalities  of  a  tax  system  or  of  mismatches  between 
two  or  more  tax  systems  for  the  purpose  of  reducing  tax 
liability  (source:  Commission  recommendation  of  6 
December 
planning 
(2012/772/EU)).  

aggressive 

2012 

tax 

on 

support to improve the quality of expenditure (19). 
A  number  of  documents  analysing  the  economic, 
fiscal  and  social  implications  of  possible  policy 
options,  have  now  been  presented  in  advance  of 
budget  decisions  and  are  part  of  the  final  budget 
package (20). Overall, these budgetary reforms aim 
at  developing  a ̔culture  of  spending̛  evaluation  to, 
for  example,  increase  responsibility  across  the 
public  administration  for  assessing  the  efficiency 
and  effectiveness  of  public  expenditure (21). 
However,  some  of  these  principles  have  not  yet 
been  fully  embedded  in  the  wider  Irish  budgetary 
process.  

Graph 4.1.4:  Change in final and planned expenditure 

allocation and revenue surprise 

(1) Total government expenditure refers to the current and 
capital resources allocated to ministerial departments and 
voted by the Irish Parliament. The planned allocation refers 
to targets set in the previous year's budget. Unexpected 
revenues are the difference between revenues effectively 
collected and those projected in the budget 
Source: Irish Department of Public Expenditure and Reform, 
European Commission 

In  an  economy  featuring  such  volatility,  the 
planned  ‘rainy-day  fund’  could  act  as  a  shock 
absorber.  The  government’s  proposal  to  create  a 
specific  fund  after  the  country  has  reached  its 
medium-term  objective  would  work  as  a  reserve 

(19)  http://finance.gov.ie/news-centre/press-

releases/government-submission-select-committee-
arrangements-budget-scrutiny 

(20)  http://budget.gov.ie/Budgets/2017/2017.aspx 
(21)  The  set  of  common  principles  endorsed  by  the  Eurogroup 
on  9  September,  for  improving  the  quality  of  public 
finances  through  the  use  of  spending  reviews  is  a  useful 
benchmark in reviewing national reform efforts. 

http://www.consilium.europa.eu/it/press/press-
releases/2016/09/09-eurogroup-statement/ 

23 

-1.5-1.0-0.50.00.51.01.52.02.53.03.54.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.0201120122013201420152016revenue surprise (rhs)final expenditureplanned expenditure% y-o-yEUR billion 
 
                                                           
                                                           
4.1. Public finances and taxation 

which  are  likely  to  narrow  the  income  tax  base 
thereby  increasing  public  finances’  exposure  to 
shocks. Measures include a tax rebate for first-time 
buyers  of  newly-built  homes  and  increases  to  tax 
credits for the self-employed and home carers (26). 
Tax  rate  increases  in  limited  areas,  notably  on 
tobacco,  are  unlikely  to  sufficiently  compensate 
for  the  more  significant  cuts  elsewhere.  This 
comes  on  top  of  the  decision  to  further  delay  the 
revaluation  of  self-assessed  property  values,  used 
to  calculate 
to 
November 2019. 

local  property 

liabilities, 

tax 

is  still  no  systematic  process 

There 
for 
evaluating  the  costs  and  benefits  of  reduced 
VAT  rates.  This  is  in  contrast  with  the  regular 
reviews of other tax expenditures. However, in the 
context  of  the  budgetary  process,  the  Department 
of  Finance  released  a  report  on  selected  VAT 
issues,  including  the  rate  of  VAT  for  hotels  and 
restaurants. The report found that bringing the 9 % 
VAT  rate  back  to  the  standard  reduced  rate  of 
13.5 %  would  generate  additional  revenue  of 
EUR 626 million.  Despite  this,  and  the  fact  that 
hotels and restaurants are performing strongly, the 
government has decided to keep the reduced VAT 
rate as a buffer for the sector against the weakness 
in  sterling, which  increases  the  cost of  holidaying 
in Ireland for British tourists.  

Recurrent  property  taxation  is  considered  one 
of  the  most  growth-friendly  revenue  sources. 
However, Irish revenues from immovable property 
are below the EU average, amounting to 1.0 % of 
GDP  in  2014,  compared  to  the  EU  average  of 
1.6 %.  The  extension  of  exemptions  for  newly 
developed houses and the postponement until 2019 
of the revaluation of self-assessed property values, 
used  to  calculate  local  property  tax  liabilities, 
contrast with the importance of broadening the tax 
base for the sustainability of public finances. 

The  tax  system  can  be  used  for  environmental 
policy  while  also  generating  revenue.  Overall, 
revenues from environmental taxes are in line with 
the  EU  average  (2.43 % of GDP  for  IE  compared 
to  an  EU  average  of  2.46 %).  The  differences  in 
the taxation of diesel and gasoline for road use are 

(26)  Further  tax  changes  include  reducing  the  rate  of  capital 
gains tax applicable to certain gains, increasing the pre-tax 
thresholds for inheritance and gift tax and reducing the rate 
of deposit interest retention tax. 

risks from aggressive tax planning. The weight of 
multinationals  in  overall  GDP  and  the  growing 
share  of  corporate  tax  receipts  in  public  revenue 
make  Ireland  more  exposed  to  changes  in  the 
international  corporate  tax  framework.  To  date, 
however,  Ireland  appears  to  have  benefitted  from 
the  changes 
the 
international  tax  environment  in  the  form  of 
windfall tax revenues.  

taking  place 

that  are 

in 

In  response  to  the  uncertain  environment,  the 
Irish  government  is  engaging  in  international 
tax  reform.  Ireland  has  been  constructively 
engaged  in  the  Base  Erosion  and  Profit  Shifting 
(BEPS) project (see OECD, 2015) and has been an 
early  adopter  of  the  country-by-country  reporting 
for  large  companies  (Action  13  of  the  BEPS 
project).  Moreover,  the  Irish  government  has 
introduced  additional  measures  to  address  tax 
evasion  and  avoidance.  They  include  a  new 
compliance  programme  to  tackle  offshore  tax 
evasion  and  amendments  to  prevent  certain  funds 
from  exploiting  existing 
tax 
avoidance  purposes.  Administrative  resources  for 
audits  and  compliance  procedures  have  also  been 
increased.  These  measures  build  on  similar 
initiatives in 2015 and 2016, including the decision 
to change the corporate tax residency rules that had 
been exploited by some multinationals. 

legislation 

for 

in 

tax 

total 

revenue  merits 

Nevertheless,  the  growing  share  of  corporate 
tax 
some 
consideration.  The  annual  corporate  tax  revenue 
increased  by  approximately  50 % 
in  2015 
compared  to  2014.  This  brought  the  share  of 
corporate  income  tax  in  total  revenue  to  almost 
10 %,  with  the  top  10  payers  accounting  for  over 
40 %  of  net  receipts.  Corporate  tax  revenue  in 
Ireland  can  therefore  be  characterised  as  highly 
concentrated  and  prone  to  volatility.  A  detailed 
examination of the risks linked to the composition 
of  the  Irish  tax  system  could  help  to  ensure  that 
public  finances  have  access  to  a  broad  set  of 
revenue  sources.  The  government  has  already 
launched  an  independent  review  of  its  corporate 
of 
yield 
code,  which  will 
tax 
recommendations by summer 2017.  

set 

a 

Relying  on  a  broader  tax  base  would  support 
in  the  face  of  economic 
revenue  stability 
volatility.  Ireland  has  done  very  little  to  broaden 
the  bases  of  its  tax  heads.  Budget  2017  has 
introduced  a  range  of  tax  expenditure  measures 

24 

 
                                                           
4.1. Public finances and taxation 

environmentally  unjustified.  In  Ireland,  diesel  is 
taxed  at  a  lower  rate,  although  it  emits  more  air 
pollutants.  The  tax  advantage  in  favour  of  diesel 
currently  stands  at  11 cents  per  litre.  An  equal 
treatment  of 
to 
environmental improvements. 

transport  fuels  would 

lead 

25 

 
 
4.2.  FINANCIAL SECTOR 

4.2.1.  BANKING SECTOR*  

the 

stock 

include 

elevated 

Bank  profitability  has  recovered  but  remains 
weak.  A  number  of  factors  will  continue  to  drag 
on  bank  profitability  in  the  near  to  medium  term. 
These 
of 
non-performing  loans  (NPLs)  and  low-yielding 
demand, 
tracker  mortgages,  weak 
difficulties  in  accessing  collateral  and  continued 
pressure  on  net 
interest  margins.  However, 
progress  made  in  loan  restructuring  and  portfolio 
sales,  as  well  as  rising  collateral  valuations,  have 
the  release  of  provisions,  supporting 
led 
profitability metrics (Graph 4.2.1). 

credit 

to 

Graph 4.2.1:  Banks’ book quality and provisioning 

Source: ECB 

Market  uncertainties  are  expected  to  persist 
over  time.  Irish  banks  remain  susceptible  to 
spillovers  from  financial  sector  problems  from 
across  the  euro  area.  Bank  shares  across  Europe 
have  generally  been  weak  but  the  domestic  Irish 
banks  have 
traded  below  euro  area  market 
averages in 2016.  

Irish  banks  maintain  adequate  capital  buffers 
but may face pressures in the coming years. The 
aggregate  Common  Equity  Tier  1  (CET1)  capital 
position  of  Irish  banks  diminished  slightly  in  the 
first quarter of 2016. This was driven primarily by 
a  reduction  in  the  capital  of  the  branches  and 
subsidiaries  of  foreign  banks.  Nevertheless,  the 
CET1  ratio  for  the  sector  as  a  whole  remained 
high,  at  20.5 %  of  risk  weighted  assets  as  of  the 
end  of  June  2016,  down  from  22.3  at  the  end  of 

2015 (ECB). Part of this capital buffer will be used 
in 
the  Capital 
Requirements Regulation. 

the  gradual  phasing 

in  of 

in 

their  European  peers 

The European Banking Authority  stress  test of 
July  2016  signalled  continuing  challenges.  The 
average  CET1  ratios  of  Allied  Irish  Banks  (AIB) 
and  Bank  of  Ireland  (BOI)  scored  significantly 
below 
the  adverse 
scenario.  This  was  primarily  explained  by  their 
accumulation of deferred tax assets and high NPL 
stock, considered below. Overall, the results show 
the  vulnerability  of  the  Irish  banking  sector  to  a 
reversal  in  macroeconomic  environment.  Credit 
risk  accounted  for  the  majority  of  the  losses  for 
these  two  banks  under  the  adverse  scenario, 
highlighting  their  key  weakness  relative  to  their 
peers. 

The  substantial  stock  of  deferred  tax  assets 
(DTAs)  is  still  a  concern.  Accounting  and  tax 
practices allow institutions that make losses — and 
thus pay no income taxes  — to generate DTAs to 
reduce  their  future  tax  liabilities.  As  a  result  of 
severe  losses  in  recent  years,  Irish  banks  have 
accumulated a substantial stock of DTAs, the value 
of  which  depends  on  the  banks’  future  profits. 
These assets will need to be gradually deducted in 
the  calculation  of  regulatory  capital  under  current 
rules.  BOI  and  AIB  had  accumulated  a  stock  of 
over EUR 4.4 billion of DTAs by the end of June 
2016, representing over 20 % of their own funds. 

The  high  forbearance  levels  in  Ireland  are 
partly  a  reflection  of  the  arrears  restructuring 
process.  According  to  the  CBI,  the  average  NPL 
ratio of the domestic Irish banks was 14.2 % as of 
September  2016. This  is lower  than its  peak  level 
of  27.1 %  at  the  end  of  December  2013  but 
remains  substantially  above  the  EU  average  of 
5.4 % (27).  Forbearance  levels  in  Ireland  remain 
large 
comparatively  high  (Graph  4.2.2).  The 
volume of restructured accounts also explains part 
of  this  differential,  given  the  significant  lag 
between the conclusion of a restructuring solution 
and the reclassification of the loan as performing. 

(27)  The  EU  average  NPL  ratio  refers  to  end-June  2016 
latest  EBA  report  on 
in 

the 

numbers,  as  reported 
non-performing loans. 

26 

0102030405060700246810121416182020122013201420152016*Net non-performing debt instrumentsLoss provisions (accumulated impairment)Provisioning ratio (rhs)% of gross debt exposure% of total non-performing debt instruments  
 
 
                                                           
4.2. Financial sector 

Graph 4.2.2:  Forbearance levels — a euro area comparison 

out-of-court  arrangements  between  banks  and 
borrowers.  A  substantial  use  of  bankruptcy  and 
personal insolvency arrangements is yet to happen. 

Graph 4.2.3:  Evolution of mortgage loans in arrears 

Source: ECB 

the 
Although  NPL  ratios  have  declined, 
substantial share of long-term mortgage arrears 
requires  continued  monitoring.  Thanks 
to 
increasing  asset  prices  and  the  loan  restructuring 
solutions offered to customers, significant progress 
has  been  made  in  reducing  mortgage  arrears, 
although  pace  of  improvement  is  slowing  down 
(Graph  4.2.3).  At  the  end  of  September  2016, 
about 14 % of  the  total balance of  mortgages was 
in arrears at least for 90 days — down from a high 
of about 20 % at the end of September 2013. As of 
September  2016,  around  70 %  of  all  mortgage 
arrears  are  past  due  for  more  than  two  years, 
primarily  due  to  the  limited  success  that  the 
lenders have had in restructuring these loans. This 
issue  requires  close  monitoring,  especially  since 
loans that remain in arrears for longer periods tend 
to carry higher risks and greater expected losses. 

The  key  difficulties  in  accessing  collateral  are 
lengthy  repossession  procedures  and 
the 
infrequent  use  of  out-of-court  arrangements, 
insolvency  and  bankruptcy.  A  large  number  of 
mortgage arrears cases are still at some stage of the 
legal process, due to repetitive adjournments. Late 
in  higher  collateral 
repossessions  can  result 
valuations,  given  the  recovery  of  the  property 
market.  However,  they  are  also  holding  up  a 
significant  portion  of  the  property  market  in  a 
context  of  insufficient  supply  (Section  4.4.2). 
Difficulties  in  collateral  access  can  also  deter 
potential  new  market  entrants  and 
investors. 
Formal repossession processes are still preferred to 

(1) The data aggregates primary home dwellings and 
buy-to-let mortgages for households 
(2) dpd: days past due 
Source: Central Bank of Ireland (CBI) 

of 

these 

continue 

Corporate  and  commercial  real  estate  (CRE) 
loans  remain  heavily  impaired  and  are  either 
being restructured or sold away. Approximately 
be 
loans 
25 % 
non-performing.  Their  restructuring  is  usually 
more complex and takes more time than mortgage 
restructuring.  Sales  of  the  portfolios  of  CRE  still 
owned by banks could be affected by the changes 
announced to the tax regime applicable to Irish real 
estate funds, which could make investment in Irish 
CRE assets less attractive. 

to 

The  National  Asset  Management  Agency 
(NAMA)  continues  with  the  successful  sales  of 
its  assets. This  process has recently been  clouded 
by  allegations  of  wrongdoings  during  the  sale  of 
one of its portfolios. By October 2016, NAMA had 
redeemed  EUR 26.6 billion  or  88 %  of  its  senior 
debt. 

A  well-functioning  central  credit  register  is  a 
crucial  element  for  ensuring  prudent  future 
lending  standards.  After  several  delays,  the 
central  register  will  begin  collecting  lenders’ 
submissions  on  consumer  lending  in  mid-2017.  It 
will cover all types of lending only in mid-2018. 

27 

051015202530354045CYGRSIITIEPTBGHUHRROLVESLTATPLMTDKFREEBENLDEFISELUGBperforming forebornenon-performing foreborne NPLsnon-foreborne NPLs (gross)% of gross debt exposure02468101205,00010,00015,00020,00025,00030,00035,00040,000Sep-12Jan-13May-13Sep-13Jan-14May-14Sep-14Jan-15May-15Sep-15Jan-16May-16Sep-16% of grossloans<90dpd90 to 720 dpd> 720 dpd> 720 dpd (%, rhs)EUR million 
 
 
Banks  are  expected  to  carefully  balance  the 
push  to  boost  credit  volumes  with  maintaining 
prudent 
legislative 
lending  standards.  The 
proposal  enabling  the  Central  Bank  of  Ireland  to 
cap  interest  rates  on  variable  rate  mortgages,  if 
enacted, could challenge the sustainability of bank 
lending  in  Ireland.  Such  measures  could  act  as  a 
deterrent  to  new  entrants  to  the  market  and  to 
lending overall. 

The  Central  Bank  concluded  its  review  of  
existing  national  macro-prudential  measures, 
and broadly left them in place. Crucially, as it is 
a  main  affordability  metric,  the  loan-to-income 
(LTI) 
ratio  was  maintained  at  3.5 %.  The 
loan-to-value  (LTV)  limits  were  altered,  but  not 
substantially.  A  new  help-to-buy  tax  rebate  also 
reduces the stringency of the loan-to-value ratio — 
thought  the  availability  of  the  rebate  is  restricted 
by its eligibility requirements. 

Negative  net 
lending  and  growing  deposit 
trends  are  unchanged  but  the  outlook  is  more 
positive.  Net  lending  for  both  households  and 
firms  is  still  negative  (Graph  4.2.4).  However, 
mortgage approvals and drawdowns are increasing, 
with the share of fixed rate mortgages growing as 
banks  expand  their  product  range.  New  credit  for 
non-financial SMEs is also on the rebound, with an 
increase of almost 30 % in June 2016 compared to 
the same period a year earlier. 

Interest  rates  on  loans  have  declined,  but 
remain  higher  than  the  euro  area average.  The 
increase in new credit to SMEs has occurred on the 
back of a reduction in average interest rates of 60 
basis  points  over 
the  year  (Section  4.2.4). 
Similarly,  the  interest  rates  for  mortgages  have 
declined by about 10 basis points (to 3 %) and 20 
basis  points  (to  3.5 %)  for  variable  and  fixed-rate 
mortgages  respectively  —  but  remained  almost 
twice  as  high  as  the  euro  area  average.  This 
reflects legacy issues whereby new lending has to 
cover  up  for  the  low-yielding  existing  loan  book. 
The small number of bank lenders in the market is 
not conducive to bringing rates down either. 

4.2. Financial sector 

Graph 4.2.4:  Net lending volumes and yearly growth rates 

Source: CBI 

4.2.2.  EXTERNAL SUSTAINABILITY*  

in 

substantial  deterioration 

The  risks  to  the  external  sustainability  of 
domestic  sectors  seem  to  be  contained.  Official 
statistics  recorded  a  very  large  level  shift  that  led 
to  a 
the  net 
international  investment  position  (IIP)  in  2015. 
However,  the  analysis  below  presents  evidence 
that  this  was  primarily  due  to  transactions  by  a 
large  multinational 
small  number  of  very 
enterprises 
from 
optimisation of their operations across their global 
value  chains.  The  associated  financial  flows  and 
positions  altered  neither  the  productive  capacity 
nor  the  external  liabilities  of  underlying  domestic 
economic  sectors.  As  such,  they  have  limited 
implications for the domestic economy and do not 
increase  the  risk  of  Ireland’s  external  position 
becoming unsustainable (28).   

(MNEs),  probably  arising 

Ireland’s  headline  external  accounts  indicators 
should be interpreted with caution. An accurate 
assessment  of  the  external  sustainability  of  the 
Irish  economy  requires  a  detailed  examination  of 
several  factors  that  affect  but  do  not  directly 
explain the IIP of the Irish domestic economy (29). 
These  include the  International Financial  Services 
Centre  (IFSC)  and  the  large-scale  operations  of 

(28)  See  Section  4.1.3  for  a  discussion  of  the  implications  of 

multinational activities on government revenues. 

(29)  The  observable  domestic  sectors  include  the  government, 

the Central Bank of Ireland and the domestic banks. 

28 

-401060110160210260-8-7-6-5-4-3-2-10Nov-10Mar-11Jul-11Nov-11Mar-12Jul-12Nov-12Mar-13Jul-13Nov-13Mar-14Jul-14Nov-14Mar-15Jul-15Nov-15Mar-16Jul-16Non-financial corporations (rhs)Households (rhs)Non-financial corporations (lhs)Households (lhs)y-o-y %EURbillion 
 
                                                           
4.2. Financial sector 

Graph 4.2.6:  International investment position by asset type 

—  excluding IFSC 

MNEs  —  including  re-domiciled  public  limeted 
(PLCs) (30),  aircraft 
companies 
leasing  and 
contract  manufacturing  (European  Commission, 
2016c,  p.  29).  The  international  orientation  of 
these  sectors  means  that  investment  in  Ireland  is 
heavily  influenced  by  global  value  chains  and  the 
interplay between tax regimes and tax treaties.  

Graph 4.2.5:  International investment position by asset type 

(IFSC and non-IFSC) 

Source: CSO 

Source: CSO 

and 

both 

assets 

The IFSC has very large gross positions but its 
net position is far smaller. The IFSC is a hub for 
international  financial  transactions,  which  have 
little  connection  to  the  financing  of  the  domestic 
economy.  If  the  IFSC  is  included,  Ireland’s  gross 
IIP 
exceeded 
liabilities 
EUR 4 trillion  in  Q3-2016  (Graph  4.2.5).  When 
the  IFSC  is  excluded,  the  gross  positions  held  in 
Ireland are far smaller (Graph 4.2.6). Nevertheless, 
they  remain  large  compared  to  nominal  GDP  of 
total  net  IIP 
EUR 256 billion 
in  2015.  The 
was 
in 
Q3-2016.  Of  this  total  net  IIP,  approximately 
EUR 120 billion  was  attributable  to  the  IFSC.  As 
the IFSC gross positions largely cancel each other 
out,  the  majority  of  the  negative  net  IIP  is 
attributable 
international  factors 
mentioned, combined with the domestic sectors of 
the economy (EUR 345 billion). 

-177 %  of  GDP 

(EUR -465 billion) 

the  other 

to 

to  market 

In  so  far  as  they  are  observable,  the  benign 
trends  in  the  net  IIP  of  the  domestic  sectors 
appear to have continued in 2016. The net IIP of 
the Central Bank turned positive in late 2015 while 
the  net  IIP  for  non-IFSC  banks  turned  positive  in 
2016 (Graph 4.2.7). After reaching levels in excess 
of EUR −100 billion during the financial crisis, the 
CBI had a small positive (EUR 7.6 billion) net IIP 
(and  Eurosystem  Target  II  payment  balance)  in 
Q3-2016.  This  is  explained  by  the  restoration  of 
domestic  banks’  access 
funding. 
Domestic  banks’  net  IIP  also  turned  slightly 
positive  (EUR 3.8 billion),  partly  reflecting  the 
switch  to  domestic  deposits  from  international 
wholesale  funding  and  the  deleveraging  process. 
Other financial intermediaries had a large positive 
net  IIP  of  EUR 176 billion,  partly  due  to  the 
overseas  investments  of  insurers  and  pension 
funds.  The  net  IIP  of  the  general  government 
sector  (EUR −129 billion)  deteriorated  since  the 
ECB 
Transactions 
this  may  partially  reflect 
announcement  but 
improved  international  investor  appetite  for  Irish 
sovereign  debt (31).  These  positive  developments 
are dwarfed by the net IIP of EUR −404 billion of 
non-financial  corporations,  a  category  that  is 
it 
heavily  dominated  by  MNEs.  Moreover, 

Monetary 

Outright 

(30)  Redomiciled  PLCs  are  companies  that  relocate  their  legal 
group  headquarters.  In  the  case  of  relocations  to  Ireland 
this  is  often  motivated  by  tax  considerations  and  may  not 
be  associated  with  substantive  economic  activity  (CSO, 
2016a). 

(31)  Foreign debt holders also include official creditors from the 
financial  assistance  programme;  the  European  Financial 
Stabilisation  Mechanism,  the  European  Financial  Stability 
Facility and the IMF.  

29 

-6-5-4-3-2-1012345Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016Other InvestmentPortfolio investment : debt instrumentsPortfolio investment : equityDirect InvestmentNet International Investment PositionEUR Trillion↑Assets↓Liabilities-1.5-1-0.500.51Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016Portfolio investmentOther InvestmentDirect investmentNet IIPIIP (Pre-revision)EUR Trillion↑Assets↓Liabilities 
 
                                                           
 
 
                                                           
4.2. Financial sector 

this 

The  behaviour  of  MNEs  partly  reflects  the 
optimisation  of  their  operations  across  their 
global  value  chains.  Notably, 
includes 
international  corporate  tax  considerations.  In  this 
context, 
the  geographic  distribution  of  FDI 
liabilities  becomes  informative  (Graph  4.2.8).  On 
an ‘immediate owner basis’ (33), offshore financial 
centres account for approximately EUR 100 billion 
of  FDI  liabilities.  In  addition  to  these  centres,  the 
US, Luxembourg and the Netherlands also appear 
to  be  substantial  direct  investors  in  Ireland,  on  an 
‘immediate  owner  basis’.  Furthermore,  on  an 
‘ultimate  ownership  basis’,  the  vast  majority  of 
direct  investment  liabilities  are  attributable  to  the 
US. 

Graph 4.2.8:  Geographic distribution of FDI liabilities, 

immediate and ultimate ownership (2015) 

Source: CSO 

(33)  The  concepts  of  immediate  and  ultimate  ownership  are 
explained using the following example in the 6th edition of 
the  IMF  Balance  of  Payments  Manual  (page  77):  ‘For 
direct  investment,  there  can  be  chains  of  voting  power, 
such  as  when  a  direct  investor  in  Economy  A  has  a 
subsidiary in Economy B, which in turn has a subsidiary in 
Economy  C.  In  this  case,  for  the  direct  investment  in 
Economy  C  (a)  the  economy  of  immediate  ownership  is 
Economy  B;  and  (b)  the  ultimate  investing  economy  is 
Economy A.’ 

represents 
EUR −190 billion net IIP recorded in Q4-2014.  

increase 

large 

from 

a 

the 

Graph 4.2.7:  International investment position by 

institutional sector, non-IFSC 

Source: CSO 

Revisions  to  the  2015  balance  of  payments  led 
to  a  very  large  deterioration  in  Ireland’s  net 
IIP.  The  revisions  to  national  accounts  data 
announced  by 
the  CSO  in  July  2016  were 
accompanied  by  large  revisions  to  the  balance  of 
payments and IIP. These comprised of a large level 
shift  in  the  negative  net  IIP  to  a  peak  of 
EUR −410 billion  in  Q1-2015,  compared  to  the 
previous  estimate  of  EUR −51 billion 
(both 
exclude  the  IFSC).  Between  2014  and  2015,  the 
net  IIP  deteriorated  by  about  EUR 300 billion 
which is comparable in scale to the increase in the 
total 
approximately 
EUR 255 billion recorded in the national accounts. 
Much of the changes to the net IIP were recorded 
as large negative volume changes as the change in 
stocks greatly exceeded the flows in 2015 (32). The 
increases  in  liabilities  were  concentrated  in  the 
foreign  direct  investment  (FDI)  equity,  other 
capital  (which  includes  inter-company  loans)  and 
portfolio investment (see also section 4.2.3).  

capital 

stock 

of 

(32)  According  to  the  6th  edition  of  the  IMF  Balance  of 
Payments  Manual  (p.  33):  ‘Changes  in  the  status  of 
existing  financial  claims  and  liabilities  arising  from  the 
change  in  residence  of  individuals  from  one  economy  to 
another  are  treated  as  other  changes  in  the  volume  of 
assets.  These  flows 
the 
classification  of  the  owner’s  residence  status,  and  hence, 
they should not be classified as transactions.’ 

result  from  a  change 

in 

30 

-700-600-500-400-300-200-1000100200300Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016Non-financial companiesOther financial intermed.Monetary Financial Inst.General governmentMonetary AuthorityTotalEUR Billion0100200300400500600700800900ImmediateUltimateUnited StatesOffshore centresUnited KingdomOther*EUR Billion 
 
                                                           
 
 
                                                           
4.2. Financial sector 

Graph 4.2.9:  Direct investment abroad end year position by 

prior domicile location 

Source: CSO 

Ireland’s  current  account  surplus  is  overstated 
due  to  a  number  of  factors.  The  headline  data 
presented  in  Graph  4.2.10  record  a  very  large 
surplus  in  merchandise  trade.  However,  much  of 
the  exports,  including  the  very  large  upsurge  in 
Q1-2015,  were  driven  by  contract  manufacturing 
activities (Section 1). A more accurate reflection of 
Ireland’s  merchandise  exports  can  be  obtained  by 
looking  at  alternative  data  sources  (Graph  1.6). 
This  phenomenon  also  contributed  to  the  services 
trade  and  primary 
income  deficits.  Notably, 
imports  of  research  and  development  business 
services  have  tended  to  increase  rapidly  in  recent 
quarters, and combined with royalties and licenses, 
accounted for approximately 56 % of total services 
imports 
the  IFSC 
continued to record a large services export surplus, 
which  stood  at  over  EUR 16 billion  in  the year  to 
Q3-2016. Regarding primary income, it should be 
noted  that  the  sharp  increase  in  profit  outflows 
observed  in  2015  is  due  to  companies  other  than 
re-domiciled  PLCs.  The  latter  recorded  large, 
albeit  declining,  net  primary  income  flows  that 
inflated  Ireland’s  current  account  balance  by 
EUR 4.8 billion  in  2015.  However,  the  precise 
value of the underlying current account balance of 
domestic sectors remains unobservable. 

in  Q3-2016.  In  contrast, 

investment 

Direct 
income  outflows  also 
highlight  the  use  of  offshore  centres  by  MNEs 
operating  in  Ireland.  Closer  examination  of 
foreign-owned  direct 
income  outflows 

from 

to 

in  2014, 

investment  enterprises  shows  that  they  increased 
by  EUR 44 billion 
just  under 
EUR 60 billion in 2015. It also highlights the very 
large profits generated by some MNEs operating in 
Ireland.  A 
profits, 
EUR 25 billion,  were  directed  to  offshore  centres, 
compared  to  EUR 22 billion  to  other  euro  area 
countries.  

proportion 

large 

of 

Graph 4.2.10: Current account balance, net components 

Source: CSO 

Intra-firm  trade  data  highlight  the  dominant 
role of MNEs in Ireland’s exports and imports. 
Intra-firm  trade  in  Ireland  accounts  for  30 %  of 
exports  and  25 %  of  imports  (Stehrer,  R.  2016). 
The  US  accounts  for  about  70 %  of  the  total 
number  of  intra-firm  flows  and  72 %  of  the  total 
number  of  import  flows,  which  can  be  explained 
by  the  large  number  of  US  multinationals  located 
in Ireland. Germany and the UK are the next most 
important  intra-firm  trading  partners.  The  top  10 
products 
intra-firm  are  predominantly 
chemicals  and  pharmaceuticals,  medical  devices 
and  electronics,  reflecting  the  specialisation  of 
multinational enterprises located in Ireland. 

traded 

In  conclusion,  much  of  Ireland’s  external 
liabilities  are  not  attributable  to  domestic 
sectors  of  the  economy.  The  above  evidence 
indicates  that  a  substantial  portion  of  Ireland’s 
external liabilities are attributable to entities whose 
ultimate  domicile  lies  abroad.  The  many  MNEs 
that have significant economic activities in Ireland 
can  be  broadly  characterised  as  follows:  They  are 
highly profitable, have a large share of liabilities in 

31 

01002003004005006007008009002009201020112012201320142015FDI from GB & Other Redomiciled PLCsFDI from US & BM Redomiciled PLCsRemainder of FDIEUR Billion-30-20-10010203040Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016MerchandiseServicesPrimary IncomeSecondary IncomeCurrent AccountEUR billion 
 
 
the  form  of  direct investment,  and have  offsetting 
overseas  assets,  while  their  debt  liabilities  are  not 
owed  to  Irish  investors.  These  factors  limit  the 
risks to the domestic Irish economy. In other cases, 
although the ultimate domicile is legally in Ireland, 
the MNEs involved have only limited connections 
to the domestic economy. This means that much of 
recorded financial inflows do not contribute to the 
productive  capacity  of  the  economy,  but  are 
instead  a  reflection  of 
tax  optimisation 
strategies  of  large  US  corporations.  However, 
precisely  because  of  the  absence  of  links  to  the 
domestic  economy,  they  do  not  increase  the  risks 
to Ireland’s external sustainability. 

the 

4.2.3.  PRIVATE INDEBTEDNESS*  

The  private  debt-to-GDP  ratio  decreased  since 
a surge in 2015, but remains high. This surge in 
GDP reflects the growth in value added booked by 
multinationals  in  Ireland  (Section  1).  At  the  same 
time,  the  transfer  of  large  balance  sheets  into 
Ireland  also  resulted  in  large  increases  to  the 
overall  stock  of  private  debt  attributed  to  the 
country. Non-financial private sector debt stood at 
310.1 % of GDP in March 2016. Deleveraging had 
followed a rather linear trend since early 2012 but, 
in  late  2014,  the  debt  stock  surged  by  an  amount 
equivalent to the size of the country’s GDP (Graph 
4.2.11). Over the course of 2015, the debt-to-GDP 
ratio reduced substantially again but this reduction 
was  primarily  explained  by  the  surge  in  GDP 
rather than the debt stock levels. 

4.2. Financial sector 

Graph 4.2.11: (Non-consolidated) private sector debt to GDP 

Source: European Commission 

less 
Households  keep  deleveraging,  but 
strongly, as new credit demand re-emerges. The 
stock of Irish household debt decreased to 56.7 % 
of GDP at the end of March 2016, from a high of 
125.2 % at the end of September 2009. Expressed 
income,  Irish 
as  a  percentage  of  disposable 
household debt has fallen to  144.8 % in Q3-2016, 
down from 225 % in 2008, as the strong recovery 
in GDP has not been matched by an equal increase 
income (34).However, 
in  household  disposable 
deleveraging slowed down in 2016, as new lending 
for  consumer  and  house  purchases  started  to  pick 
up.   

The  improvement  in  household  finances  is 
supported  by  recovering  asset  values.  Housing 
and financial assets held by Irish households keep 
increasing  in  value  (Graph  4.2.12).  The  recovery 
of  house  prices  helps  mortgage  holders,  as  it 
increases  the  value  of  the  equity  they  hold. 
Approximately  15 %  of  mortgages  remained  in 
negative  equity  at  the  end  of  2015,  compared  to 
20 %  a  year  earlier.  CBI  statistics  indicate  a 
concentration of debt in loans overdue for over two 
years  (Section  4.2.1),  making  their  restructuring 
efforts  crucial  for  resolving  the  debt  burden  of 
households. 

(34)  The relative importance of households as producing sectors 
as  well  as  current  transfers  between  households  and  other 
sectors in the economy (social transfers, income taxes, etc.) 
explain  the  difference  between  disposable  income  and 
GDP. 

32 

050100150200250300350400450Q1-07Q1-08Q1-09Q1-10Q1-11Q1-12Q1-13Q1-14Q1-15Q1-16HouseholdNon financial corporationsTotal private (non-financial) sector% of GDP 
 
                                                           
4.2. Financial sector 

Graph 4.2.12: Financial assets held by Irish households 

Graph 4.2.13: Total corporate loans by counterparty 

Source: European Commission 

Source: CBI 

The  debt  levels  of  non-financial  corporations 
are  heavily  affected  by 
the  presence  of 
multinationals.  Only  one  third  of  total  debt  of 
these  corporations  can  be  attributed  to  indigenous 
firms  -  an  amount  equivalent  to  approximately 
62 %  of  GDP  in  2014  (Graph  4.2.13).  These  are 
firms 
that  are  not  foreign-parent  owned  or 
re-domiciled  from  abroad (CSO,  2015). However, 
even  when  discounting  for  that,  the  Irish  private 
sector  remains  highly  leveraged  in  comparison  to 
the euro area average. 

Isolating 
the  effect  of  multinationals  on 
corporate  debt  is  crucial  because  they  do  not 
rely  on  the  domestic  banks.  In  the  aftermath  of 
the  2008-2010  crises,  domestic  banks  had  limited 
access to credit but this did not stop the increase in 
corporate  indebtedness,  which  almost  doubled 
from  2011  to  2015.  This  implies  that  in  Ireland 
many 
corporations,  mostly 
multinationals, do not rely on domestic lenders for 
through 
funding 
intra-group  lending (35)  or  international  financial 
markets  (Graph  4.2.14).  This  type  of  lending  is 
less  vulnerable  to  a  worsening  of  domestic  credit 
conditions.  

non-financial 

themselves 

finance 

but 

(35)  According 

to 

the  Irish  authorities,  most  of  foreign 
corporations’ debt pertains to intra-group lending, whereby 
companies’ headquarters and/or its subsidiaries lend to one 
another. 

in 

remains 

companies, 

The  Irish  domestic  corporate  sector,  mostly 
small 
strong 
deleveraging  mode.  This  is  evidenced  by  the 
negative net credit numbers characterising the Irish 
banking sector in recent years, and in line with the 
behaviour of Irish households which keep reducing 
their debt. The total stock of SME credit is falling 
due  to  continuous  repayments  and  the  sale  of 
banks’  loan  portfolios.  Between  early  2010  and 
early  2016,  it  fell  by  over  50 %.  There  is  an 
increase  in  new  lending,  but  it  is  still  very  small 
compared to the overall SME debt burden (Graph 
4.2.14).  

in 

Firms default less often and more firms have no 
debt  at  all.  In  addition  to  the  overall  fall  in  the 
stock  of  SME  non-performing  loans  (see  Section 
4.2.1),  fewer  SME  loans  are  entering  arrears  and 
more  loans  are  exiting  arrears.  Indebted  firms  are 
now  better  placed  to  service  their  debt.  This  is 
reflected 
the  median 
the  decline  of 
debt-to-turnover  ratio  to  about  4.5 %  in  March 
2016,  down  from  a  peak  of  10 %  two  years 
previously.  Most  defaults  still  occur 
the 
construction sector and among loans linked to both 
SME  and  personal  lending,  i.e.  loans  for  house 
purchases 
investment. 
Encouragingly,  37 %  of  all  firms  had  no  debt 
outstanding at the end of March 2016. 

property 

other 

or 

in 

33 

-8-6-4-20246Q1-2010Q1-2011Q1-2012Q1-2013Q1-2014Q1-2015Q1-2016Net other accountsMiscellaneous assetsSecurities & equityOther insurancePension & life insuranceDepositsNew loans borrowed% of GDP0100200300400500600700800Q1-2012Q2-2012Q3-2012Q4-2012Q1-2013Q2-2013Q3-2013Q4-2013Q1-2014Q2-2014Q3-2014Q4-2014Q1-2015Q2-2015Q3-2015Q4-2015Q1-2016Rest of WorldNon-financial corporationsFinancial Corporates (MFI and other)General governmentTOTAL  Loan LiabilitiesEUR billion 
 
                                                           
 
 
4.2. Financial sector 

Graph 4.2.14: SME lending – total and new 

that one third of Irish firms invest in fixed capital, 
such  as  land  and  machinery,  which  is higher  than 
the EU average of 27 %. 

to 

the  factors  explaining 

While  internal  funds  remain  overwhelmingly 
the financing choice, more bank credit is being 
sought.  Some  SMEs  still  have  debt  to  repay  and 
the 
others  delay  credit  applications  due 
uncertain  market  prospects.  This  cautiousness  is 
the  continued 
one  of 
dominance  of  retained  earnings  as 
top 
the 
financing  source  (Graph  4.2.15).  Reliance  on 
internal funds has increased over the past year, and 
remains  stronger  than  elsewhere  in  the  EU (37). 
However,  the  recovery  in  SME  bank  lending 
continues,  albeit  from  a  very low base.  Most new 
to  construction, 
loans  are  being  extended 
agriculture and manufacturing firms. 

While  hurdles  remain,  it  is  getting  easier  for 
firms  to  borrow.  As  the  SAFE  Survey  reports, 
Irish  SMEs  are  becoming  less  concerned  about 
their  ability  to  obtain  credit,  as  they  believe  that 
banks are more willing to lend. Rejection rates by 
banks  have  declined  and  the  waiting  time  for  a 
credit  decision  has  decreased.  However,  collateral 
and/or  personal  guarantees  are  still  required  in 
about 30 % of cases. The low profitability of Irish 
banks,  legacy  issues  affecting  the  quality  of  their 
balance  sheets  and  a  concentrated 
lenders’ 
market (38)  remain  the  main  reasons  for  the 
elevated cost of credit in Ireland (Section 4.2.1). 

(37)  According  to  the 2016  SAFE  survey,  42 %  of  Irish  SMEs 
list  retained  earnings  as  a  significant  source  of  funding 
compared to 39 % the year previously. The EU average is 
27 %.  

(38)  The  three  main  retail  banks  account  for  95 %  of  all  SME 
loans.  This  de  facto  means  two  banks,  as  Permanent  TSB 
does not have a substantial SME loan book at present (CBI, 
2016).  

Source: Central Bank of Ireland 

important  step 

Viable  firms  constrained  by  their  debt  burden 
can only resume growth by rapid restructuring. 
The  Central  Bank  of  Ireland’s  Regulations  for 
firms lending to SMEs, that apply since July 2016, 
are  an 
in  ensuring  adequate 
engagement  between  distressed  SMEs  and  their 
lenders.  Where  the  viability  of  firms  depends  on 
their  debt  servicing  capacity,  the  downsizing  of 
debt is an option that can result in a better outcome 
for  all.  For  a  large  portion  of  SME  debt  that  has 
the 
‘personal’ 
restructuring  approach  should  be  similar 
to 
mortgage resolution.  

characteristics 

above), 

(see 

4.2.4.  SME ACCESS TO FINANCE  

Most  Irish  SMEs  report  improved  turnover. 
According  to  the  most  recent  Department  of 
Finance  SME  Credit  Demand  Survey,  88 %  of 
Irish  SMEs  reported  stable  or  increased  turnovers 
in  the  six  months  to  the  end  of  September 
2016 (36).  The  April-September  2016  Survey  on 
Access to Finance of Enterprises (SAFE) indicates 

(36)  According  to  the 2016  SAFE  survey,  57 %  of  Irish  SMEs 
reported  an  increase  in  turnover  over  the  last  6-month 
period,  in  comparison  to  61 %  in  the  2015  SAFE  survey. 
This somewhat contradicts the Red C Survey. In any case, 
both exceed the EU average of 41 % significantly. It should 
be noted that there is a substantial difference in the sample 
sizes of these two surveys. The SAFE survey sample is of 
500  SMEs,  while  all  Department  of  Finance  SME  Credit 
Demand  Surveys  have  a  sample  of  a  minimum  of  1,500 
SMEs. 

34 

00.20.40.60.811.21.4010203040506070Mar-10Aug-10Jan-11Jun-11Nov-11Apr-12Sep-12Feb-13Jul-13Dec-13May-14Oct-14Mar-15Aug-15Jan-16Jun-16SME credit outstandingNew SME lending (rhs)EUR billion 
 
                                                           
                                                           
4.2. Financial sector 

Graph 4.2.15: Financing sources for SME fixed investment 

Graph 4.2.16: Interest rates for SME loans 

Source: CBI 

Source: ECB 

A  pick-up  in  the  use  of  non-bank  sources  for 
SME  credit  is  yet  to  be  observed.  When  not 
relying on own funds for investment, SMEs turn to 
bank  loans  and  leasing  financing  (Graph  4.2.15), 
while alternatives such as equity financing remain 
little  used.  Of  the  government  bank  financing 
initiatives,  the  Strategic  Banking  Corporation  of 
Ireland 
(SBCI)  has  achieved  most  success, 
accounting  for  9 %  of  all  SME  lending  in  the 
period  from  March  to  December  2015.  SBCI 
financing  is  obtained  through  bank  and  non-bank 
lenders (39)  and  has  a  more  pronounced  focus  on 
investment,  rather  than  working  capital  purposes. 
It translates, on average, into a 1 % decrease in the 
interest  rate  for  SMEs.  In  December  2016  it 
increased  its  funding  capacity  from  the  original 
EUR 800 million to EUR 1.25 billion. 

(39)  The end SBCI-finance lending rate is around 4.5 %, about 

1 pp. lower than the average market rate.  

The  European  Investment  Fund  (EIF)  and  the 
SBCI are entering new partnerships to support 
SMEs.  In  December  2016, 
they  signed  an 
agreement  aimed  at  supporting  Irish  SMEs  over 
the next three years to the tune of EUR 100 million 
the 
loans.  The  first  EU  programme  for 
in 
Competitiveness  of  Enterprises  and  Small  and 
Medium-sized Enterprises (COSME) agreement in 
Ireland will enable the SBCI to back an estimated 
initiatives. 
2 000 
Moreover,  to  mitigate  liquidity  challenges  facing 
the  agricultural  sector  the  SBCI  launched  a 
EUR 150 million  low-cost  agri-loan  scheme.  This 
temporary  scheme,  designed  in  partnership  with 
the  Irish  government,  will  include  an  SBCI  credit 
risk  guarantee  and  subsidy  to  selected  financial 
intermediaries  to  enable  them  to  offer  loans  at  a 
2.95 % interest rate to farmers (40). 

risk-sharing 

through 

firms 

(40)  For  more  details  on  the  eligibility  of  applicants  and 
financial  intermediaries,  see  http://sbci.gov.ie/sbci-seeks-
lending-partners-for-new-e150-million-low-cost-agri-loan-
scheme 

35 

0102030405060708090100Sep-13Mar-14Sep-14Mar-15Sep-15Mar-16OtherCredit AdvancesBankOwnersLeasingInternal Funds0123456789GermanySpainFranceIrelandPortugalEuro area 
 
                                                           
 
                                                           
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

in  the  EU  overall.  The  least  educated  represent 
about  20 %  of  the  25-64  population  in  Ireland,  as 
compared  with  24 %  in  the  EU  and  27 %  in  the 
euro area. 

Graph 4.3.2:  Relative dispersion of employment rates by 

education level, 2010, 2014 and 2015 

4.3.1.  LABOUR MARKET   

In  parallel  with  the  labour  market  recovery, 
long-term  unemployment  has  continued  to  fall 
but remains a challenge. As a proportion of total 
unemployment, it was above or close to 60 % from 
2011 to early 2015, when it started to decrease but 
remained  around  5 pps.  above  the  EU  average  in 
Q2-2016  (53 %  vs.  47.8 %).  At  the  same  time, 
very-long-term  unemployment  (over  two  years) 
amounted to more than 40 % of all unemployment 
in  2015  —  one  of  the  highest  rates  in  the  EU 
(Graph 4.3.1). 

Graph 4.3.1:  Unemployment by duration 

(1) Annual average based on the average of four quarters 
Source: Update of calculations by Kiss and Vandeplas 
(2015). European Commission (DG EMPL) calculations based 
on Eurostat data 

(1) Activity and employment rates (% of population), total, 
ages 20--64, seasonally adjusted; Unemployment rate (% of 
labour force), total, ages 15--74, seasonally adjusted 
Source: Eurostat, LFS 

to 

continues 

labour  market 

The 
be 
characterised  by  large  disparities  between  the 
labour  market  outcomes  of  different  skill 
groups.  The  disparities  between  the  employment 
rates of low-, medium- and highly skilled workers 
were among the highest in the EU in 2015 (Graph 
4.3.2).  These  discrepancies  have  decreased  only 
marginally  in  Ireland  since  2010,  compared  to 
faster  falls  in  some  other  Member  States.  This 
suggests  that  the  labour  market  recovery  has  not 
yet  been  able  to  reverse  the  relative  deterioration 
low-skilled 
labour  market  prospects 
of 
workers 
2008. 
experienced 
Nevertheless,  continued  employment  growth, 
including  in  the  construction  and  services  sectors, 
is  expected  to  contribute  to  reducing  this  gap. 
Ireland has, however, fewer low-skilled adults than 

since 

have 

that 

While 

international 
indicate 

Skills  shortages  are  intensifying  in  several 
surveys 
areas. 
(ManpowerGroup,  2016) 
that  skills 
shortages  are  less  severe  in  Ireland  than  in  most 
other countries, they do occur in some sectors and 
occupations.  The  National  Skills  Bulletin  2016 
(EGFSN,  2016)  highlights  challenges  in  ICT, 
engineering,  sales,  logistics,  health,  business  and 
finance. This could potentially constrain growth in 
the future and have an impact on competitiveness. 
Strong growth in the construction sector has led to 
an emergence skills shortage in categories such as 
project  managers,  surveyors  and  some  technical 
professions.  An  increasing  number  of  employers 
report  that  they  are  experiencing  issues  with 
attracting  and 
is 
particularly  relevant  in  view  of  the  large  unmet 
demand for housing.   

retaining  employees.  This 

The  roll-out  of  JobPath  Service  was  completed 
in  mid-2016.  Ireland  has  taken  important  steps  to 
address 
long-term 
integration  of 
unemployed  (LTU)  in  the  labour  market,  though 
an  established  activation  model,  the  provision  of 
tailored support for LTU and a strong engagement 

the 

the 

36 

050100150200250300350Q1-2007Q3-2007Q1-2008Q3-2008Q1-2009Q3-2009Q1-2010Q3-2010Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Total> 6 months> 12 months>24 months> 48 monthsthousand people0.00.10.20.3UKPTATNLEEDKDELVSICZSEFIELEU28LUROCYPLESFRMTHRHUSKITLTIEBG201520142010 
 
 
 
4.3. Labour market, education and social policies 

in 

the  high  prevalence  of  disability 
jobless 
households  (Section  4.3.2).  Disability,  however, 
appears to be less prevalent in Ireland. Most recent 
LFS estimates from Eurostat show that 7 % of the 
adult  population  had  a  disability  affecting  work 
capacity, compared with 11 % in the EU. 

The  government  has  adopted  a  new  strategy 
and a  number  of  measures.  The  Comprehensive 
Employment Strategy for People with Disabilities, 
published in October 2015 and covering the period 
up to 2024, aims at increasing the employment rate 
to  38 %.  The 
of  people  with  disabilities 
government has already taken a number of actions 
such  as  establishing  an  employer  helpline  and 
doubling  the  quota  for  people  with  a  disability 
working  in  the  public  sector,  from  3 %  to  6 %.  A 
group  has  also  been  established  to  examine  the 
financial barriers to taking up employment, such as 
the loss of the free travel pass associated with the 
support 
receipt  of  disability/illness 
payments.  Finally,  Budget  2017  announced  an 
additional  EUR 2 million  of  funding  to  be  made 
available  in  2017  for  pre-activation  support  for 
people with disabilities.  

income 

4.3.2.  SOCIAL POLICY  

the 

and 

Both 

overall 

While  absolute  poverty  and  joblessness  have 
been  falling  since  the  labour  market  recovery 
took  effect  in  2012,  social  transfers  continue  to 
protect  the  most  vulnerable.  The  proportion  of 
people  affected  by  severe  material  deprivation 
continued to decrease in Ireland in 2015 and while 
much higher than at the onset of the crisis in 2008 
it  is  now  slightly  below  the  EU  average  (Graph 
child 
4.3.3). 
at-risk-of-poverty-or-social-exclusion 
fell 
slightly  in  2014  but  they  remain  higher  than  the 
EU average. Relative poverty among children and 
young  people  increased  slightly  in  2015.  Overall, 
relative poverty remains below the EU average of 
17.3 %  and  is  significantly  reduced  by  social 
transfers.  The  at-risk-of-poverty  rate  before  social 
transfers  stood  at  46.3 %  but  the  impact  of  social 
transfers  reduced  this  rate  to  16.3 %.  There  is  a 
territorial  dimension 
this  phenomenon  as 
to 
consistent poverty and joblessness continues to be 
highest  in  small  and  medium-sized  towns  than  in 
cities or rural areas (OECD, 2016). 

rates 

with employers. The JobPath Service forms part of 
the Pathways to Work (41) strategy and is aimed at 
integrating  the  long-term  unemployed  into  the 
labour  market.  The  programme  results  (it  is 
important  to  note  that  the  figures  are  based  on  a 
small initial cohort of participants only, those who 
have  completed  their  52  week  engagement  period 
with  the  service,  and  are  subject  to  review)  have 
been  positive  so  far,  with  full-time  job-starts  for 
JobPath  participants  reaching  a  rate  of  22.2 %. 
This exceeds the target job-start rate set out in the 
contract  with  the  service  providers  (14.8 %)  by 
50 %.  In  October  2016,  JobPath  participants  who 
were  in very-long-term  unemployment  were 42 % 
more 
than 
non-participants.  

employment 

to  obtain 

likely 

initiatives 

large  number  of 

Existing  schemes  continue  to  be  evaluated  but 
the 
initiatives  makes  a 
comprehensive  assessment  difficult.  A  major 
evaluation of the Intreo ‘one-stop-shop’ service for 
jobseekers, making use of counterfactual methods, 
is  currently  being  carried  out.  This  is  a  positive 
development  as  it  will  better  align  the  available 
programmes  with  the  needs  and  employability  of 
participants.  The  responsibility  for  delivering 
training 
lies  with  a  number  of 
organisations  and  departments,  making  it  difficult 
to  arrive  at  an  estimate  of  total  expenditure  of 
activation training programmes. The 2016 Country 
Report  also  highlighted  concerns 
regarding 
activation  and  employment  support  programmes, 
including the Back to Education Allowance (ESRI, 
2015a),  and  some  of  the  measures  taken  forward 
by  authorities  to  improve  effectiveness.  It  is 
difficult  to  draw  conclusions  on  the  effectiveness 
of  other  upskilling  programmes  (i.e.  JobBridge, 
Springboard  and  Momentum)  due  to  the  lack  of 
formal, rigorous evaluation. 

Labour  market  integration  of  people  with 
disabilities  represents  a  challenge  for  Ireland. 
The  country  has  the  lowest  employment  rate  of 
people  with disabilities  in  the  EU  — only 26.5 % 
against an EU average of 48.5 %. The gap between 
the  employment  rate  of  people  with  and  without 
disabilities  is  the  second  widest  in  the  EU 
(37.6 pps.  against  an  EU  average  of  22.9 pps.). 
Addressing this issue is particularly relevant due to 

(41)  Pathways  to  Work  is  the  overarching  strategy  to  increase 
long-term  and  young 

the  engagement  of  mainly 
unemployed jobseekers (European Commission 2016c). 

37 

 
                                                           
4.3. Labour market, education and social policies 

Graph 4.3.3:  Main social indicators 

Graph 4.3.4:  Gap between people living in jobless 
households and unemployment ratio 

Source: Eurostat, EU--SILC 

respectively, 

Low-work  intensity  for  some  groups  persists. 
The proportion of people living in households with 
very low work intensity continues to be high. The 
rate,  which  was  already  high  at  the  onset  of  the 
crisis  at  13.7  %  in  2008  versus  an  EU  average  of 
9.2 %, fell from 21.0 % in 2014 to 19.1 % in 2015, 
but  it  remains  almost  double  the  EU  average. 
During  the  recession,  joblessness  became  more 
common  among  multi-adult  households  with 
children. In 2015, 12.4 % of adults and 14.5 % of 
children  lived  in  jobless  households,  down  from 
peaks  of  16 %  and  20 %, 
in 
2011/2012. Persistent joblessness is more common 
for women, older adults, those with lower levels of 
education, adults with a disability and in one-adult 
households with children. The chance of someone 
in a jobless household getting employment is little 
more than half than that of someone in a working 
household. The presence of children is linked with 
a lower chance of getting a job and a higher chance 
of  exiting  employment,  mainly  due  to  the  pattern 
of care for women and the prevalence of inactivity 
as  a  result  of  caring  responsibilities  (Watson, 
Maître  and  Russell,  2015).  The  gap  between 
people  living  in  jobless  households  and  the 
unemployment  ratio  is  greater  in  Ireland  than  in 
the  EU  on  average.  This  is  due  to  the  Irish 
economy growing faster than the EU average and, 
while  the  rate  of  joblessness  is  generally  falling 
(Graph 4.3.4), only about one in four job entries in 
joblessness 
Ireland  removes  households  from 
(O’Rorke, 2016). 

(1) The unemployment ratio is defined as the percentage of 
unemployed individuals in the total population (age group 
15 --74) 
Source: Eurostat 

government  has 

The 
announced  policy 
measures  to  tackle  low  work  intensity  but 
to  emerge.  The 
further  details  have  yet 
Programme  for  Government  (Irish  Government, 
2016b)  outlined  plans  to  develop  a  ‘Pathways  to 
Work  for  Jobless  Households’  strategy,  expected 
in  the  first  half  of  2017.  Similarly,  Budget  2017 
announced  plans  for  a  new  working  family 
payment that would be in place for the next budget 
round. The content and scope of these initiatives is 
not  yet  known  but  they  are  expected  to  combat 
some  of  the  barriers  faced  by  low  work  intensity 
households,  including  the  need  to  increase  work 
incentives in some cases. 

Some aspects of the tax and benefit system lead 
to low work incentives. In particular, the effective 
tax rate when taking up a job remains very high for 
some groups. This means that the net material gain 
of  accepting  a  job  offer  is  low.  Disincentives  are 
highest  for  those  on  low  incomes  with  inactive 
partners,  with  or  without  children.  Calculations 
suggest  that only  about  3 %  of  those  in  receipt  of 
unemployment benefits would be financially worse 
off in the short term when taking up work (Savage 
et al., 2015). But for others individuals (recipients 
of  either  unemployment  or  welfare  benefits)  the 
financial  gain  can  be  small.  The  disincentives  are 
typically caused by lost benefits while the negative 
impact  of  labour  taxes  and  contributions  is  small. 

38 

0510152025303520052006200720082009201020112012201320142015At-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households% of population345672006200720082009201020112012201320142015European Union (28 countries)Irelandpps.  
 
 
4.3. Labour market, education and social policies 

The  Irish  authorities  have  taken  steps  to 
address  the  issue  of  access  and  affordability  of 
childcare. As a follow-up to a report presented by 
on 
Inter-departmental  Working  Group 
an 
Investment  in  Childcare,  considered  in  last  year’s 
country  report,  the  Programme  for  Government 
presented a range of actions to improve the quality 
and affordability of childcare. Free pre-school care 
has  been  extended  for  children  from  three  years 
old until school age. The authorities are working to 
ensure that all eligible children will receive a place 
in the course of 2017. 

The  government  has  announced  plans  that  are 
expected to address the needs of disadvantaged 
families  in  particular.  Budget  2017  announced 
the  introduction  of  a  new  Single  Affordable 
Childcare  Scheme  to  replace  all  existing  targeted 
schemes. Most of the funding for  the scheme will 
go into means-tested subsidies, with a strong focus 
low-income,  disadvantaged 
families.  The 
on 
scheme  will 
full-time 
for 
include  subsidies 
childcare, including 'wrap-around' care for children 
who are in school or in the Early Childhood Care 
pre-school 
(ECCE) 
and 
programme,  which  currently  provides  only  15 
hours a week and around 61 weeks of coverage. 

Education 

free 

to  upgrade 

Measures  are  also  underway  to  improve  the 
quality  of  childcare  provision.  In  2016,  a 
minimum  qualification  level  for  staff  at  childcare 
facilities  was  established,  with  existing  staff 
their 
receiving  financial  support 
qualifications.  Childcare  facilities  also  receive 
additional funding when they employ more expert 
staff  and  mentoring  services  are  offered 
to 
underperforming  facilities.  These  measures  are 
also  expected  to  contribute  to  reducing  the  high 
turnover  of  staff  in  the  sector,  where  pay  remains 
unattractive  compared 
to  some  other  sectors 
requiring  a  similar  qualification  level.  Inspection 
the 
schemes  have  also  been 
Department  of  Education  and  Skills  Inspectorate 
completed  close  on  500  education-focused 
inspections in pre-schools by the end of 2016. The 
inspections  have  highlighted 
results  of 
challenges  for  the  sector,  such  as  the  inclusion  of 
children  from  diverse  backgrounds,  fostering 
positive  partnerships  with  parents  and  smoothing 
transitions from preschool to primary school. 

revamped  — 

these 

To  address  child  poverty,  the  new  government 
has continued with previous financial measures 

Conversely, in-work benefits increase the financial 
gains from taking up work.  

to 

in,  or 

sought 

address  work 
Ireland  has 
disincentives  by  tapering  the  withdrawal  of 
benefits  when  returning  to  work.  The  Back  to 
Work Family Dividend was set up in 2015 to help 
families  move  from  social  welfare  into  work.  It 
offers financial support to people, with at least one 
dependent  child,  who  are 
take  up, 
employment  or  self-employment  and,  as  a  result, 
do  no  longer  claim  a  jobseeker’s  or  one-parent 
family payment. Currently, around 12 000 families 
receive 
this  Dividend,  which  reaches  21 000 
dependent  young  people.  The  roll-out  of  the 
Housing  Assistance  Payment,  designed  to  tackle 
work  disincentives  in  previous  housing  support 
schemes, is also continuing. There are over 13 000 
recipients  and  the  payment  will  be  made  for  all 
local  authorities  by  mid-2017.  Budget  2017 
to 
announced  an  additional  EUR 105 million 
enable  15 000  more  households  to  avail  of  this 
payment. 

Childcare 

The  availability  and  cost  of  childcare  remain 
barriers  to  female  labour  market  participation 
and hinder efforts to reduce child poverty. The 
female employment rate is below the EU average. 
The  gender  employment  gap  increased  further  in 
2015,  although  it  has  come  down  from  pre-crisis 
levels. However, parents are frequently forced into 
inactivity  and  part-time  work  due  to  the  lack  of 
care  services.  Around  27.4 %  of  inactive  women 
aged 20-64 do not work because they have to look 
after  children  or  incapacitated  adults  (4.5 %  of 
men) and 26 % of women who work part-time cite 
the  same  reason  (3.6 %  of  men).  Single  parents, 
mostly  women,  in  particular  suffer  from  the  lack 
and  high  cost  of  childcare  support.  Formal 
childcare  is  more  common  among  higher  income 
families  while  informal  unpaid  care  provided  by 
relatives is more common among those with fewer 
resources (Barnardos, 2016; ESRI, 2016b). Female 
participation in the labour market will also depend 
on  the  provision  of  more  gender-balanced  leave 
arrangements.  While 
recently 
introduced  paid  paternity  leave,  parental  leave  is 
still  unpaid,  which  encourages  the  second-earner, 
mostly women, to step out of the labour market to 
take care of children. 

Ireland 

has 

39 

 
4.3. Labour market, education and social policies 

is  expected 

present  and  future  demographic  trends  which  will 
further  increase  the  demand  for  education.  The 
population 
to  grow  by  between 
500 000 and 1 million people by 2035, with around 
600 000  being  the  most  likely  figure  according  to 
the  Irish  Central  Statistics  Office  (CSO,  2016). 
Enrolment  in  primary  education  is  expected  to  be 
the highest ever in 2018, with a peak in secondary 
education  in  2025.  The  recent  Infrastructure  and 
Capital  Investment  Plan  estimates 
investment 
needs  at  EUR 3.8 billion  in  2016-2021  for  the 
primary, secondary and tertiary education levels. 

have 

increased 

Public  spending  on  education,  as  a  share  of 
GDP,  decreased  slightly  but  recent  policy 
measures 
education 
expenditure.  Spending  decreased  slightly  from 
4.5 %  of  GDP  in  2013  to  4.3 %  in  2014.  It  also 
remained  somewhat  below  the  EU  average  of 
4.9 %  in  2014  (Graph  4.3.5).  However,  as  a 
percentage  of  total  government  expenditure  it 
stood  at  11.1 %  in  2014,  0.2  pps.  below  the  2013 
level,  but  above  the  EU  average  of  10.2 % 
In September 2016, the Irish government launched 
a comprehensive Action Plan for Education, which 
will  guide  investment  in  education  over  the 
2016-2019 period. It contains a set of actions with 
particular  focus  on  disadvantaged  students,  skills 
provision  and  continuous  improvement  within  the 
education  sector.  Budget  2017  envisages  higher 
spending on education and the recruitment of more 
teachers in the future. 

and  a  stronger  focus  on  targeted  and  early 
intervention policies. The non-means tested child 
benefit was increased by EUR 5 per month in two 
consecutive  budgets  (2015  and  2016)  and  now 
amounts  to  EUR 140  per  month  per  child.  The 
Social 
Inclusion  and  Community  Activation 
Programme aims to help 30 000 vulnerable people 
improve  their  work  prospects  and  is  currently 
being  evaluated.  The  Area  Based  Childhood 
Programme  continues  to  be  implemented  with  a 
view  to  testing  effective  approaches  to  improve 
outcomes  for  children  and  families  as  a  means  of 
addressing child poverty. The Programme is being 
evaluated  but  a  final  report  will  not  be  available 
until 2018. 

leading 

launching 

The  surge  in  homelessness  continues  with  the 
government 
targeted  measures.  
Almost  1 200  families,  including  2 500  children, 
were  homeless  in  Dublin  in  November  2016, 
compared to 683 families and 1 400 dependants in 
December  2015.  This  is  due,  in  particular,  to  the 
insufficient  supply  of  housing,  including  social 
housing, 
in 
affordability  in  the  private  rental  sector  (Section 
4.5.1).  The  Action  Plan  for  Housing  of  July  2016 
contains  measures  to  address  both  the  structural 
problem  of  insufficient  housing  supply  and  the 
immediate  needs  of  homeless  families 
more 
(Section 4.5.1). Most homeless families are hosted 
in temporary accommodation at a cost to the public 
finances  that  exceeds  the  provision  of  social 
housing solutions (42). 

deterioration 

the 

to 

4.3.3.  EDUCATION AND SKILLS  

well 

performs 

the  provision  of  basic 

regarding 
Ireland 
early-school-leaving  and  tertiary  educational 
attainment and has made significant progress in 
improving 
skills. 
the 
However,  skills  shortages 
economy  such  as  ICT  (which  has  an  impact  on 
ICT occupations across all sectors) have emerged, 
and  there  is need  to  further upskill and reskill  the 
increasing 
adult  population, 
participation in further education and training. 

in  particular  by 

in  sectors  of 

Ireland  will  require  additional  investment  in 
schools  and  related  facilities.  This  is  due  to 

(42)  https://www.focusireland.ie/resource-hub/about-

homelessness/ 

40 

 
                                                           
4.3. Labour market, education and social policies 

remains a challenge. The tertiary attainment rate, 
at 52.3 % in 2015, is very high and well above the 
EU  average.  The  goal  is  to  reach  60 %  by  2020. 
The  report  of  the  Expert  Group  on  the  Future 
Financing  of  Higher  Education,  from  April  2016, 
points  to  a  25 %  fall  in  public  funding  during  the 
economic recession (Department of Education and 
Skills, 2016a). It also argues that additional funds, 
relative  to  the  ones  already  envisaged  in  the 
Capital  Investment  Plan,  may  be  needed  given 
demographic  pressures.  Finally, 
fairness  and 
inclusion  at  tertiary  level  are  also  a  concern  and 
part of the National Strategy for Higher Education 
to  2030.  However,  the  funding  for  this  strategy 
could  prove  to  be  insufficient  in  the  light  of  its 
fairly broad goals. 

of 

and 

The National Skills Strategy acknowledges, and 
responds  to,  the  challenges  that  remain  in 
relation  to  skills  shortages.  Skills  shortages  are 
increasing  in  certain  sectors  and  the  quality  and 
availability 
reskilling 
upskilling 
opportunities remain inadequate. This is borne out 
by  Ireland’s  relatively  weak  performance 
in 
relation to participation in lifelong learning which 
decreased  to  6.5 %  in  2015,  well  below  the  EU 
average of 11 %. A key component of the response 
to  these  issues  is  the  establishment  of  a  national 
council  to  oversee  research  into,  and  forecasting 
and  prioritisation  of  skills  needs  in  the  economy. 
The  strategy  also  envisions  further  developing 
Regional  Skills  Fora 
support  employer 
engagement with education and training providers 
to  meet 
region 
(Department of Education and Skills, 2016b). 

the  skills  needs  of  each 

to 

to 

target 

increase  participation 

Meeting  the  ambitious  lifelong  learning  targets 
will  be  challenging.  The  strategy  sets  out  an 
ambitious 
in 
lifelong  learning  to  15 %  by  2025.  One  option 
being  explored  is  the  redeployment  of  spending 
from  the  National  Training  Fund.  The  fund 
finances  training  mainly  for  the  unemployed,  but 
could 
reskilling 
opportunities for people in employment, especially 
as  unemployment  continues  to  fall.  The  Further 
Education and Training Authority (SOLAS) is also 
currently  overseeing 
the  development  of  a 
framework  for  employee  development  which  will 
contribute to achieving the target.  

target  more  upskilling  and 

The  roll-out  of  new  apprenticeships  has  begun 
and  a  strong  commitment  to  delivery  will  be 

Graph 4.3.5:  Public expenditure on education 

Source: European Commission 

Ireland has clearly improved its performance in 
basic  skills.  Students’  basic  skills  in  reading, 
mathematics  and  science  are  high  and  equitable.  
Ireland  has  maintained  a  very  good  average 
performance  in  reading,  and  ranks  second  in  the 
EU, according to PISA 2015. Although the country 
continued to perform above the OECD average in 
science,  it  registered  a  significant  drop  compared 
to  2012.  The  proportion  of  low  achievers  is  the 
lowest in the EU in reading (10 %) and among the 
smallest  in  maths  (15 %)  and  science  (15 %).  In 
addition,  the  impact  of  socio-economic  status  on 
performance  is  fairly  limited.  The  gender  gap  is 
among  the  lowest  in  the  EU  in  all  three  test 
domains (OECD, 2016). 

in  addressing 

Important  progress 
social 
inequalities  has  been  made  in  Irish  education. 
Early  school  leaving  has  fallen  consistently  since 
2009 to a rate of 6.9 % in 2015, one of the lowest 
in the EU. Ireland has met its Europe 2020 national 
target of 8 %. The action plan Delivering Equality 
of  Opportunity  in  Schools  (DEIS)  targets  schools 
serving  disadvantaged  communities,  with  836 
schools  taking  part  in  the  2016-2017  school  year. 
There  have  been  significant  improvements  in 
participating  schools  as  regards  planning  and 
target-setting.  The  plan  plays  a  key  role  in 
combating  disadvantage  and  improving  learning 
outcomes. 

Ireland  features  high  tertiary  attainment  levels 
financing  of  higher  education 
but 

future 

41 

33.544.555.52008200920102011201220132014EU-28Ireland% of GDP 
 
4.3. Labour market, education and social policies 

labour  market  data 

delivering  ambitious  objectives.  FET  is  being 
refined and improved, including through the use of 
improved 
and  better 
engagement with employers and the Department of 
Social  Protection.  FET  funding  programmes  will 
also  be  subject  to  formal  review  and  evaluation, 
starting  with  the  largest  —  the  Post  Leaving 
Certificate  programme  —  which  is  due  to  be 
completed early in 2017. 

Programme  evaluations  may  help  in  achieving 
even better results. Furthermore, better and more 
current data on programmes may be achieved with 
the delivery and roll-out of the Programme Learner 
Support  System  in  2016  and  2017.  The  next  few 
years  are  expected 
to  be  characterised  by 
implementation  and  evaluation  rather  than  further 
reform.  The  creation  of  a  one-stop  shop  for 
students, detailing all further education courses is a 
positive  development.  However,  a  total  of  4 000 
courses  represents  a  difficult  choice  for  learners, 
making  the  provision  of  guidance  essential.  The 
lower  attractiveness  of  vocational  education, 
compared  to  academic  education,  is  an  ongoing 
issue,  and  is  likely  to  continue  hindering  the 

registrations.  The 

crucial to meeting the requirements of business. 
Following  an  evaluation  process  involving  the 
government,  social  partners  and  further  education 
bodies,  the  Apprenticeship  Council  has  selected 
new  types  of  apprenticeships  tailored  to  labour 
market  needs.  The  target  is  to  provide  50 000 
apprenticeship and traineeship places  (of which 31 
000  apprenticeships)  cumulatively  between  2016 
and  2020,  which  equates  to  doubling  current 
apprenticeship 
first  new 
apprenticeships  were  in  insurance  practice  and 
industrial engineering. Besides covering the whole 
range  of  national  qualifications,  it  could  also  be 
to  develop  middle-  and  higher-end 
useful 
qualifications. 
example,  modernising 
traditional  craft  apprenticeships  in  construction 
could  help  in  dealing  with  housing  shortages.  In 
addition, as stressed by the OECD (2016), specific 
support could help to make the schemes accessible 
to 
including 
disadvantaged 
pre-apprenticeships support. 

populations, 

For 

education 

Further 
(FET) 
programmes are being adjusted and improved. 
in 
Continuous  evaluation  may  prove  useful 

training 

and 

42 

Box 4.3.1: Selected highlights: Expert Group on Future Skills NeedsThe Expert Group on Future Skills Needs (EGFSN) is advising the government on future skills requirements and associated labour market issues that may impact the growth potential of enterprises and employment. It also anticipates the market needs for skilled workers. Overall, the group advises the government on:  skills requirements projections, at national and sectoral levels, and recommendations on how to best address the identified needs;  associated priority training requirements and the most cost-effective ways to address them;  skills requirements that cannot be met internally at a given time. An innovative feature of the Irish model is the national skills database which matches different sources of data and provides information on employment trends and forecasts for various occupations.  The EGFSN skills forecasting system actively contributes to the country’s efforts in achieving the Europe 2020 national employment target. The work of the EGFSN has also contributed to the implementation of country-specific recommendations from 2014 — in particular to ‘improve and ensure the relevance of further education and training (FET) courses and apprenticeships with respect to labour market needs.’ Developing better systems that forecast skills needs and ways to address them is a common interest across Europe and a key component of the New Skills Agenda for Europe. The occupational forecasts have been used to influence and shape policy responses by contributing to the making sound decisions. This has resulted in the provision of training and work placements for the long-term unemployed and reskilling unemployed people in education priority areas. The EGFSN is a tripartite group comprising representatives from government, employers and trades unions. The involvement of different stakeholders, a central element of the Irish approach to skills forecasting, contributed to making the national skills database a success.  The Expert Group was presented as a good practice at a Mutual Learning Programme event on 13/14 June 2016 (1) and features in its own database (2).                                                             (1) http://ec.europa.eu/social/main.jsp?catId=1070&langId=en&newsId=2474&furtherNews=yes (2) http://ec.europa.eu/social/main.jsp?catId=1047&langId=en  
 
 
 
 
 
4.3. Labour market, education and social policies 

Given the poor level of expenditure control in the 
past,  better  monitoring  of  the  budget  and  making 
supplementary allocations conditional on improved 
governance  remain  challenges  in  improving  the 
budget execution. 

Multi-year  budgeting  remains  a  challenge  in 
planning  and  budgeting  healthcare  provision. 
Executing public healthcare expenditure plans has 
been  problematic  over  recent  years.  To  address 
technical challenges in the planning and budgeting 
of  healthcare  provision,  the  new  government 
programme envisages multi-year budgeting, based 
on  a  five-year  service  plan  based  on  verifiable 
metrics.  While  this  would  represent  a  step  in  the 
right  direction,  no  concrete  plans  have  yet  been 
forthcoming. 

that 

projects 

Healthcare  spending  is  projected  to  have  a 
negative  impact  on  fiscal  sustainability.  The 
public 
2015 Ageing  Report 
expenditure on healthcare will increase by 1.2 pps., 
more  than  the EU  average  increase  of  0.9 pps.,  in 
the  period 
to  2060  (European  Commission, 
2014b).  From  a  debt  sustainability  perspective, 
risks can appear in the medium term. This is due to 
the  high  sensitivity  of  healthcare  spending  to 
possible  shocks 
in  nominal  GDP  (European 
Commission,  2016k,  p. 117).  The  sustainability 
gap  indicator  S1 (43)  also  points  to  medium-term 
fiscal  risks  emerging  from 
initial 
debt-to-GDP  ratio  and  the  projected  costs  of 
healthcare 
ageing 
expenditure). 

(impacting 

the  high 

strongly 

on 

A  major  cost-saving  deal  was  concluded  with 
the  pharmaceutical  industry  in  2016.  The  new 
Framework Agreement  on  the  Supply and  Pricing 
of  Medicines  embraces  some  of  the  European 
Commission’s  previous  proposals 
(European 
Commission,  2016c).  In  particular,  it  expands  the 
to 
reference  price  basket  of  countries  used 
benchmark  price  realignments,  and  provides  for 
annual  price  realignment  exercises  throughout  the 
agreement’s  lifetime (44).  Meanwhile,  the  Health 

(43)  S1 is  a 

traditional  sustainability 

indicator  based  on 
forecasts for growth and fiscal balances used in the Ageing 
Report; for more details see European Commission, 2016k, 
p. 5.  

(44)  Price  realignments  will  only  be  possible  downwards.  This 
means  that  if  in  a  given  year  the  average  price  of  the 
countries  in  the  basket  goes  up,  there  will  be  no 
realignment for Ireland in that year. 

uptake  of  these  types  of  courses,  particularly  by 
young people. 

after 

Ireland launched the Springboard+ programme 
in  June  2016  to  upskill  and  reskill  the 
unemployed  to  find  employment  in  growth 
sectors  of  the  economy.  Springboard  has  been 
running  since  2011.  Over  30 000  people  have 
enrolled on courses to date and 54 % of those were 
in  employment  or  self-employment  six 
back 
months 
course. 
completing 
Springboard+ 2016 is the latest version. It provides 
free  part-time  and  full-time  higher  educational 
opportunities  to  reskill  and  upskill  up  to  5 825 
jobseekers.  Almost  half  the  places  are  on  ICT 
courses,  reflecting  the  growing  demand  for  these 
skills.  ICT  conversion  programmes  are  open  to 
people regardless of employment status. There are 
significant  number  of  places  on 
also 
manufacturing  courses, 
the  strong 
performance of this sector. 

reflecting 

their 

a 

4.3.4.  HEALTHCARE  

are 

ageing 

Making the health system more cost-effective is 
a  priority,  given  Ireland’s  growing  and  ageing 
population. The Irish population has increased by 
around  12 %  in  just  10  years.  Population  growth 
and 
the  debate  on 
fuelling 
cost-effectiveness  in  the  delivery  of  healthcare. 
Ireland  has  phased  in  some  important  efficiency 
financial 
measures,  such  as  a  streamlining 
management  and  information  systems,  developing 
new  eHealth  architecture  and 
rolling  out 
activity-based  funding.  Together  these  measures 
will promote transparency, improve data collection 
and  enable  resources  to  be  reallocated,  but  will 
take  some  years  to  bear  fruit.  The  scope  for 
additional efficiency measures is addressed further 
below. 

The  pressure  on  public  healthcare  expenditure 
persists.  The  public  healthcare  system  has 
deviated from the ex-ante budget plans repeatedly 
over  the  past  few  years  (European  Commission, 
2016c). In July 2016, the government has allocated 
additional funding of EUR 500 million per annum. 
However,  in  2016,  the  additional  funding  has 
primarily  been  used  to  cover  overspending  rather 
than  expanding  service  provision.  For  2017,  an 
extra EUR 497 million has been allocated bringing 
the total budget to a record level EUR 14.6 billion. 

43 

 
                                                           
4.3. Labour market, education and social policies 

a  dedicated  Oireachtas  Committee  has  been 
reflecting  on 
the  future  model  of  Ireland’s 
healthcare  provision.  Following  an  earlier  costing 
the 
project  on  universal  health 
committee  aims  to  deliver,  by  spring  2017,  a 
ten-year  strategy  on  health  policy  and  new 
recommendations  on  a  universal  single-tier  health 
service. 

insurance, 

the  already 

Private  insurance  discourages  recourse  to  the 
most  cost-effective  service.  Private  insurance 
buys  faster  access  to  Ireland’s  near  full-capacity 
long 
jumping’ 
hospitals,  ‘queue 
hospital waiting lists. As doctors and hospitals are 
paid a fee for services to private patients, publicly 
funded  hospitals  have  a  financial  incentive  to 
insured  patients.  More 
prioritise  privately 
transparent financial management and information 
systems,  currently  being  phased  in,  should  ensure 
that public hospitals adhere to the cap of 20 % for 
private  treatment.  In  primary  care,  adding  an 
element  of  performance-related  pay 
to  GPs’ 
capitation  income  would  not  only  increase  the 
cost-effectiveness  of  the  health  system  but  also 
encourage health promotion and illness prevention 
(European Commission, 2016i). 

A significant block to Irish healthcare reform is 
the  shortage  of  medical  staff.  Ireland  produces 
the  most  medical  graduates  per  capita  in  the  EU, 
yet  has  amongst  the  fewest  doctors.  Despite  an 
investment of EUR 200 million in medical training 
over  the  last  decade,  87 %  of  medicine  students 
either  intend  to  emigrate  or  are  contemplating  it 
(DPER,  2015).  The  retention  of  Ireland’s  health 
workforce and medical graduates is exacerbated by 
overly  long  working  hours,  although  continuous 
progress  is  being  made  to  comply  with  the 
Working  Time  Directive.  At  present,  there  are  no 
return-of-service  schemes, 
in  which  medical 
students  receive  loans  to  help  with  living  costs 
during  their  studies  that  can  either  be  repaid  or 
written  off  by  working  in  a  shortage  area  upon 
graduation for a period. As for primary care, there 
may  be  scope  for  better  workload  allocation 
between  GPs,  nurses  and  pharmacists  for  certain 
types of routine tasks.  

Services  Executive  (HSE)  estimates  savings  of 
EUR 600 million 
Irish  Pharmaceutical 
Healthcare Association members and an additional 
EUR 150 million from other manufacturers. 

from 

ePrescribing can contribute to lowering the cost 
of  pharmaceuticals  for  consumers.  Under  the 
Health  Act  2013,  pharmacists  are  advised  to 
provide  the  cheapest  interchangeable  medicine 
available  for  medicines 
that  fall  within  an 
interchangeable  group.  However,  the  practice  is 
not mandatory and doctors can revert to a ‘do not 
substitute’ clause. A promising policy lever in this 
context  would  be  ePrescribing,  which  enables 
automatic  interchangeable  substitution  and  closer 
monitoring  of  prescribing  behaviour.  The  rollout 
of  individual  patient  identifiers,  another  eHealth 
milestone, is a precondition for ePrescribing, but is 
only now reaching its operational stage. 

Key  efficiency  gains  can  still  to  be  made  in 
primary  care.  Primary  care  acts  as  a  gatekeeper 
for  hospital  care  and  has  an  important  role  in 
health  promotion  and  illness  prevention.  Yet,  a 
large  proportion  of  the  population  has  a  financial 
disincentive  to  visit  a  general  practitioner  (GP) 
first, as they do not have a medical card (which is 
generally  means-tested)  or  GP  visit  card.  In 
addition  to  the  current  99  primary  care  centres 
across  Ireland,  the  Programme  for  a  Partnership 
Government  plans  a  further  80  centres.  There  are 
currently  81  centres  at  varying  stages  of 
development.  The  European  Fund  for  Strategic 
Investment is supporting the construction of 14 of 
these  centres.  While  this  represents  a  significant 
step  forward,  additional  structural  reforms  could 
optimise  the  actual  use  of  primary  care.  These 
could  for  instance  relate  to  changing  payment 
incentives, 
referral  practices  and 
tackling  the  medical  workforce  challenge  (see 
below).  

improving 

Steps  towards  a  universal  single-tier  health 
service are fragmented and lack an overarching 
vision.  Piecemeal 
towards  universal 
steps 
healthcare  are  yielding  varied  results.  Whereas 
medical  card  coverage  is  being  extended  to  all 
children  receiving  a  Domiciliary  Care  Allowance, 
the  planned  extension  of  free  GP  care  to  children 
between  the  ages  of  6  and  12  has  been  severely 
delayed.  Given 
incremental 
approach,  its  impact  on  overall  cost-effectiveness 
and waste reduction is uncertain. Since June 2016, 

slow  and 

this 

44 

 
4.4. INVESTMENT 

4.4.1.  INVESTMENT SITUATION AND 

CHALLENGES  

Intellectual  property  investment  has  been  very 
volatile over the last year, but largely driven by 
the  operations  of  some  multinationals.  A  small 
number  of  multinationals  have  transferred  large 
volumes of intangibles assets, such as patents, into 
Ireland.  New  capital  formation  (in  the  year) 
translates into large increases in gross fixed capital 
formation  and  capital  stock.  The  investment  flow 
in  intellectual  property  assets  doubled  in  size  in 
2015 and has been very volatile over the first three 
quarters  of  last  year  (Graph  4.4.1).  Over  three 
quarters  of  the  flows  are  compensated  for  by 
imports,  with  the  remainder  reflecting  indigenous 
investment (Section 4.5.3).  

Graph 4.4.1:  Investment in intellectual property and aircraft 

first half of 2016 due to the recent conclusion of a 
large  industrial project,  but is expected  to recover 
as  companies  continue  to  replenish  their  capital 
stock and construction activity picks up. 

Construction investment has continued to grow 
steadily,  albeit  from  low  levels.  Gross  fixed 
capital  formation  in  construction  grew  by  just 
under  8 %  in  2015  and  almost  15 %  in  the  first 
three  quarters  of  2016,  compared  to  the  same 
period  a  year  earlier.  The  recovery  in  housing 
construction has  been  slower  than for  commercial 
properties  —dwellings  accounted  for  almost  half 
of  total  construction  prior  to  2008  but  just  under 
20 % 
(Graph  4.4.2).  Residential 
construction  continued  to  recover  in  2016  and  is 
expected  to  keep  growing,  given  the  large  unmet 
demand,  supportive  government  policies  and 
renewed public investment in social housing stock 
(Section 4.5.1). 

in  2015 

Graph 4.4.2:  Investment in dwellings and other construction 

(1)Gross fixed capital formation. 
Source: European Commission.  

Imports of aircraft for leasing are very volatile 
but core equipment investment has been strong. 
Investment  in  aircraft  transport  equipment  fell  by 
approximately 20 % in 2015 but still accounted for 
close  on  40 %  of  total  investment  in  machinery 
and  equipment.  These  are  purchases  of  planes  for 
rental  abroad  by  leasing  companies  based  in 
Ireland,  and  almost  entirely  compensated  for  by 
imports.  If  planes  are  excluded,  ‘core’  machinery 
and  equipment  investment  grew  by  more  than 
25 %  in  2015,  compared  to  a  growth  rate  of  less 
than 5 % in the euro area, highlighting the strength 
of  the  economic  recovery  in  Ireland.  It  fell  in  the 

(1) Gross fixed capital formation 
Source: European Commission 

Public investment has started to increase under 
the Infrastructure and Capital Investment Plan. 
The plan envisages an allocation of EUR 27 billion 
to  capital  expenditure  from  2016  until  2021  and 
has  recently  been  increased  by  EUR 5.1 billion. 
The  share  of  public  investment  in  government 
expenditure, as for the 2017 Draft Budgetary Plan, 
is expected to gradually grow to close to 8.6 % by 
2021, up from 5.8 % in 2015, well above the euro 
area average.  

45 

0123456789Q1-2010Q3-2010Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Intellectual propertyAircraft (proxy)EUR billion050100150200250300350199519961997199819992000200120022003200420052006200720082009201020112012201320142015Total construction, euro area (19 countries)Dwellings, IrelandOther buildings and structures, IrelandIndex (2010=100) 
 
 
 
4.4. Investment 

(Section  4.5). 

Transport  and  housing  will  receive  the  largest 
allocations  but  other  areas  are  also  prioritised. 
They account for approximately 30 % and 20 % of 
total government capital expenditure planned until 
2021 
In  addition,  a  Local 
Infrastructure  Housing  Activation  Fund  will 
address  infrastructure  deficiencies  (Section  4.5.1). 
Other  investment  priorities  include  education  and 
healthcare,  which  also  feature  prominently  in 
government  plans,  given  the  impact  of  population 
growth and ageing on these services (Section 4.3).  

46 

 
 
 
 
 
 
 
 
 
 
 
4.4. Investment 

4.4.2.  COMPETITIVENESS* AND BUSINESS 

domestic wages and prices since 2010 (Section 1).  

ENVIRONMENT  

External  competitiveness  has  improved.  The 
boom  in  asset  prices  and  construction  up  to  2008 
eroded the country’s competitiveness but the latter 
has  recovered  due  to  downward  adjustment  of 

Productivity  has  become  increasingly  difficult 
to  measure  in  the  Irish  context.  Total  factor 
productivity  (TFP)  contributed  by  29  pps.  to  the 
fall  in  unit  labour  costs  in  2014  and  2015  (Graph 
4.4.3).  However, 
all 
TFP 
productivity  contributions  that  cannot  be  directly 

encompasses 

47 

 Box 4.4.1: Investment challenges and reforms in IrelandSection 1. Macroeconomic perspective  Most of the growth in investment in 2015 was driven by transfers of intellectual property assets, with limited impact on the domestic economy and jobs. However, investment in construction and core machinery and equipment were also strong. The sum of these two components grew by more than 40 % from 2010 to 2015, compared to an estimated fall of 2 % in the euro area. In the coming years, construction investment is expected to grow rapidly, given the large unmet demand for housing and supportive government policies. Domestic businesses are also expected to continue to replenish their capital stock, although some investment plans may be delayed due to increased uncertainty worldwide. For more information on the investment trends please see Section 1. Section 2. Assessment of barriers to investment and ongoing reforms  Barriers to private investment in Ireland are overall fairly moderate (European Commission, 2015d). However, there are emerging challenges, and existing barriers affect multinationals and indigenous companies differently. Ireland remains a very competitive destination for foreign direct investment. Large multinationals are interested in basing a bigger share of their activities in the country but this can be difficult due to infrastructure and housing shortages — which also constrain the expansion of indigenous companies. The growing cost base for business can also act as a deterrent to additional investment in Ireland. Interest rates for SME loans remain much higher than the euro area average but surveys indicate that it is getting easier for Irish firms to borrow (Section 4.4.2). Main barriers to investment and priority actions underway: 1. The barriers affecting the development of housing and infrastructure projects have become the most pressing (Section 4.5). Both are closely linked as infrastructure provision is needed to enable housing developments of sufficient size and reduce commuting times and pollution. Until 2021, housing demand is estimated at 25 000 units per year but only 60 % of this demand was met in 2016, despite the recovery in construction. To build new apartments and houses in sufficient numbers at affordable prices, development projects need to become bigger. The government has taken a number of actions to promote construction, including the allocation of just over EUR 5 billion in capital expenditure to deliver 47 000 social housing units until 2021, and address the infrastructure shortages that constrain the development of larger housing projects. It has also taken a number of regulatory measures to ease administrative requirements, for which the country scores poorly in international rankings (World Bank, 2016). However, Ireland needs to continue its efforts in developing a new National Planning Framework, which is expected during 2017, strategically to coordinate both spatial development and capital investment in a manner that the previous National Spatial Strategy could not fully achieve.  2. Increasing costs for business are an emerging challenge (Section 4.4.1). Despite the improvement in Ireland’s cost competitiveness since 2010, the country remains a high cost location (National Competitiveness Council, 2016). Costs are rising slowly but a number of factors point to the risk of significant increases going forward. Rising rents and house prices exert upward pressure on wages, which are the largest cost for many businesses, in particular in the services sector. Legal services, commercial insurance and credit are also expensive. As a small open economy, the performance of business services and regulated professions is important. However, barriers to entry and exit remain significant. According to the new restrictiveness indicator developed by the Commission, access to and/or exercise of the following professions are more restricted in Ireland than in the EU on average: architects and real estate agents. Regulatory/ administrative burdenTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation EnergyLegend:TransportNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
 
 
 
4.4. Investment 

Graph 4.4.4:  Total value added per person employed  Irish 

indigenous and foreign firms  (2000-2014) 

Source: Department of Jobs, Enterprise and Innovation 

in 

the 

indication  on 

recent  years,  productivity 

Breakdown  of  gross  value  added  by  sector  can 
provide  an 
impact  on 
productivity  of  multinational  companies.  In 
most 
Ireland, 
measured  as  gross value  added  per hours worked, 
has  drifted  away  from  that  of  a  relatively  similar 
group  of  EU  countries  (Graph 4.4.5  ) (46).  The 
difference  mostly  stems  from 
the  divergent 
productivity  pattern  of  Ireland’s  manufacturing 
sector  where  production  contracted  abroad  and 
other  MNEs  operations 
an 
increasingly 
the 
productivity  gap  between  Ireland  and  other 
countries.  The  gross  value  added  —  and  the 
productivity  growth  —  of  economic  activities 
effectively 
Ireland  can  be 
approximated by applying the output-per-hour rate 
of  the  comparative  group  of  EU  countries  to  the 
hours  worked  in  the  manufacturing  sub-sectors  in 
Ireland (broken down at the highest possible level). 
As shown in the chart, productivity still appears to 
grow  rapidly  but  at  a  more  moderate  rate  than 
when using raw Irish national account data. 

have  played 
role,  widening 

taking  place 

important 

in 

(46)  The  comparative  group  of  EU  countries  includes  France 
and  Germany  —  the  two  largest  continental  economies  –
Denmark, Finland, Sweden and the United Kingdom. 

in 

the  value  added 

attributed  to  capital  or  labour.  In  Ireland’s  case, 
most  of  this  jump  in  TFP  can  be  attributed  to  the 
level  shift 
that  some 
multinationals  now  book  in  Ireland  from  the 
production of goods in third countries (Section 1). 
The  contribution  of  capital  and 
to 
productivity has been mixed, as in most European 
economies.  However,  between  2014  and  2015, 
nominal  unit  labour  costs  fell  in  Ireland  while 
marginally grew in the euro area by 0.3 %. 

labour 

Graph 4.4.3:  Breakdown of unit labour costs 

Source: European Commission 

by 

dominated 

Productivity  varies  widely  across  sectors  and 
the  trend  among  indigenous  firms  is  unclear. 
Sectors 
foreign-owned 
multinationals  account  for  a  growing  share  of  the 
Irish  economy  —  approximately  40 %  of  gross 
value  added  and  80 %  of  taxable  profits  in  2015 
(Revenue 2016,  p. 6).  These  profits  frequently 
arise  from 
the  production  of  goods  outside 
Ireland (45)  and  therefore  do  not  reflect  domestic 
productivity  developments.  The  Annual  Business 
Surveys  from  the  Department  of  Jobs,  Enterprise 
and  Innovation  provide  indicators  for  total  value 
added  per  employee,  distinguishing  between 
indigenous  and  foreign  firms  (Graph  4.4.4). 
Foreign  companies  do  not  only  register  a  higher 
gross  value  added  per  employee,  but  the  gap 
between indigenous and foreign firms is growing. 

(45)  This  takes  place  under  ‘contract  manufacturing’,  meaning 
abroad  on  behalf  of 

the  production  of  goods 
Irish-domiciled entities (Section 1). 

48 

-30-25-20-15-10-505101520022003200420052006200720082009201020112012201320142015201620172018Investment contributionTotal factor productivity contributionLabour (hours worked)Nominal compensation per employee per hourNominal unit labour cost growthy-o-y %Autumn forecast 2016050100150200250300350400200020012002200320042005200620072008200920102011201220132,014Irish IndigenousForeign firmsEUR  
 
                                                           
 
                                                           
4.4. Investment 

barriers (48) indicates that restrictions are above the 
EU  average  in  Ireland  for  real  estate  agents  in 
particular and also for architects. Restriction levels 
are  also  high  for  lawyers  but  close  to  the  EU 
average.  These 
restrictions  effectively  stifle 
competition. It has been estimated that if the level 
of  the  restrictions  for  real  estate  agents  in  Ireland 
was  brought  down  to  the  EU  average  level,  the 
number of firms in that market would increase by 
1 %. Ireland has not yet submitted a national action 
plan  of  proposed  reforms  in  the  context  of  the 
mutual 
regulated 
professions (49). 

evaluation 

exercise 

of 

However, Ireland continues to rank favourably 
in  international  business  environment  surveys. 
The  country’s  position  in  global  competitiveness 
rankings improved further in 2016 but the business 
somewhat (50).  The 
environment  deteriorated 
country  also  performs  strongly  in  the  2016  EU 
(European 
Small  Business  Act 
Commission, 2016m), where it is a frontrunner in 
several  areas.  Ireland  is  among  the  three  best 
performing  Member  States 
and 
Innovation,  Responsiveness  of  the  Administration 
and Single Market issues. It is also well above the 
EU  average  in  Entrepreneurship.  This  is  due  to 
continuous 
business 
environment since 2008.  

improvements 

in  Skills 

indicators 

the 

in 

Yet,  there  are  areas  that  still  require  further 
attention.  For  example,  Ireland  still  lacks  rules 
and  procedures  for  companies  to  directly  transfer 
their registered offices into and out of the country 
(European  Commission,  2016c).  Furthermore, 
the  recently  adopted  Legal  Services 
despite 

(48)  (European Commission, 2016l). Regulatory barriers entail, 
for example, reserves of activities, shareholding and voting 
requirements,  multidisciplinary  restrictions,  compulsory 
chamber  membership, 
and 
professional indemnity insurance. 

authorisation 

schemes 

to  and  exercise  of 

(49)  The European Commission has developed a new composite 
indicator  on  the  restrictiveness  of  most  existing  barriers 
concerning  access 
the  regulated 
professions.  It  is  based  on  data  collected  from  Member 
States, complemented by desk research. This new indicator 
has  many  similarities  with  the  Commission’s  indicator 
assessing  the  barriers  in  business  services  published  in 
2015, but also differs from it in certain respects (European 
Commission, 2016l).  

(50)  Ireland’s position improved from 24th to 23rd place in the 
2016-2017 WEF Global Competitiveness Report and from 
16th  to  7th  in  the  2016  IMD  World  Competitiveness 
Scoreboard.  However,  the  country  fell  from  15th  to  18th 
place  in  the  2017  World  Bank  Ease  of  Doing  Business 
Indicators. 

Graph 4.4.5:  Gross Value Added per hour worked, total 

economy (2006-2015) 

(1) The comparative group of EU countries include Denmark, 
Germany, France, Finland, Sweden and United Kingdom. 
(2) The contribution of the manufacturing sector in the 
‘"adjusted’" line is proxied by the hours effectively worked in 
all sub--sectors times the hourly productivity of the 
comparative group of countries in the same sub--sectors. 
Source: European Commission 

Upward  cost  pressures  are  an  emerging 
challenge  for  Ireland.  A  detailed  analysis  by  the 
National  Competitiveness  Council 
(2016) 
concludes  that  ‘business  costs  are  high  and  rising 
slowly’  and  consumer  prices  are  more  than  20 % 
above the euro area average. Of particular concern 
are  services  costs,  which  are  increasing  rapidly 
compared to the euro area average. The rising cost 
of  accommodation  (Section  4.5.1)  exerts  upward 
pressure  on  wages,  which  are  the  largest  cost  for 
businesses  in  the  services  sector.  In  turn,  services 
account  for  approximately  30 %  of  costs  in  the 
manufacturing  sector  (ECSIP  Consortium,  2014). 
The  rising  cost  of  commercial  insurance  and  the 
high  interest  rates  for  business  loans  (Section 
4.2.4) are also relevant. 

Some  regulated  professions  continue  to  be 
affected  by 
competition  and 
to  entry (47).  Research 
significant  barriers 
the  Commission  on  restrictive 
conducted  by 

insufficient 

(47)  As evidenced by the low ratio of newly founded and closed 
companies  in  these  professions.  The  2016  restrictiveness 
indicators  (European  Commission,  2016l)  are  relatively 
high  in  several  professions  such  as  the  legal  profession, 
civil engineering and architecture, and for accountants and 
real estate agents. 

49 

30354045505560657075IrelandComparative group of EU countriesIreland (adjusted)EUR per hourworked 
 
                                                           
                                                           
4.4. Investment 

supplier 

opportunities, 

firms  could  be 

export  intensity  of  the  indigenous  firms  and 
support  geographic  market  diversification.  The 
Global  Sourcing  initiative  undertaken  in  2012  to 
deepen  Irish  company  and  MNEs  relationships 
through 
technology 
partnerships,  investment  and  other  collaborative 
engagements  has  made  progress  but  its  continuity 
is  important.  The  Enterprise  Ireland  Agency  has 
also strengthened its information and support tools 
recently. At the same time, innovation among Irish 
indigenous 
improved.  More 
strategic  cooperation  with  public research  centres, 
universities  and  foreign  multinationals  could  help 
improve  those  results  (National  Competitiveness 
Council,  2016).  A  National  Support  Network  has 
been  created  to  scan  and  exploit  innovation 
opportunities for firms and researchers in Horizon 
2020.  The  Health  Innovation  Hub  Ireland  fosters 
cooperation  between  the public  health  system  and 
companies  for  products  and  services  innovation. 
The  European  Regional  Development  Fund 
programmes  2014-2020  and  Science  Foundation 
Ireland  Spokes  Programme  2015  are  already 
involved in helping Irish firms in this area. Limited 
managerial skills and lack of resources remain key 
barriers 
internationalisation.  Skills 
shortages are also becoming relevant in some areas 
(Section 4.3.3). 

to  SME 

Strengthening  entrepreneurship  remains  a 
challenge  for  competitiveness.  Following  the 
publication  of  the  National  Policy  Statement  on 
Entrepreneurship,  several  measures  have  been 
taken  to  foster  entrepreneurship.  The  government 
is  developing  a  policy  to  make  entrepreneurship 
part of education for all students, across all levels 
of 
training  system.  The 
2016 Action Plan for Jobs pays special attention to 
entrepreneurship.  It  includes  almost  30  measures 
that aim to provide support to start-ups. 

the  education  and 

regulation  of 

Regulation  Act,  imperfections  in  the  market  for 
legal  services  still  drive  the  costs  of  enforcing 
contracts  upwards,  to  the  detriment  of  small 
businesses  in  particular.  As  a  part  of  the  Act, 
public  consultations  on 
legal 
partnerships  and  multidisciplinary  practices  and 
whether  to  introduce  direct  professional  access  to 
barristers  (both  important  elements  to  amend 
market imperfections) are expected to be launched 
in the course of 2017. Unfortunately, the Act does 
not  take  full  advantage  of  open-ended  provisions 
in  order  to  ensure  the  greatest  impact  possible  on 
enhancing competition and reducing costs for legal 
services.  

services  exported  and 

Ireland  has  a 
successful  but  distinctive 
exporting profile that entails some risks. Despite 
recent  efforts  to  diversify  exports,  the  country’s 
profile  remains  highly  concentrated  in  terms  of 
products  and 
their 
destination.  Since  2000,  Ireland  has  had  the 
highest level of trade specialisation in the internal 
market 
(Stehrer  et  al.,  2016)  after  Malta. 
Approximately  50  products  account  for  67 %  of 
largely 
total  exports  of  goods 
represented by chemicals and pharmaceuticals. 

the  EU, 

to 

indigenous 

Irish 
firms  present  a  weaker 
exporting  profile  than  multinational  firms 
operating  in  Ireland.  Multinationals  account  for 
90 %  of  exports  for  five  key  sectors:  computer 
programming,  chemicals,  computer  consultancy, 
computer  electronic  and  optical  devices,  and 
medical  devices.  The  median  number  of  products 
exported by Irish firms was 5, with a big difference 
between  Irish owned  firms  (4)  and  foreign-owned 
firms  (11).  The  median  number  of  destination 
countries  per  firm  is  3  for  indigenous  firms,  the 
UK  being  their  main  export  market,  and  12  for 
foreign  firms  (Lawless  et  al.,  2016).  This  high 
concentration  and  specialisation  makes 
Irish 
exports vulnerable to industry and country-specific 
shocks. Although, indigenous SMEs are vulnerable 
to  external  shocks,  they  tend  to  be  less  footloose, 
better embedded in the national economy and more 
evenly  distributed  in  the  country  (Lawless  et  al., 
2016).  These  are  some  of  the  reasons  why  the 
National  Competitiveness  Council  has  identified 
the  broadening  of  the  export  base  as  one  of  the 
Challenges for Ireland in December 2016. 

The  Irish  government  adopted  last  year  the 
Enterprise Policy 2025 plan to help increase the 

50 

 
 
4.5. SECTORAL POLICIES 

4.5.1.  PROPERTY MARKET*   

Residential prices and rents 

Despite  brisk  increases  in  2016,  residential 
property prices do not appear to be overvalued. 
Nationally, residential property prices continued to 
rise,  by  8.6 %  year-on-year  (y-o-y)  in  November 
2016. However, the national index was still 31.5 % 
lower than the highest level reached in 2007 during 
the  pre-crisis  boom.  At  this  stage,  there  is  no 
strong evidence of overvaluation when comparing 
current  prices  with  standard  indicators,  such  as 
price-to-income  or  regression-based  equilibrium 
price estimates (Graph  4.5.1). In contrast with the 
pre-crisis  period,  current  price  developments  are 
not  driven  by  bank  credit  and  cash  buyers  still 
account for half of all transactions. 

Graph 4.5.1:  Overvaluation gap with respect to 

price/income, price/rent and fundamental 
model valuation gaps 

(1) Overvaluation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps. Long-term values are computed over 1995-2015. 
Source: European Commission 

Residential  property  price 
increases  show 
substantial  regional  variation.  Prices  in  Dublin 
increased  by  5.9 %  y-o-y  in  November  2016, 
compared to 12.8 % in the rest of the country. This 
occurred  despite  underlying demand  factors being 
strongest in urban areas, particularly Dublin. Some 
regional variation in prices and rents may relate to 
the  introduction  of  macroprudential  measures  by 
the  Central  Bank  of  Ireland.  Loan-to-value  and 
loan-to-income  limits  were  introduced  in  2015, 

residential  property  prices 

in  Dublin 
after 
increased  by  approximately  19 % 
in  2014. 
Property  prices  in  the  capital  are  the  highest  in 
Ireland  both  in  absolute  terms  and  as  a  ratio  to 
income.  In  addition  to  dampening  expectations  of 
further  house  price  increases,  the  loan-to-value 
limit  is  likely  to  have  been  more  binding  in  the 
capital. Initially, this may have diverted demand to 
commuter areas close to Dublin.  

Residential rents continued to increase rapidly. 
Nationally, private rents increased by 9.7 % y-o-y 
in  December  2016  and  market  participants  report 
that  private  rents  in  Dublin  now  exceed  pre-crisis 
peaks.  This  could  relate  to  the  macro-prudential 
measures, as would-be first time buyers may have 
been  forced  to  rent  for  longer  while  saving  for  a 
down-payment,  diverting  demand  to  the  rental 
market and contributing to the rent increases. 

that 

for  2014 

The  affordability  of  housing  is  deteriorating. 
Data 
the  housing 
indicate 
‘cost-over-burden  rate’ (51)  for  tenants  stood  at 
21 %, slightly below the EU average of 26.2 %. It 
is 
is 
deteriorating and, based on current trends, it could 
soon exceed the EU average (52). This will further 
strain affordability, particularly as tenants are more 
likely to have lower earnings. 

the  cost-over-burden 

likely 

that 

rate 

Residential supply and policies 

The  underlying  problem  is  still  undersupply. 
Estimated  housing  demand,  based  on  projected 
household formation rates, is generally considered 
to be in excess of 25 000 units per year nationally, 
including  8 000  in  Dublin  (Morgenroth,  2014; 
Byrne et al., 2014). This greatly exceeds expected 
housing 
project 
completions  in  the  range  of  14-15 000  in  2016 
compared  to  12 666  in  2015  (Graph  4.5.2).  The 
latest  available  data,  show  completions  at  14 728 
in  the  year  to  November  2016,  an  increase  of 

completions. 

Forecasters 

(51)  The housing cost-over-burden rate measures the percentage 
of the population living in households where total housing 
costs (net of housing allowances) represent more than 40 % 
of disposable income (net of allowances). 

(52)  According  to  Commission  projections,  between  2014  and 
2016,  gross  disposable  income  will  have  increased  by  a 
cumulative 10 %, while rents increased by 17.6 % between 
December  2014  and  October  2016.  These  adverse  trends 
are likely to be more pronounced in Dublin. Over the same 
period,  national  residential  property  prices  increased  by 
11.4 %. 

51 

-60-40-20020406080199519961997199819992000200120022003200420052006200720082009201020112012201320142015Model-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg. 
 
 
                                                           
almost  18 %  y-o-y.  Overall,  while  the  rate  of 
increase  in  residential  construction  is  rapid  in 
percentage  terms,  it  represents  a  recovery  from  a 
very  low  base,  meaning  that  completions  in  2016 
are likely to remain 40 % below demand estimates.  

Graph 4.5.2:  Housing completions and demand 

4.5. Sectoral policies 

housing,  building  more  homes,  improving  the 
rental sector and better utilising existing housing. 

to 

support 

initiatives 

supply, 
Targeted 
including larger-scale residential developments, 
are now in place. In particular, a EUR 200 million 
Local Infrastructure Housing Activation Fund was 
set  up  in  August  2016.  The  fund  is  aimed  at 
helping to unlock sites with the capacity for a large 
number  of  new  units,  preferably  in  relatively 
central urban locations. Relatedly, the Department 
of  Housing,  Planning,  Community  and  Local 
Government  has  since  identified  ‘major  urban 
housing  development  sites’,  with  the  aim  of 
delivering  30 000  additional  homes.  The  size  of 
housing  developments  appears  to  help  achieving 
some  economies  of  scale,  with  the  high  cost  of 
construction  in  Ireland  frequently  cited  to  explain 
the  absence  of  active  developers.  The  vacant  site 
levy would provide a disincentive to holding land 
speculatively in anticipation of price increases but 
will not come into effect until 2018. 

Source: Department of Housing, Planning, Community and 
Local Government. Estimated demand based on 
Morgenroth (2014) and Duffy et al. (2014) 

The construction industry was severely affected 
by  the  crisis  and  still  lacks  capacity.  Surviving 
domestic developers are still struggling to adapt to 
equity-based  financing.  In  the  pre-crisis  period, 
banks  regularly  offered  100 %  bank  debt  funding 
but  this  is  no  longer  available.  The  industry  may 
suffer from a lack of capacity for delivering large 
scale  developments  as  there  are  only  a  limited 
number of large construction companies in Ireland. 
High  construction  sector  wages  and  shortages  of 
skilled  labour  could  put  upward  pressure  on  costs 
as the recovery continues. Insufficient competition 
and restrictions to entry in the provision of services 
by  architects  and  real-estate  agents  are  additional 
the  sluggish  supply 
to 
factors  contributing 
reaction. Together, these factors may have limited 
the  capacity  of  the  industry  to  increase  supply  in 
the short-term.  

The  government  has  repeatedly  intervened  in 
the residential property market. The Action Plan 
for  Housing  and  Homelessness,  launched  in  July 
2016,  included  a  very  wide  array  of  measures 
along with a target of delivering 25 000 homes per 
year.  The  plan  focuses  on  five  pillars,  namely; 
addressing  homelessness,  providing  more  social 

Additional  social  housing  units  will  contribute 
to  increasing  overall  supply.  The  Action  Plan 
included a commitment to directly provide 47 000 
social housing units by 2021. The estimated cost is 
EUR 5.35 billion, meaning that social housing will 
account  for  approximately  40 %  of  the  capital 
budget  over  the  next  four  years.  The  addition  of 
almost 8 000 new units per year would help to ease 
the  pressure  generated  by  the  lack  of  supply. 
the  absence  of  complementary 
However, 
reforms to the social housing system, such as cost 
rental (53),  direct  provision  of  social  housing  may 
be  more  expensive  in  the  long  run  than  schemes 
operating via the private rental market. 

in 

Government  intervention  on  the  demand  side 
may be counterproductive. Most notably, Budget 
2017  included  a  ‘help-to-buy’  tax  rebate  for  first 
time  buyers.  Although  the  scope  of  the  scheme  is 
relatively limited, the measure is likely to increase 
demand in the face of inelastic supply. As such, it 
may  contribute  to  further  price  increases,  at  an 
estimated  fiscal  cost  of  EUR 50 million,  without 
directly contributing to increasing supply.  

(53)  Cost  rental  is  when  a  social-housing  provider  raises  the 
finance to provide accommodation and charges enough rent 
to cover current and capital costs. (National Economic and 
Social Council, 2014).  

52 

01020304050607080901001995199619971998199920002001200220032004200520062007200820092010201120122013201420152016Ireland (ex Dublin)DublinIreland ex. Dublin estimated demandDublin estimated demandAverage Completions in Dublin (1995-2015)Average Completions in Ireland incl. Dublin (1995-2015)thousand homes 
 
                                                           
4.5. Sectoral policies 

National  Planning  framework,  which  is  expected 
during  2017,  strategically  to  coordinate  both 
spatial  development  and  capital  investment  in  a 
manner that the previous National Spatial Strategy 
could  not  fully  achieve.  In  addition,  the  Action 
Plan  for  Housing  and  Homelessness  (referred  to 
above) included measures aimed at expediting the 
planning process for large developments (in excess 
of 100 units) by allowing direct applications to the 
National  Planning  Board,  which  usually  only 
adjudicates  on  appeals.  Finally,  early  indications 
suggest 
the  apartment 
planning  standards,  introduced  in  2015,  may  be 
starting to have  the desired  effect. The  number  of 
apartments granted planning permissions increased 
to 4.073 in the year to September 2016, compared 
to  just  1,683  in  the  previous  year.  However, 
restrictions  and  underground 
building  height 
parking 
hinder 
developments in urban areas.  

requirements  may 

the  revisions 

still 

that 

to 

4.5.2.  TRANSPORT AND TELECOMS   

Transport 

significant 

Shortcomings  in  transport  infrastructure  and 
spatial  planning  have  become  more  pressing. 
Large  projects,  particularly  upgrading  roads  into 
motorways,  were  undertaken  during  the  boom 
years  and  until  2010  (European  Commission 
2016c).  However, 
infrastructure 
shortages  remain,  particularly  in  and  around  main 
urban areas. This situation is aggravated by rising 
economic 
and 
under-investment in recent years. According to the 
World Economic Forum’s Global Competitiveness 
Index  (GCI),  Ireland  ranks  only  32nd  for  the 
quality  of 
railroad 
infrastructure, well below other EU countries.  

activity,  population  growth 

and  35th 

roads 

for 

in 

transport 
the  shortcomings 
Addressing 
infrastructure and spatial planning is a growing 
challenge.  To  address  this  growing  problem,  the 
Irish  authorities  face  a  quadruple  challenge: 
delivering additional transport capacity, finding the 
right balance between public and private transport, 
improving  the  efficiency  of  transport  corridors  by 
means  of  careful  spatial  planning,  and  limiting 
carbon  emissions  from  transport.  Moreover,  main 
urban  areas  also  face 
large  housing  supply 
shortages (Section 4.5.1). The timely and targeted 
expansion  of  rail  and  road  networks  is  crucial  to 

to 

the 

the 

increases 

EUR 28 million 

total  provision 

The  government  has  also  introduced  measures 
in  the  rental  market,  including  to  reduce  the 
risk  of  homelessness.  In  an  effort  to  increase  the 
supply  of  properties  in  the  private  rental  market, 
Budget 2017 modified the ‘rent-a-room’ tax relief. 
This  measure 
tax  ceiling  and 
mortgage  interest  tax  deduction  for  landlords’ 
rental  income.  The  budget  also  allocated  an 
tackling 
additional 
homelessness  bringing 
to 
EUR 98 million.  A  new  rental  strategy,  published 
on  13  December  2016  includes  proposals  to 
impose  upper  limits  on  rent  increases  (4 %  per 
annum) 
areas  
selected 
(rent  pressure  zones).  The  new  measure  has  been 
prompted  by  the  growing  affordability  concerns 
described  above  and  the  rent  pressure  zone 
designation  is  limited  to  3  years.  However,  rent 
controls  have  been  shown  to  have  a  significant 
destabilising  impact  on  the  aggregate  housing 
market  in  other  countries  (Cuerpo  et  al.,  2014). 
Stringent  rent  regulations  potentially  discourage 
new construction and maintenance by capping the 
price  of  rentals,  thus  lowering  the  net  return  on 
the 
such 
frequency of rent-reviews introduced last year did 
not prevent further rapid rent increases. 

investments.  Moreover,  changes 

urban 

in 

to 

increased 

output  will 

A  coherent  and  timely  planning  process  would 
help  to  deliver  new  homes  in  the  right  areas. 
Ireland  is  ranked  38th  by  the  World  Bank  for 
dealing  with  construction  permits.  The  delays  are 
largely  at  local  authorities  level  and  relate  to  the 
assessment  of  planning  applications.  It  is  not  yet 
clear  whether 
be 
concentrated in the areas of highest demand. Over 
the  12  months  to  September,  approximately  30 % 
of commencements and 27 % of completions were 
located  in  the  four  Dublin  councils.  Yet  these 
numbers  may  still  be 
the 
concentration  of  demand  in  the  capital.  The 
that 
absence  of  a  coherent  spatial  strategy 
integrates housing and infrastructure delivery with 
projected  population  developments  is  a  concern 
(Section  4.4.1).  During  the  pre-crisis  property 
boom,  a  considerable  proportion  of  property 
development activity occurred in relatively remote 
areas  without  appropriate  transport  links  to  the 
main centres of employment (Section 4.5.2). 

relative 

low 

to 

The  government  plans  to  introduce  several 
further reforms to the planning process. Ireland 
needs  to  continue  its  efforts  in  developing  a  new 

53 

 
4.5. Sectoral policies 

public  support.  The  Intervention  Strategy  2015 
under  the  National  Broadband  Plan,  in  which  the 
European  Regional  Development  Fund  (ERDF)  is 
to  provide  high  speed 
a  co-investor,  aims 
broadband  by  2020  also  to  households  and  SMEs 
in  those  parts  of  the  country  where  there  is  no 
certainty  that  the  commercial  sector  will  invest 
(Department  of  Communications,  Energy  and 
Natural  Resources,  2015).  A  full  up-take  of  the 
high-speed broadband services by the end users is 
important to maximise the benefits of the strategy 
(Box 2.1).  

ICT 

specialists 

There  are  significant  digital  skills  gaps  but  the 
Irish  government  is  working  to  address  them. 
Only 44 % of individuals  in Ireland have basic  or 
above  basic  digital  skills,  which  is  below  the  EU 
average of 56 %. When it comes to ICT specialists, 
in  2016,  35 %  of  enterprises  employed  such 
specialists,  the  highest  in  the  EU.  However,  over 
50 %  of  enterprises  who  recruited  or  tried  to 
recruit 
reported  hard-to-fill 
vacancies  for  jobs  requiring  ICT  specialist  skills 
(European  Commission,  2017).  As  set  out  in  the 
new enterprise policy framework, Enterprise 2025, 
Ireland  has  a  comparative  advantage  and 
significant  export  potential  in  the  ICT  sector.  A 
significant  number  of  new  jobs  are  expected  in 
ICT  and  data  analytics.  Against  this  background, 
the  National  Skills  Strategy  2025  envisages  new 
actions 
in  science, 
increase  participation 
technology, engineering and mathematics (STEM) 
in  higher  education.    The  Strategy  will  promote 
lifelong learning, including opportunities for adults 
to  improve  their  digital  skills,  based  on  existing 
programs, such as Springboard. 

to 

4.5.3.  RESEARCH, DEVELOPMENT AND 

INNOVATION (R&D&I)  

Ireland  is  a  strong  innovator  moving  up  the 
international rankings (54). Ireland has the vision to 
become  a  global  innovation  leader,  which  largely 
depends  on  the  economy  maintaining  its  recent 
recovery. 

Low  public  expenditure  on  R&D  continues  to 
cause concern as Ireland ranks 25th in the EU. 

(54)  European  Commission,  European  Innovation  Scoreboard 
(6th  place  in  2016)  and  Innovation  Output  Indicator  (3rd 
place in 2016). 

allow  for  the  development  of  housing  projects  of 
sufficient scale. In turn, the strategic positioning of 
those  projects  close  to  public  transport  corridors 
again  highlights  the  important  role  of  spatial 
planning. 

to 

the 

Planned  investment  in  transport  infrastructure 
is  expected  to  help  ease  some  pressures.  In 
addition 
Infrastructure  and  Capital 
Investment  Plan  (European  Commission,  2016c), 
the  Local  Infrastructure  Housing  Activation  Fund 
targets 
infrastructure, 
including  transport,  to  facilitate  the  development 
of large housing projects (Section 4.4.1). 

in  public 

investment 

in 

the  expansions 

railways  envisaged 

Concrete plans for the rail extensions are being 
to 
delayed.  Some  details  of 
Ireland’s 
the  Capital 
Investment Plan still need to be specified, such as 
the  connection  between  Dublin  and  its  airport  or 
the  underground  plan  for  the  Dublin  Area  Rapid 
Transit  (DART)  system.  An  assessment  of  the 
various  alternatives  for  the  DART  extension  is 
expected  in  2017.  Works  to  extend  Dublin’s  light 
rail tram system (LUAS) are ongoing. 

Telecoms 

increase 

Access  to  broadband  is  improving  but  remains 
uneven.  Fixed  broadband  coverage  is  stable,  but 
7 %  of  rural  homes  have  no  access  to  basic 
broadband.  By  mid-2016, 
there  had  been  a 
in  high-speed  coverage, 
significant 
particularly  in  rural  areas,  as  fixed  infrastructure 
has  now  been 
installed.  The  percentage  of 
households able to access high-speed broadband in 
Ireland  (82 %)  surpassed  the  EU  average  (76 %), 
including  in  rural  areas  (50 %  of  households 
(European 
compared 
to  40 %  EU  average) 
Commission,  2017).  While 
take-up  of 
high-speed and mobile broadband is above the EU 
average,  the  overall  take  up  of  fixed  broadband 
(including 
average 
remains 
basic) 
(European Commission, 2017). 

below 

the 

The roll-out of high-speed networks is expected 
to  progress,  helped  by  public  support  in  rural 
areas.  Various  private  operators  are  likely  to  roll 
out  the  infrastructure  allowing  for  high-speed 
broadband  (in  particular  fibre).  However,  private 
investment  alone  is  not  expected  to  be  enough  to 
close  the  gap  in  high  speed  broadband  coverage 
between  rural  and  urban  areas,  which  requires 

54 

 
                                                           
4.5. Sectoral policies 

Even 
though  public  expenditure  on  R&D 
marginally grew from EUR 814 million in 2014 to 
EUR 843 million  in  2015,  public  R&D  intensity 
has declined since  2009,  reaching  0.33 %  GDP  in 
2015  (Graph  4.5.3,  Graph  4.5.4).  The  share  of 
capital  expenditure  in  public  R&D  also  decreased 
from 15 % in 2008 to 10 % in 2014. 

universities have started to fall in the international 
rankings,  and  the  falling  number  of  enrolled  PhD 
students  may  become  a  barrier  to  sustaining  the 
economic growth. 

Graph 4.5.4:  Difference between real growth in government 
budget appropriations for R&D (GBOARD) and 
real growth in GDP, 2007-2015 

Graph 4.5.3:  Trends in business R&D intensity and public 

R&D intensity, 2000-2015 

Source: European Commission, Directorate General for 
Research and Innovation - Unit for the Analysis and 
Monitoring of National Research Policies. Data: Eurostat 

for 

strategy 

Ireland’s 

In reaction to the decline, R&D public funding 
has  been  redesigned  to  improve  its  impact 
through 
research, 
development,  science  and  technology  (Innovation 
2020).  A  first  progress  report  was  published  in 
July  2016  showing  progress  in  implementing  the 
strategy  (Department  of  Jobs,  Enterprise  and 
Innovation,  2016).  Specific  R&D  programmes 
have been implemented. Of key importance is the 
planning  of  a  new  cycle  of  funding  for  the 
Programme 
in  Third  Level 
Institutions.  Also  twelve  world  class  Research 
Centres  and 
technology 
Centres are being supported.  

for  Research 

industry-led 

fifteen 

Full  implementation  of  measures  undertaken 
depends  however  on  the  return  to  a  trend  of 
sustained  investment.  Declining  R&D  intensity 
may  have  a  negative  impact  on  the  high  standing 
the  Irish  public  research  base (55).  Irish 
of 

(55)  2015  Eurostat:  International  scientific  co-publications 
(Ireland  ranks  8th  in  the  EU),  highly-cited  publications 

(1) Real growth was calculated from values in PPS€ at 
constant 2010 prices and exchange rates 
(2) Foregone tax revenues resulting from R&D tax revenues 
are not included 
(3 )Poland: 2007-2011; Romania: 2007-2012; Luxembourg: 
2007-2014; Greece, Croatia: 2008-2015; Denmark: 2010-2015 
(4) Austria: GBAORD refers to federal or central government 
only 
Source: European Commission, Directorate General for 
Research and Innovation - Unit for the Analysis and 
Monitoring of National Research Policies. Data: Eurostat 

indigenous  Irish-owned 

Further public expenditure in R&D is needed to 
make 
firms  more 
dynamic  and  innovative,  while  maintaining  the 
country’s  attractiveness  to  foreign  investment. 
Business  expenditure  on  R&D  (1.14 %  of  GDP) 
accounted  for  73.5 %  of  the  overall  research 
carried out in 2014.  This  was  however dominated 
by  a  small  number  of  mainly  foreign-owned 
multinational companies with limited spillovers to 
Irish  SMEs.  Furthermore,  54 %  of  R&D  active 
companies  with  headquarters  in  Ireland  do  not 
perform  their  R&D  in  the  country  (Research  and 
the 
Innovation  Observatory,  2016).  Despite 
increase  of  SMEs  engaging 
in  R&D,  Irish 
patenting  remains  low  and  is  concentrated  in  a 
small  number  of  companies.  To  stimulate 

(Ireland ranks 4th in EU), new doctoral graduates (Ireland 
ranks 9th in the EU). 

55 

0.20.40.60.81.01.22000200120022003200420052006200720082009201020112012201320142015Public R&D intensityBusiness R&D intensityR&D expenditure as % of GDP-50-250255075100125EUMTLUSKEEPTATHRDECZBESEDKFIELNLBGPLFRUKCYITSIHULVESLTROIE 
 
                                                           
 
                                                                                   
innovation  by  indigenous  SMEs,  innovation 
policies  could  be  rebalanced  towards  more 
direct  forms  of  funding.  Support  from  the 
government  for  business  R&D  has  increasingly 
relied  on  R&D 
tax  credits.  A  Knowledge 
Development  Box  was  introduced  in  2016.  More 
targeted policy mixes and direct funding measures 
may  better  address  the  needs  of  Irish  young 
innovative firms and exploit opportunities from the 
strong investing power of MNEs. This would serve 
to  facilitate  access  to  global  value  chains  and 
accelerate knowledge spillovers. In this regard, the 
government’s  first  steps  in  reviewing  the  R&D 
support to businesses (56), are welcomed, as is the 
scaling  up  of  the  National  Healthcare  Innovation 
Hub in 2016. The Global Sourcing Initiative helps 
to  deepen  Irish  company  and  MNE  relationships 
through 
technology 
partnerships,  investment  and  other  collaborative 
engagements. 

opportunities, 

supplier 

the 

and 

industry 

leverage 

public-private 

introduced  more 

More business-academia cooperation could help 
Irish–owned  firms  become  more  competitive 
and 
private  R&D 
additional 
investments.  The  level  of  business  enterprise 
funding of public R&D is one of the lowest in the 
EU 
scientific 
co-publications  per  million  inhabitants  remains 
relatively  low.  To  address  this  challenge,  Ireland 
has 
leadership  — 
including by MNEs — onto the agendas of Higher 
Education 
Institutions  and  Public  Research 
Organisations  (Research  Centres  programme  and 
the  Technology  Centres  Programme).  The 
Knowledge  Transfer  Ireland  office  acts  as  an 
interface  between  public  research  and  industry. 
748  new  collaborative  research  agreements  were 
signed  in  2015  between  research  performing 
organisations  and  industry.  In  January  2016,  an 
updated  national  intellectual  property  protocol  to 
assist  firms  access  knowledge  in  the  public 
research sector was introduced. ERDF is currently 
co-investing  35 %  in  RTDI,  its  largest  share  of 
allocation  from  its  total  2014-2020  co-investment 
to Ireland (Box 2.1). 

(56)  Request  for  tenders  for  the  provision  of  research  and 
consultancy  services  to  undertake  a  review  of  RD&I 
support  to  business  in  Ireland  to  maximise  business 
expenditure on research and expenditure, 19 April 2016. 

4.5. Sectoral policies 

4.5.4.  ENERGY, RESOURCES AND CLIMATE 

CHANGE   

Energy and climate action 

reduction 

targets.  According 

Ireland  is  falling  behind  its  greenhouse  gas 
emission 
to 
Ireland’s own projections, based on existing policy 
measures,  the  country  is  expected  to  miss  its 
national  emission  reduction  targets  by  12 pps.  in 
2020  and  by  an  estimated  6  megatons  of 
CO2  equivalent over 2013-2020(57). 

of 

importance 

the 
in  public 

Transport and agriculture are the main drivers 
of  increased  greenhouse  emissions.  The  Irish 
authorities expect transport emissions, representing 
about 20 % of total emissions, to increase by 11 % 
between 2015 and 2020. This increase in transport 
emissions  is  largely  due  to  the  shortage  of  mass 
facilities  around  Dublin  —  which 
transit 
additional 
underlines 
investments 
transport  and  spatial 
planning  (Section  4.5.2).  Over  the  same  period, 
agriculture  emissions,  representing  one  third  of 
total emissions, are expected to increase by 7 %. In 
order to reduce emissions from agriculture, one of 
the measures that Ireland has developed is the Beef 
Data  and  Genomics  Programme.  It  is  expected  to 
achieve greenhouse gas savings from agriculture in 
the range of 65 kilotons of CO2 to 300 kilotons of 
CO2  per year by 2020 (which represents between 
0.35 % and 1.6 % of total agricultural emissions). 

Measures  are  underway  to  tackle  persisting 
challenges  in  the  energy  sector.  The  proportion 
of  renewable  energy  is  estimated  to  have  reached 
9 %  in  2015,  about  half-way  towards  achieving 
16 %  EU  2020  target  in  Ireland (58).  Budget  2017 
envisages  additional  capital  to  support  renewable 
heating,  grants  to  households,  electrical  vehicles 
and  expanding  energy  efficiency  programmes  in 
2017.  Approximately  25 000  homes  are  expected 
to  be  upgraded  for  improved  energy  efficiency  in 
2017.  However,  around  75 000  homes  (and 
businesses) may need to be upgraded every year to 
reach  the  EU  2020  target  (Sustainable  Energy 
Agency  Ireland,  2016).  Given  the  robust  growth 

(57)  Figures may be subject to revision. 
(58)  Renewable energy shares for 2015 are approximations and 
not official data, reflecting the available data (04.10.2016). 
See the Öko-Institut Report: Study on Technical Assistance 
in  Realisation  of 
the  2016  Report  on  Renewable 
Energy, http://ec.europa.eu/energy/en/studies. 

56 

 
                                                           
                                                           
4.5. Sectoral policies 

Water 

Ireland  faces  severe  challenges  in  providing 
proper  water  services.  In  2012,  as  regards  the 
required  minimum  standard  biological  treatment, 
47  of  the  170  existing  Irish  wastewater  treatment 
facilities  did  not  provide  sufficient  treatment, 
causing a negative impact on the environment and 
human  health.  Ireland’s  performance  on  a  more 
stringent treatment (59), required for sensitive areas 
to avoid eutrophication, is worse. Most wastewater 
treatment  plants  are  not  yet  equipped  for  these 
requirements. The investment needed to reach EU 
standards 
at  EUR 443 million 
(European Commission, 2016f, p. 152).  

estimated 

is 

The  need  for  large  investments  to  improve 
water  infrastructure  is  widely  recognised.  The 
EUR 5.5 billion  set  out  in  the  Infrastructure  and 
Capital  Investment  Plan  (European  Commission, 
2016c)  would  address  essential  needs  such  as 
lifting  all  current  boil  water  notices  and  reducing 
the  leakage  from  49 %  to  38 %  —  saving  180 
million litres every day. The Irish Water estimates 
that  an  additional  EUR 8 billion  would  be  needed 
to  address 
in 
deficiencies in the infrastructure. 

(2021-2034) 

term 

long 

the 

Recent  decisions  have  created  uncertainty 
around  investment  in  water  infrastructure. 
Water charges have been suspended for a period of 
nine  months  starting  from  July  2016.  The  expert 
commission,  assembled  to  examine  the  long-term 
funding model for Irish Water, submitted its report 
in  November (60) 
(Expert  Commission  on 
Domestic Public Water Services, 2016). The report 
recommended  charging 
for  domestic  water 
consumption  through  general  taxation  up  to  the 
level of ‘normal’ water usage, to be determined by 
the  Energy  Regulator.  Households  that  consume 
above  this  level  would  be  charged  extra  tariffs. 
The government has allocated EUR 123 million to 
Irish Water  to  cover  the  shortfall arising  from  the 
suspension  of  water  charges,  but  it  remains  to  be 
seen if it is enough to cover the operating costs of 
Irish Water. 

(59)  i.e. with nitrogen and/or phosphorus removal. 
(60)  The  recommendations  will  be  considered  by  a  special 
Oireachtas  committee,  which  is  expected  to  report  within 
three months, followed by the plenary. 

expected  in  the  domestic  economy  (Section  1), 
improving  energy  efficiency  is  all  the  more 
important  so  that  energy  needs  do  not  outpace 
economic growth. 

The  transition  to  low-carbon  energy  sources  is 
another challenge for Ireland. Fossil fuel energy 
represented  90 %  of  total  energy  used  in  2014. 
Decarbonisation  and  replacement  with  renewable 
energy  may  help  to  improve  energy  efficiency. 
Public  and  private  investment  needs  in  energy 
infrastructure  are  large,  including  in  management 
systems,  smart  distribution  and  storage  systems 
(Environmental Protection Agency, 2016).  

Resource efficiency and circular economy 

Ireland  appears  to  have  done  quite  well  as 
regards its environmental performance. The fall 
since  2008 
in  ozone-precursor  gas  emission 
intensity,  resource  intensity  and  waste  intensity 
ranks  among  the  highest  in  the  EU.  The  levels  of 
these GDP-intensities are among the lowest in the 
EU. However, it remains to be seen how robust the 
environmental  achievements  turn  out  to  be  with 
the current strong economic upturn.  

is  making  progress 

Ireland 
in  resource 
efficiency  measures.  A  wide  range  of  measures, 
both voluntary and regulatory, have been proposed 
to  support  business  in  improving  its  resource 
efficiency.  The  SMILE  Resource  Exchange  2010 
is a successful example. It aims at encouraging the 
exchange  of  resources  between  SMEs  to  reduce 
their  costs,  reduce  waste,  and  develop  new 
business 
Resource 
Exchange,  2016).  About  34 %  of  participating 
SMEs  have  achieved  cost  savings  through  the 
actions taken so far.  

opportunities 

(SMILE 

There  is  further  scope  to  reduce  landfill  waste 
and  increase  separate  waste  collection.  Landfill 
rates  remain  high  (42 %)  but  the  current  landfill 
levy and regulations on household waste collection 
are  expected  to  help  Ireland  meet  the  set  waste 
targets. The insufficient coverage of households by 
door-to-door  separate  waste  collection  —  with 
some  households  not  subscribed  to  any  collection 
system  remains  a  challenge.  Also,  there  are 
insufficient  fiscal  incentives  to  move  away  from 
residual  waste  treatment  towards  prevention  and 
recycling.  

57 

 
                                                           
ANNEX A 

Overview table 

Commitments 

2016 country-specific recommendations (CSRs) 

CSR  1:  Following  the  correction  of  the  excessive 
deficit,  achieve  an  annual  fiscal  adjustment  of 
0.6 % of GDP towards the medium-term budgetary 
objective  in  2016  and  in  2017.  Use  windfall  gains 
from strong economic and financial conditions, as 
well  as  from  asset  sales,  to  accelerate  debt 
reduction.  Reduce  vulnerability 
to  economic 
fluctuations  and  shocks,  inter  alia  by  broadening 
the  tax  base.  Enhance  the  quality  of  expenditure, 
increasing  cost-effectiveness  of 
particularly  by 
healthcare  and  by  prioritising  government  capital 
expenditure in R&D and in public infrastructure, in 
particular transport, water services and housing. 

Summary assessment(61) 

Ireland  has  made  some  progress  in  addressing 
CSR 1  (this  overall  assessment  of  CSR1  does  not 
include  an  assessment  of  compliance  with  the 
Stability and Growth Pact): 

  Following  the  correction  of  the  excessive 
deficit,  achieve  an  annual  fiscal  adjustment  of 
0.6 %  of  GDP  towards  the  medium-term 
budgetary objective in 2016 and in 2017. 

  The  compliance  assessment  with  the  Stability 
and  Growth  Pact  will  be  included  in  Spring 
when final data for 2016 will be available. 

  Use  windfall  gains  from  strong  economic  and 
financial conditions, as well as from asset sales, 
to accelerate debt reduction. 

  The  compliance  assessment  with  the  Stability 
and  Growth  Pact  will  be  included  in  Spring 
when final data for 2016 will be available. 

  Reduce  vulnerability  to  economic  fluctuations 
and  shocks,  inter  alia  by  broadening  the  tax 
base. 

  Limited  progress  in  reducing  the  vulnerability 
to  economic  fluctuations  and  shocks.  The 
announced establishment of a ‘rainy-day fund’, 
if appropriately designed, could provide a fiscal 
buffer  during  a  future  economic  downturn. 
Together with the announced long-term target 

(61)  The following categories are used to assess progress in implementing the 2015 country-specific recommendations: 
No  progress:  The  Member State  has  not  credibly  announced  nor adopted  any  measures  to  address  the  CSR.  Below  a  number  of 
non-exhaustive typical situations that could be covered under this, to be interpreted on a case by case basis taking into account 
country-specific conditions: 

•  no  legal,  administrative,  or  budgetary  measures  have  been  announced  in  the  National  Reform  Programme  or  in  other  official 
communication  to  the  national  Parliament  /  relevant  parliamentary  committees,  the  European  Commission,  or  announced  in 
public (e.g. in a press statement, information or  on government’s website); 
• no non-legislative acts have been presented by the governing or legislator body;   
•  the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures that would need to be taken (unless the CSR explicitly asks for orientations or exploratory actions), 
while clearly-specified measure(s) to address the CSR has not been proposed. 

Limited progress: The Member State has: 
• announced certain measures but these only address the CSR to a limited extent;    
and/or 
• presented legislative acts in the governing or legislator body  but these have not been adopted yet and substantial non-legislative 

further work is needed before the CSR will be implemented;  

• presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the CSR. 
Some progress: The Member State has adopted measures that partly address the CSR  
and/or  
the Member State has adopted measures that address the CSR, but a fair amount of work is still needed to fully address the CSR as 
only  a  few  of  the  adopted  measures  have  been  implemented.  For  instance:  adopted  by  national  parliament;  by  ministerial 
decision; but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way in addressing the CSR and most of which have 

been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

58 

 
 
 
                                                           
A. Overview table 

of  45 %  for  the  debt-to-GDP  ratio,  the  fund 
could help to reduce vulnerability to economic 
fluctuations.  However,  in  the  short  term,  the 
Draft Budgetary Plan for 2017 has introduced a 
wide  range  of  tax  expenditure  measures, 
including  a  tax  rebate  for  first-time  buyers  of 
newly-built homes, and increases in tax credits 
for the self-employed and home carers. These 
are  likely  to  narrow  the  income  tax  base, 
thereby 
increasing  the  exposure  of  public 
finances  to  shocks.  This  is  in  addition  to  the 
suspension  of  water  charge  payments  earlier 
this  year,  and  the  decision  to  further  delay, 
until  November  2019,  the  revaluation  of 
self-assessed property values used to calculate 
local  property  tax  liabilities.  In  isolation,  the 
phasing out of the Universal Social Charge will 
undermine  the  commitment  to  maintain  a 
broad tax base. 

This 

help 

to 
expenditure 

  Some  progress  in  enhancing  the  quality  of 
expenditure through a reform of the budgetary 
improve 
process. 
can 
communication  on 
targets, 
increase stakeholder engagement and harness 
public  support  to 
improve  the  quality  of 
expenditure.  A  ‘culture  of  spending’  to,  for 
increase  responsibility  across  the 
example, 
the 
public  administration 
efficiency 
public 
expenditure is being developed. The roll-out of 
activity-based  funding,  the  development  of 
new  eHealth  architecture,  the  streamlining  of 
financial  management 
information 
systems and the new cost-saving deal with the 
pharmaceutical 
steps 
forward. 

industry  are  also 

for  assessing 

effectiveness 

and 

and 

of 

  Some  progress 

Public 

expenditure. 

in  prioritising  government 
capital 
expenditure 
marginally  grew  from  EUR 814 million  in  2014 
to  EUR 843 million 
in  2015.  Specific  R&D 
Programmes  being  funded  by  the  Capital Plan 
include  commitments  in  respect  of  Cycle  5  of 
the  Programme  for  Research  in  Third  Level 
Institutions. However, low public R&D intensity 
continues  to  cause  concern  (decreasing  at 
0.33 %  GDP  in  2015).  According  to  the  Draft 
Budgetary  Plan  for  2017,  capital  expenditure 
will 
increase  by  9 %  compared  to  2016. 
Investment  will  focus  primarily  on  social 

  Enhance the quality of expenditure, particularly 
by increasing cost-effectiveness of healthcare  

  And  by  prioritising  government 
in 
in 

capital 
expenditure 
public 
R&D 
infrastructure,  in  particular  transport,  water 
services and housing. 

and 

59 

 
A. Overview table 

a 

of 

to 

and 

further 

the  EUR 3.8 billion 

housing  and  education.  Ireland  is  planning  to 
increase  public  investment  while  rebalancing 
current 
priorities  between 
capital 
the  government 
July 
spending.  On  19 
published  a  housing  action  plan  involving  the 
allocation 
EUR 2.2 billion 
(approximately  40 %  of  total  capital  spending) 
to  social  housing  over  the  next  four  years,  in 
addition 
already 
committed by the last government. The action 
plan  envisages  an  increase  in  social  housing 
units by approximately 47 000 and an increase 
in housing output of around 25 000 per year. It 
aims 
to  create  a  EUR 200 million  Local 
Infrastructure  Housing  Activation  Fund,  which 
will contribute to contribute to the delivery of 
transport,  water  and  other 
infrastructure 
essential to an increase in housing supply. The 
government  proposes 
the 
development of a number of large urban sites 
with  the  capacity  to  deliver  up  to  20 000  new 
homes. 

to  expedite 

Ireland has made some progress in addressing CSR 
2. 

CSR 2: Expand and accelerate the implementation 
of activation policies to increase the work intensity 
of  households  and  address  the  poverty  risk  of 
children. 
incentivise 
employment  by  tapering  the  withdrawal  of 
benefits  and  supplementary  payments.  Improve 
the  provision  of  quality,  affordable  full-time 
childcare. 

Pursue  measures 

to 

  Expand  and  accelerate  the  implementation  of 
activation  policies 
the  work 
to 
intensity of households 

increase 

  And address the poverty risk of children. 

  Pursue measures to incentivise employment by 
tapering  the  withdrawal  of  benefits  and 
supplementary payments. 

  Some  progress  in  increasing  households  work 
intensity.  Labour  activation  programmes  have 
been  rolled  out  further  but  their  effects  have 
not  yet  been  assessed  by  the  government. 
New  announced  measures,  such  as  ‘Pathways 
to  Work  for  Jobless  Households’,  are  likely  to 
increase the work intensity of households. 

  Some  progress  in  reducing  child  poverty.  The 
government  continues  to  implement  previous 
measures but child benefit remains at EUR 140 
per  month.  The  benefits  for  lone  parents  is 
envisaged to increase from 2017.  

  Some  progress  in  incentivising  employment. 
The  Back  to  Work  Family  Dividend,  set  up  in 
2015,  currently  reaches  21 000  dependent 
young  people.  Budget  2017  announced 
additional  funding  for  the  Housing  Assistance 

60 

 
A. Overview table 

Payment,  which  is  designed  to  tackle  work 
disincentives arising from housing subsidies for 
the  unemployed.  This  support  is  expected  to 
reach an additional15 000 people. 

 

Improve  the  provision  of  quality,  affordable 
full-time childcare. 

CSR  3:  Finalise  durable  restructuring  solutions  to 
loans,  to  ensure  debt 
lower  non-performing 
sustainability  of  households  and  to  encourage 
lenders 
the  debt  of  excessively 
leveraged  yet  viable  businesses.  Accelerate  the 
phasing-in  of  a  fully  operational  central  credit 
registry  covering  all  categories  of  lenders  and 
debtors. 

to  reduce 

  Finalise  durable  restructuring  solutions  to 
lower  non-performing  loans,  to  ensure  debt 
sustainability  of  households  and  to  encourage 
lenders  to  reduce  the  debt  of  excessively 
leveraged yet viable businesses. 

  Accelerate the phasing-in of a fully operational 
central credit registry covering all categories of 
lenders and debtors. 

Europe 2020 (national targets and progress)  

Employment rate target: between 69 % and 71 %  

  Some  progress 

in 

improving 

childcare 
provision.  Ireland  has  taken  steps  to  make 
childcare  more  affordable  and  improve  its 
quality,  but  sustained  efforts  are  needed  over 
to  meet  existing  needs, 
coming  years 
especially 
families. 
among  disadvantage 
Measures  are  also  underway  to  improve  the 
quality of childcare provision. 

Ireland has made some progress in addressing CSR 
3. 

  Some  progress 

in  adopting  restructuring 
solutions  sustainable  in  the  long  term.  As  the 
overall level of non-performing decreases, the 
more difficult long-term arrears cases make up 
an  increasingly  higher  share  of  the  remaining 
stock. Repossessions remain low and the legal 
route  lengthy.  Following  a  pilot  phase,  the 
Money  Advice  and  Budgeting  Service  for 
distressed debtors was launched nationally. In 
it  registered 
the  first  couple  of  months 
significant interest, with over 2 800 free advice 
vouchers given out, of which the majority were 
used for financial counselling. 

  Some progress in phasing-in the central credit 
registry.  The  consultation  with  the  data 
Protection  Commissioner  has  been  concluded 
the  regulations  published  by  the  Central  Bank 
of  Ireland.  However,  delays  in  implementing 
the central credit register mean that it will not 
be fully operational until late 2018. 

The  employment  rate  (Eurostat  definition,  age 
group 20-64) rose to 70.7 % in Q3-2016 compared 
with an average of 63.7 % in 2011-2012.  

61 

 
 
R&D investment target: 2.0 % of GDP (2.5 % GNP) 

Reduction  of  greenhouse  gas  (GHG)  emissions  in 
sectors  that  are  not  covered  by  the  Emission 
Trading System by 20 % in 2020 compared to 2005 
levels.  

Renewable  energy  target:  16 %  proportion  of 
gross  energy 
in 
renewable  energy 
consumption in 2020.  

total 

Energy  efficiency  target:  13.9  million  tons  of  oil 
equivalent 
energy 
consumption (11.7 million tons of oil equivalent in 
final energy consumption).  

expressed 

primary 

in 

Early school leaving target: 8 %  

A. Overview table 

Ireland has set a national R&D intensity target for 
2020  of  2.0 %  of  GDP  but  has  made  no  recent 
progress towards that target.  

R&D  intensity  was  1.51 %  in  2014  down  from 
1.56 %  in  2013.  This  is  mainly  due  to  the  low 
public sector R&D intensity.  

Public  sector  R&D 
intensity  continues  on  a 
downward trend and in 2015 decreased to 0.33 % 
from  0.51 %  in  2009.    Business  R&D  intensity 
(1.09 % in 2014) has evolved more favourably than 
public  expenditure 
indirectly 
supported  by  an  R&D  tax  credit  scheme  that  has 
seen large uptake. 

in  recent  years, 

to 

the  most 

According 
recent  estimates, 
non-Emission  Trading  System  greenhouse  gas 
emissions  decreased  by  11 %  between  2005  and 
2013. According to national projections, emissions 
will decrease by 8 % between 2005 and 2020. The 
target is thus expected to be missed be 12 pps.  

The  proportion  of  renewable  energy  in  2015  is 
estimated to have reached 9 % (62). Ireland is close 
to  its  2013-2014  interim  targets  as  set  out  in  the 
Renewable  Energy  Directive.  However,  Ireland 
might  need  to  step  up  its  efforts,  particularly  in 
the electricity and heating and cooling sectors, to 
enable  the  stepwise  achievement  of  the  2020 
target. 

Ireland increased its primary energy consumption 
by 5 % from 13.35 Mtoe in 2014 to 13.96 Mtoe in 
2015.  Final  energy  consumption  increased  by  4% 
from  10.77  Mtoe  in  2014  to  11.21  Mtoe  in  2015. 
Ireland  has  to  increase  its  effort  to  decrease  its 
primary  energy  consumption  further  in  order  to 
achieve its indicative primary energy consumption 
2020  target  (13.9 Mtoe)  and  to  keep  its  current 
final  energy  consumption  below  its  final  energy 
2020 target (11.7 Mtoe). 

Ireland’s early school leaving rate remained stable 
at  6.9 %  in  2015,  well  below  the  EU  average  of 
11 %.  

(62)  Renewable energy shares for 2015 are approximations and not official data, reflecting the available data (04.10.2016). See the 
the  2016  Report  on  Renewable 

in  Realisation  of 

Öko-Institut  Report:  Study  on  Technical  Assistance 
Energy,  http://ec.europa.eu/energy/en/studies. 

62 

 
 
 
 
 
                                                           
A. Overview table 

Tertiary education attainment target: 60 %  

To  reduce  the  number  experiencing  consistent 
poverty to 4 % by 2016 (interim target) and to 2 % 
or  less  by  2020,  from  the  2010  baseline  rate  of 
6.2 %, which will lift at least 200 000 people out of 
the  risk  of  poverty  and  exclusion  between  2012 
and 2020 (revised target).  

Ireland had a very high tertiary attainment rate of 
52.3 %  in  2015,  well  above  the  EU  average  of 
38.7 %.    It  is  making  progress  towards  its  very 
ambitious  national  target  of  60 %,  which  is  the 
highest in the EU.  

The number of people at risk of poverty or social 
exclusion  decreased  from  1.27  million  in  2014  to 
1.20  million  in  2015.  This  remains  significantly 
above  the  pre-crisis  level  of  1.05  million  in  2008. 
Achieving the national target remains ambitious. 

63 

 
 
ANNEX B 

MIP Scoreboard 

Table B.1: 

The MIP Scoreboard for Ireland  

Flags: b: break in time series.           
 * The change for 2015 is due to relocation to Ireland of balance sheets of large multinational enterprises and inclusion of 
corresponding transactions in the Irish balance of payments and IIP statistics. 1) Unit labour cost: 2011 break in time series. 
Since the indicator is a three-year % change, the break affects all the following years.      

Source: European Commission, Eurostat and Directorate General for Economic and Financial Affairs (for real effective 
exchange rate), and International Monetary Fund’ 

64 

Thresholds201020112012201320142015Current account balance, (% of GDP) 3 year average-4%/6%-4.3-2.8-2.1-0.80.44.7*-35%-114.9-138.3-137.3-131.7-162.1-208.0*Real effective exchange rate - 42 trading partners, HICP deflator3 years % change±5% & ±11% -5.4-9.6-12.2-3.9-3.6-5.9Export market share - % of world exports5 years % change-6%-6.8-10.5-15.7-7.5-12.038.3*Nominal unit labour cost index (2010=100)3 years % change9% & 12% -6.5-13.5b-8.34.0-0.5-18.16%-11.6-16.9-15.21.115.18.314%2.216.2-0.6-1.42.56.7133%257.9270.9278.8267.3281.3303.460%86.3109.6119.5119.5105.278.6Unemployment rate3 year average10%10.813.514.414.213.011.316.5%6.3-2.2-1.8-2.723.19.5-0.2%-3.2-2.9-1.40.40.60.80.5%5.46.95.51.0-2.0-3.72%18.515.86.4-0.8-5.2-9.5Activity rate - % of total population aged 15-64 (3 years change in p.p)Long-term unemployment rate - % of active population aged 15-74 (3 years change in p.p)Youth unemployment rate - % of active population aged 15-24 (3 years change in p.p)External imbalances and competitivenessNew employment indicatorsNet international investment position (% of GDP)Deflated house prices (% y-o-y change)Total financial sector liabilities (% y-o-y change)Private sector credit flow as % of GDP, consolidatedPrivate sector debt as % of GDP, consolidatedGeneral government sector debt as % of GDPInternal imbalances 
 
 
 
 
 
 
ANNEX C 

Standard tables 

Table C.1: 

Financial market indicators 

(1) Latest data Q2 2016. 
(2) Quarterly values are not annualised 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

65 

201120122013201420152016Total assets of the banking sector (% of GDP)758.9665.7564.3558.9424.9398.2Share of assets of the five largest banks (% of total assets)46.746.447.847.646.0-Foreign ownership of banking system (% of total assets)37.435.735.632.925.2-Financial soundness indicators:1)              - non-performing loans (% of total loans)-16.618.416.311.711.3              - capital adequacy ratio (%)18.919.220.522.625.323.2              - return on equity (%)2)-11.1-14.6-13.28.56.83.9Bank loans to the private sector (year-on-year % change)-4.7-2.6-6.8-10.1-6.9-4.0Lending for house purchase (year-on-year % change)-0.96.6-1.7-3.9-1.2-3.6Loan to deposit ratio133.4128.7113.699.484.380.8Central Bank liquidity as % of liabilities18.717.07.44.12.41.8Private debt (% of GDP)270.9278.8267.3281.3303.4-Gross external debt (% of GDP)1) - public59.771.269.874.055.852.3    - private653.5650.6583.3703.7727.6656.4Long-term interest rate spread versus Bund (basis points)*699.3467.7222.0120.468.765.1Credit default swap spreads for sovereign securities (5-year)*673.9406.0120.453.537.045.7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.2: 

Labour market and social indicators 

(1) The unemployed are all those who were not employed but had actively sought work and were ready to begin working 
immediately or within 2 weeks.       
(2) Long-term unemployed are those who have been unemployed for at least 12 months.       
(3) Not in education, employment or training.       
(4) Average of first three quarters of 2016. Data for total unemployment and youth unemployment rates are seasonally 
adjusted. 
Source: European Commission (EU Labour Force Survey). 

66 

201120122013201420152016 4Employment rate(% of population aged 20-64)63.863.765.567.068.770.0Employment growth (% change from previous year)-0.5-0.62.51.72.52.8Employment rate of women(% of female population aged 20-64)59.459.460.361.262.664.0Employment rate of men (% of male population aged 20-64)68.268.170.973.075.176.2Employment rate of older workers (% of population aged 55-64)50.049.351.353.055.657.1Part-time employment (% of total employment, aged 15-64)23.123.523.523.022.222.2Fixed-term employment (% of employees with a fixed term contract, aged 15-64)10.210.110.09.38.78.4Transitions from temporary to permanent employment::41.239.7::Unemployment rate1 (% active population, age group 15-74)14.714.713.111.39.48.0Long-term unemployment rate2 (% of labour force)8.69.07.86.65.34.4Youth unemployment rate (% active population aged 15-24)29.130.426.823.920.917.0Youth NEET3 rate (% of population aged 15-24)18.818.716.115.214.3:Early leavers from education and training (% of pop. aged 18-24 with at most lower sec. educ. and not in further education or training)10.89.78.46.96.9:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)49.751.152.652.252.3:Formal childcare (30 hours or over; % of population aged less than 3 years)11.010.010.09.0:: 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.3: 

Labour market and social indicators (continued) 

(1) People at risk of poverty or social exclusion : individuals who are at risk of poverty and/or suffering from severe material 
deprivation and/or living in households with zero or very low work intensity.       
(2) At-risk-of-poverty rate : proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.        
(3) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
(5) For EE, CY, MT, SI and SK, thresholds in nominal values in euros; harmonised index of consumer prices = 100 in 2006 (2007 
survey refers to 2006 incomes)       
Source: For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC. 

67 

Expenditure on social protection benefits (% of GDP)201020112012201320142015Sickness/healthcare7.67.57.47.16.7:Disability1.31.21.21.21.2:Old age and survivors6.26.26.36.15.8:Family/children3.23.03.02.82.5:Unemployment3.73.53.33.12.7:Housing0.60.50.50.40.4:Social exclusion n.e.c.0.30.30.30.20.2:Total22.822.221.920.919.3:of which: means-tested benefits6.86.96.86.66.0:Social inclusion indicators201020112012201320142015People at risk of poverty or social exclusion1 (% of total population)27.329.430.329.927.525.9Children at risk of poverty or social exclusion  (% of people aged 0-17)34.134.133.534.430.228.7At-risk-of-poverty  rate2 (% of total population)15.215.216.615.716.216.3Severe material deprivation rate3  (% of total population)5.77.89.89.98.47.5Proportion of people living in low work intensity households4 (% of people aged 0-59)22.924.223.423.921.019.1In-work at-risk-of-poverty rate (% of persons employed)5.55.65.65.05.24.8Impact of social transfers (excluding pensions) on reducing poverty61.961.658.059.056.355.0Poverty thresholds, expressed in national currency at constant prices5117911152811399112531147812193Gross disposable income (households; growth %)-4.1-2.93.1-0.53.75.4Inequality of income distribution (S80/S20 income quintile share ratio)4.74.64.84.74.84.5GINI coefficient before taxes and transfers57.858.257.058.257.5:GINI coefficient after taxes and transfers30.429.829.930.030.8: 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.4: 

Product market performance and policy indicators 

(1) The methodologies, including the assumptions, for this indicator are shown in detail at : 
http://www.doingbusiness.org/methodology.        
(2) Average of the answer to question Q7B_a. '[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?'. Answers were scored as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or if the outcome is not known.       
(3) Percentage population aged 15-64 having completed tertiary education.       
(4) Percentage population aged 20-24 having attained at least upper secondary education.       
(5) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at:  http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
(6) Aggregate OECD indicators of regulation in energy, transport and communications.       
Source: ‘European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs’ applications for bank loans).’       

68 

Performance indicators201020112012201320142015Labour productivity (real, per person employed, year-on-year % change)Labour productivity in industry12.8711.970.07-9.255.3563.47Labour productivity in construction0.64-16.820.547.27-3.12-3.62Labour productivity in market services6.681.40-5.32-2.366.064.37Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in industry-11.294.870.3110.19-4.09-59.92ULC in construction-5.54-4.77-1.35-4.024.344.72ULC in market services-8.655.337.234.30-3.46-0.71Business environment201020112012201320142015Time needed to enforce contracts1 (days)515.0650.0650.0650.0650.0650.0Time needed to start a business1 (days)13.013.010.010.06.06.0Outcome of applications by SMEs for bank loans20.951.491.240.791.230.73Research and innovation201020112012201320142015R&D intensity1.601.541.561.561.51:Total public expenditure on education as % of GDP, for all levels of education combined6.416.156.165.84nanaNumber of science & technology people employed as % of total employment475051515152Population having completed tertiary education3333335363637Young people with upper secondary education4868787899393Trade balance of high technology products as % of GDP4.525.435.372.551.433.18Product and service markets and competition200320082013OECD product market regulation (PMR)5, overallna1.351.45OECD PMR5, retail0.871.531.53OECD PMR5, professional services1.601.251.25OECD PMR5, network industries63.322.492.21 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.5:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2005 prices)         
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)         
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)         
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)         
          Waste intensity: waste (in kg) divided by GDP (in EUR)         
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP           
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP         
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change)         
Real unit energy cost: real energy costs as a percentage of total value added for the economy         
Environmental taxes over labour taxes and GDP: from European Commission's database, ‘Taxation trends in the European 
Union’         
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR)          
Real unit energy costs for manufacturing industry excluding refining : real costs as a percentage of value added for  
manufacturing sectors         
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP         
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT.         
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste         
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP         
Proportion of GHG emissions covered by EU Emissions Trading System (ETS) (excluding aviation): based on greenhouse gas 
emissions         
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency.         
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2005 EUR)         
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector         
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels         
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.         
Diversification of the energy mix: Herfindahl index over natural gas, total petrol products, nuclear heat, renewable energies 
and solid fuels         
* European Commission and European Environment Agency                     
Source: European Commission (Eurostat) unless indicated otherwise 

69 

Green growth performance201020112012201320142015MacroeconomicEnergy intensity kgoe / €0.090.080.080.080.070.06Carbon intensity kg / €0.360.330.340.340.31-Resource intensity (reciprocal of resource productivity)kg / €0.620.580.540.590.530.44Waste intensity kg / €0.11-0.08---Energy balance of trade % GDP-2.8-3.2-3.0-3.2-2.7-Weighting of energy in HICP%9.2510.5312.7011.6711.1510.62Difference between energy price change and inflation %3.38.37.93.01.0-4.9Real unit of energy cost% of value added6.36.46.77.27.1-Ratio of environmental taxes to labour taxesratio0.200.190.180.190.19-Environmental taxes% GDP2.52.42.42.52.4-Sectoral Industry energy intensity kgoe / € 0.060.060.060.070.060.03Real unit energy cost for manufacturing industry excl. refining% of value added6.86.66.88.18.5-Share of energy-intensive industries in the economy% GDP------Electricity prices for medium-sized industrial users€ / kWh0.110.120.140.140.140.14Gas prices for medium-sized industrial users€ / kWh0.030.040.040.040.040.04Public R&D for energy % GDP0.020.000.000.000.000.00Public R&D for environmental protection% GDP0.010.010.010.000.000.00Municipal waste recycling rate%35.736.136.6---Share of GHG emissions covered by ETS*%28.527.729.426.827.427.9Transport energy intensitykgoe / €2.362.502.693.113.363.64Transport carbon intensitykg / €5.766.507.098.188.53-Security of energy supplyEnergy import dependency%86.690.085.189.385.388.7Aggregated supplier concentration indexHHI8.014.519.915.413.9-Diversification of energy mixHHI0.380.360.340.350.34- 
 
 
 
 
 
REFERENCES 

Barnardos 
http://www.barnardos.ie/assets/files/pdf/2017-Pre-Budget-Submission.pdf  

submission,  Dublin:  Barnardos, 

pre-budget 

(2016), 

2017 

available 

at: 

Brons  M.,  Kalantzis  F.,  Maincent  E.,  Arnoldus  P.,  (2014)  Infrastructure  in  the  EU:  Developments  and 
Impact on Growth. European Economy. Occasional Papers 203. December 2014. Brussels 

Buti, M. and G. Giudice (2002), ‘Maastricht’s Fiscal Rules at Ten: An Assessment’, Journal of Common 
Market Studies, 40(5): 823-47 

Byrne,  D.,  Duffy,  D,  and  Fitzgerald,  J.  (2014)  Household  Formation  and  Tenure  Choice,  ESRI  QEC 
research note, https://www.esri.ie/publications/household-formation-and-tenure-choice/  

Calmfors,  L.  (2003),  Fiscal  policy  to  stabilise  the  domestic  economy  in  the  EMU,  CESifo  Economic 
Studies 49 

Calmfors, L. (2015), The Swedish Macroeconomic Policy Framework, IFN Working Paper No. 1075 

CBI (Central Bank of Ireland) 2016, SME Market Report H1 2016  

CBRE (2016) Dublin Office Market Review, Q3 2016 http://www.cbre.ie/ie_en/research  

Central Statistics Office (2016a), Redomiciled PLCs in the Irish Balance of Payments, October 2016 

Central  Statistical  Office 
http://www.cso.ie/en/media/csoie/releasespublications/documents/population/2013/poplabfor2016_2046.
pdf 

and  Labour  Force  Projections  2016-46’, 

‘Population 

(2016), 

Central Statistics Office (2015), Macroeconomic Scoreboard 2014, November 2015 

CSO (2011), Census 2011 Profile 6 Migration and Diversity - A profile of diversity in Ireland 

Cuerpo,  C.  Kalantaryan,  S.  and  Pontuch,  P.  (2014)  Rental  Market  Regulation  in  the  European  Union, 
515; 
European 
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp515_en.pdf 

Commission, 

Economic 

Papers 

Department  of  Communications,  Energy  and  Natural  Resources  (2015),  National  Broadband  Plan, 
Ireland’s Broadband Intervention Strategy, Updated – December 2015 

Department  of  Education  and  Skills  (2016a),  ‘Investing  in  National  Ambition:  A  Strategy  for  Funding 
Higher 
http://www.education.ie/en/Publications/Policy-Reports/Investing-in-National-
Ambition-A-Strategy-for-Funding-Higher-Education.pdf  

Education’, 

Department of Education and Skills (2016b), National Skills Strategy 2025 — Ireland’s Future 

Department  of  Housing,  Planning,  Community  and  Local  Government  (2015a),  Homeless  persons  – 
December 2015  

Department  of  Housing,  Planning,  Community  and  Local  Government  (2015b),  Homeless  persons  – 
August 2016  

Department  of  Jobs,  Enterprise  and  Innovation  (DJEI)  (2016),  Innovation  2020  First  Progress  Report, 
Innovation and Investment Division, July 2016 

70 

 
 
References 

Department of Public Expenditure and Reform (DPER) (2015), Medical Workforce Analysis, Ireland and 
the European Union compared Labour Market & Enterprise Policy Division, Staff Paper October 2015 

DES (Department of Social Protection) (2016), Social impact assessment of the welfare and income tax 
measures in Budget 2017, Research Briefing, November 2016, Dublin 

DESI (Digital Economy and Society Index) (2016), Ireland  

Economic  and  Social  Research  Institute  (ESRI)  (2014);  Selina  McCoy,  Emer  Smyth,  Dorothy  Watson, 
Merike Darmody Leaving School in Ireland: A Longitudinal Study of Post-School Transitions 

Economic  and  Social  Research  Institute  (ESRI)  (2016a),  Review  of  the  Droichead  Teacher  Induction 
Pilot Programme, Dublin 2016 

Economic and Social Research Institute (ESRI) (2016b), Cherishing All the Children Equally? Children 
in Ireland 100 Years on from the Easter Rising 

Economic and Social Research Institute (ESRI) (2016c), ‘Scoping the Possible Economic Implications of 
Brexit 
Dublin. 
https://www.esri.ie/pubs/RS48.pdf  

Research Series, 

November 

Number 

Ireland’ 

2015, 

48, 

on 

Economic  and  Social  Research  Institute  (ESRI)  (2015a),  An  Evaluation  of  the  Back  to  Education 
Allowance 

Economic  and  Social  Research  Institute  (ESRI)  (2015b),  Learning  from  DEIS  —  A  Report  on  the 
Implementation over 10 years of delivering Equality of Opportunity in Schools 

Economic and Social Research Institute (ESRI) (2015c), Review of the School Completion Programme 

ECSIP  2014,  ECSIP  Consortium  for  the  European  Commission  (2014).  ‘Study  on  the  relation  between 
industry and services in terms of productivity and value creation’, Vienna October 

Environmental Protection Agency (2016), Ireland’s Environment 2016, An Assessment 2016 

European  Central  Bank  (ECB),  The  Household  Finance  and  Consumption  Survey:  results  from  the 
second wave; Statistics Paper Series no 18, December 2016 

European  Commission  (2017),  Digital  Scoreboard  2017,  available  at  https://ec.europa.eu/digital-single-
market/en/digital-scoreboard)  

European Commission (2016a), Post-Programme Surveillance Report - Ireland, Spring 2016 

European Commission (2016b), Common Consolidated Corporate Tax Base (CCCTB) of October 2016 

European  Commission  (2016c),  ‘Country  Report  Ireland 2016’,  Commission  Staff Working  Document, 
February 26, URL: http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_ireland_en.pdf 

European Commission (2016d), Digital Economy and Society Index 

European  Commission  (2016e),  Education  and  Training  Monitor  (2016)  –  Country  Sheet  for  Ireland, 
https://ec.europa.eu/education/sites/education/files/monitor2016-ie_en.pdf  

71 

 
 
References 

European  Commission  (2016f),  Eighth  Report  on  the  Implementation  Status  and  the  Programmes  for 
Implementation  (as  required  by  Article  17)  of  Council  Directive  91/271/EEC  concerning  urban  waste 
water  treatment  (COM  (2016)105  final)  and  Commission  Staff  Working  Document  accompanying  the 
report (SWD(2016)45 final) 

European Commission (2016g), Eurydice, Eurypedia 

European Commission (2016h), Eurydice, National Sheets on Education Budgets in Europe — 2015 

European  Commission  (2016i),  Joint  Report  on  Health  Care  and  Long-Term  Care  Systems  and  Fiscal 
Sustainability, Volume 2, Country documents, Ireland, Institutional Paper 037|October 2016 

European Commission (2016j), Urban waste water, 8th implementation reports 

European Commission (2016k), Fiscal Sustainability Report 2015, Institutional Paper 018 | January 2016 

European  Commission  (2016  l),  Commission  Communication  and  accompanying  Staff  Working 
Document on reform recommendations for regulation in professional services, {COM(2016) 820 final}, 
and {SWD(2016) 436 final} of 10.01.2017,  URL: 
http://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/COM-2016-820-F1-EN-MAIN-PART-1.PDF  and 
http://ec.europa.eu/DocsRoom/documents/20505/attachments/3/translations/en/.../native  

European  Commission 
ec.europa.eu/DocsRoom/documents/20302/attachments/18/translations/en/.../pdf 

(2016j)  SBA  Fact  Sheet  2016 

Ireland,  November  2016,  URL: 

European  Commission  (2015a),  Eurydice,  Structural  Indicators  for  Monitoring  Education  and  Training 
Systems in Europe — 2015 

European  Commission  (2015b),  A  framework  for  Member  States  to  support  business  in  improving  its 
resource efficiency 

European Commission (2015c) = Challenges to Member States’ Investment Environments’, SWD (2015) 
(http://ec.europa.eu/europe2020/challenges-to-member-states-investment-
400 
environments/index_en.htm) 

final 

European  Commission  (2014a),  Infrastructure  in  the  EU:  developments  and  impact  on  growth. 
Occasional papers 203/2014 

European Commission (2014b), The 2015 Ageing Report, Economic and budgetary projections for the 28 
EU Member States (2013-2060), European Economy 3|2015 

European  Environment  Agency  (2016),  Report  No  17/2016:  Environmental  taxation  and  EU 
environmental policies 

Expert  Group  on  Future  Skills  Needs  (EGFSN)  (2016)  The  National  Skills  Bulletin  2016,  available  at: 
http://www.skillsireland.ie/Publications/2016/National%20Skills%20Bulletin%202016.html 

Expert  Commission  On  Domestic  Public  Water  Services  (2016),  Report  on  the  Funding  of  Domestic 
Public Water Services in Ireland November 2016 

Focus  Ireland  (2016),  Why  are  so  many  becoming  Homeless?  https://www.focusireland.ie/privacy-
policy/resource-hub/about-homelessness/ 

72 

 
 
References 

Higher Education Authority (2015), National Plan of Equity of Access to Higher Education 

Insolvency Service of Ireland (ISI) (2015), Statistical Reports, www.isi.gov.ie  

International Monetary Fund, 2009. Balance of Payments and International Investment Position Manual, 
Sixth Edition 

IFAC  (Irish  Fiscal  Advisory  Council) 
http://www.fiscalcouncil.ie/november2016/  

(2016),  Fiscal  Assessment  Report,  November  2016 

Irish  Government  (2016a),  Rebuilding  Ireland:  An  Action  Plan  for  Housing  &  Homelessness,  Pillar  3: 
Build more homes, July 2016 

Irish Government (2016b), National Reform Programme for Ireland 

Irish Government (2016c), Programme for a Partnership Government 

Jones, Lang Lasalle (2016) Property Index, Q3 2016 http://www.jll.ie/ireland/en-ie/Research  

Kiss, A. and A. Vandeplas (2015), ‘Measuring skills mismatch’, Analytical web note 7/2015, European 
Inclusion.  URL: 
Commission,  Directorate-General 
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7860 

for  Employment,  Social  Affairs 

and 

Lawless,  Martina,  Iulia  Siedschlag  and  Zuzanna  Studnicka  (2016),  ‘Expanding  and  Diversifying  the 
Manufactured Exports of Irish-owned Enterprises’ (forthcoming) 

ManpowerGroup (2016), Annual Talent Shortage Survey 2016-2017  

Morgenroth,  E.  (2014)  Projected  Population  Change  and  Housing  Demand:  A  County-level  Analysis, 
ESRI research note, https://www.esri.ie/pubs/RN20140203.pdf  

National Competitiveness Council (2016), Cost of doing business 2016 

National  Economic  and  Social  Council,  2014,  Social  Housing  at  the  Crossroads:  Possibilities  for 
Investment, Provision and Cost Rental, June 2014 

O’Rorke,  G.  (2016),  Characteristics  and  implications  of  the  level  of  household  joblessness  in  Ireland, 
Staff  Paper,  July  2016,  Irish  Government  Economic  and  Evaluation  Service,  Dublin,  Available  at: 
http://igees.gov.ie/wp-content/uploads/2014/11/Household-joblessness-paper-final.pdf 

OECD  (2016),  Weaving  Together  Policies  for  Social  Inclusion  in  Ireland,  OECD  Publishing,  Paris. 
http://dx.doi.org/10.1787/9789264252677-en 

Red  C,  (2016)  SME  Credit  Demand  Survey,  May  2016.  Redomiciled  PLCs  in  the  Irish  Balance  of 
Payments, Central Statistics Office, October 2016 

Revenue  2016  =  An  Analysis  of  Corporation  Tax  Receipts  in  2014-2015,  Revenue  (Irish  Tax  and 
Customs) April 2016 

Research and Innovation Observatory (2016, Country Report Ireland, Joint Research Center, 2016 

Savage  et  al.  (2015)  Making  Work  Pay  More:  Recent  Initiatives,  Budget  Perspectives  2016,  Paper  2. 
www.esri.ie 

73 

 
 
References 

Savage,  M.,  Callan,  T.,  Logue,  C.,  Regan,  M.,  Walsh,  J.R.  (2016),  Distributional  Impact  of  Tax  and 
Welfare Policies: Budget 2017, ESRI Special Article, Dublin 

SMILE Resource Exchange, 2016 

Stehrer,  R.  (coord.)  (2016)  ‘The  Evolving  Composition  of  Intra-Eu  Trade  Over  Time’,  WIIW  for  the 
European Commission, Vienna, URL://ec.europa.eu/DocsRoom/documents/20210  

Sustainable  Energy  Agency  Ireland  (SEAI)  (2016).  Ireland’s  Energy  Targets  Progress,  Ambitions,  & 
Impacts 

World Bank (2016), World Bank Doing Business Report 2017 

74