COMMISSION STAFF WORKING DOCUMENT Country Report Ireland 2018 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 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2018-03-07
Institutions: European Commission, Secretariat-General
Subjects: Ireland, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.3.2018 SWD(2018) 206 final  COMMISSION STAFF WORKING DOCUMENT Country Report Ireland 2018  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 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Summary of the main findings from the Macroeconomic Imbalance Procedure 

in-depth review 

4.  Reform priorities 

4.1.  Public finances and taxation 

4.2.  Financial sector and indebtedness 

4.3.  Labour market, education and social policies 

4.4. 

Investment 

4.5.  Sectoral policies 

Annex A Overview table 

Annex B Macroeconomic Imbalance Procedure Scoreboard 

Annex C Standard tables 

References 

LIST OF TABLES 

Table 1.1: 

Key economic, financial and social indicators - Ireland 

Table 2.1: 

Summary table on 2017 CSR Assessment 

Table 3.1: 

MIP assessment matrix (*) — Ireland 2017 

Table B.1: 

The MIP scoreboard for Ireland (AMR 2018) 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

1 

5 

12 

15 

19 

19 

24 

31 

40 

47 

55 

61 

62 

68 

11 

13 

17 

61 

62 

63 

64 

65 

66 

67 

 
 
 
 
 
LIST OF GRAPHS 

Graph 1.1:  GNI* vs GDP 

Graph 1.2:  Modified Domestic Demand and Employment 

Graph 1.3: 

Employment developments 

Graph 1.4: 

Actual and predicted wage growth based on economic fundamentals 

Graph 1.5: 

Core investment and its components 

Graph 2.1: 

Level of implementation today of 2011-2017 CSRs 

Graph 4.1.1:  Alternative debt indicators (EU countries, 2016) 

Graph 4.1.2:  Bonds and EU-IMF programme loans repayment schedule (end-December 2017) 

Graph 4.1.3:  Charges paid for the use of intellectual property 

Graph 4.2.1:  Profitability of the main domestic banks 

Graph 4.2.2:  NPL reduction by portfolio - domestic banks 

Graph 4.2.3: 

International investment position by institutional sector, non-IFSC 

Graph 4.2.4:  Current account balance benchmark 

Graph 4.2.5:  CA vs CA* 

Graph 4.2.6:  Private debt evolution 

Graph 4.2.7:  Composition of corporate debt 

Graph 4.2.8:  Credit advanced to Irish companies 

Graph 4.2.9:  Households’ financial assets 

Graph 4.2.10:  New SME lending: volumes and interest rates 

Graph 4.3.1:  Unemployment and inactivity as a percentage of the population aged 25-54 

Graph 4.3.2:  Employment rates by level of education 

Graph 4.3.3:  Change in employment by sector 

Graph 4.3.4:  Main social indicators 

Graph 4.3.5:  Progress towards reaching the benchmark of low achievers in reading, 2009-2015 

Graph 4.4.1: 

Total investment and main drivers 

Graph 4.4.2:  Capital expenditure by the general government sector 

Graph 4.4.3:  Labour productivity across sectors and firms, 2014 

Graph 4.4.4:  Distribution of TFP values and means by quintile, indigenous companies vs 

multinationals, 2014 

Graph 4.4.5:  Average growth rate of labour productivity 

Graph 4.5.1:  House price increases 

Graph 4.5.2:  Overvaluation gap with respect to price/income, price/rent and fundamental model 

valuation gaps 

Graph 4.5.3:  Public support for business R&D as % of GDP, 2006 and 2014 

5 

5 

7 

7 

9 

12 

19 

20 

22 

24 

25 

26 

27 

27 

28 

28 

29 

29 

30 

31 

32 

32 

35 

37 

40 

40 

44 

44 

45 

47 

47 

52 

 
 
 
LIST OF BOXES 

Box 1.1: GNI* and other new indicators of Ireland's domestic economic activity 

Box 2.1: Tangible results delivered through EU support to structural change in Ireland 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 4.4.1: Investment challenges and reforms in Ireland 

Box 4.5.1: Policy highlights: Technology Partnerships and Technology/Research Centres 

6 

14 

33 

42 

51 

 
 
 
 
EXECUTIVE SUMMARY 

of 

and 

and 

external 

The  sustained  strong  economic  growth 
in 
Ireland  provides  ample  momentum  to  further 
increase the resilience of the public and private 
sectors. A continued reduction in government debt 
and  deficit  could  create  tailwinds  against  the 
possible  materialization 
risks. 
Moreover,  a  rebalancing  towards  less  volatile 
sources  of  government  revenues  could  ensure  the 
sustainability  of  public  finances  in  the  long  run. 
Improvements in the balance sheets of households, 
continued  
companies 
banks 
deleveraging 
resolving 
non-performing loans. Addressing these challenges 
would  reduce  the  risk  of  a  slowdown,  should  the 
external  environment  and  financial  conditions 
become 
labour 
market,  with  rapidly  subsiding  unemployment, 
brings  to  the  fore  the  importance  of  increases  in 
labour  market  participation,  while  accumulating 
skills  shortages  further  accentuate  the  need  to 
continue  upskilling  efforts.  Ensuring  that  the 
already  broad-based  growth  reaches  all  parts  of 
society, 
remaining 
housing,  social  and  infrastructural  shortcomings, 
remains a government priority (1).  

including  addressing 

less  supportive.  A 

reflect 
in 

tightening 

progress 

the 

The Irish economy continues to grow at a solid 
pace. In the first three quarters of 2017, real GDP 
increased  by  7.4 %  year-on-year  (y-o-y),  well 
above  the  euro  area  average.  It  is  projected  to 
further  increase  by  4.4 %  in  2018  and  3.1 %  in 
2019 (2). Uncertainties persist, primarily related to 
the  outcome  of  the  negotiations  between  the  UK 
and 
the 
international  taxation  environment.  Ireland  is  one 
of  the  most  affected  Member  States  by  the  UK's 
decision  to  leave  the  EU,  given  the  nature  of  the 

the  EU  and  potential  changes 

to 

(1)  This  report  assesses  Ireland’s  economy  in  the  light  of  the 
European Commission’s Annual Growth Survey published 
on 22 November 2017. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
resilient  and 
European  economy  more  productive, 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  boosting 
investment,  pursuing 
structural reforms  and ensuring responsible fiscal policies. 
At  the  same  time,  the  Commission  published  the  Alert 
Mechanism Report (AMR) that initiated the seventh round 
of  the  macroeconomic  imbalance  procedure.  The  AMR 
found  that  Ireland  warranted  an  in-depth  review,  which  is 
presented in this report. 

(2)  Projections  for  2019  are  based  on  a  purely  technical 
assumption that trade relations between the EU-27 and the 
UK  will  remain  unchanged.  This  is  for  forecasting 
purposes only and has no bearing on the talks in the context 
of the Article 50 process. 

1 

all-island economy, Ireland's geographical position 
and the volume of trade between the two countries. 

Domestic economic activity continues to thrive. 
Modified  domestic  demand,  a  new  measure  of 
domestic activity that strips out some of the effects 
of  multinationals,  increased  in  2016  and  the  first 
three  quarters  of  2017,  driven  by  private 
consumption  and  construction  investment.  The 
strong,  broad-based  growth  in  employment  also 
reflects the strength of domestic activity. 

The  labour  market  remains  strong,  with  some 
outstanding  challenges.  In  the  third  quarter  of 
2017,  total  employment  increased by  2.9 %  on  an 
annual  basis,  and  across  almost  all  economic 
sectors. Full-time employment increased by 7.1 % 
as  people  who  had  been  working  part-time  are 
moving  into  full-time  jobs.  The  unemployment 
rate  fell  to  6.7 %  in  2017.  In  the  third  quarter  of 
2017,  very  long-term  unemployment  (over  two 
years)  stood  at  28.9 %  of  all  unemployment, 
somewhat above the EU average. Some challenges 
remain in relation to high inactivity rates and skills 
shortages in certain sectors. Some households also 
continue 
social 
exclusion  and  the  homelessness  rate  continues  to 
increase.  

to  experience  poverty  and 

The  government  has  repeatedly  intervened  to 
tackle  the  undersupply  of  housing,  but  it  will 
take  time  for  the  measures  to  have  an  effect. 
Against  the  backdrop  of  a  limited  housing  stock, 
residential  property  price  growth  accelerated. 
Years  of  low  investment  following  the  economic 
bust  are  taking  their  toll  on  the  availability  of 
supporting  infrastructure  for  residential  sector 
transport), 
(such  as  water  and 
construction 
constraining  housing  supply.  Although  prices  did 
not  seem  overvalued  in  2016,  affordability  is  a 
concern.  

The  government  deficit  is  moving  closer  to 
balance.  The  general  government  deficit 
is 
expected  to  decline  further  in  the  near  future, 
although progress in making public finances more 
resilient has slowed down in recent years. Relying 
on  highly  volatile,  highly  pro-cyclical  sources  of 
revenue remains a risk. 

Ireland  has  made  some  progress  in  addressing 
the  2017  country-specific  recommendations 
fiscal 
regard 
(CSRs).  With 

the 

to 

 
 
                                                           
recommendations, it made some progress in 2017. 
The  proceeds  from  the  sale  of  government  shares 
in  state-owned  banks  have  been  used  to  reduce 
public  debt  and  the  National  Asset  Management 
Agency redeemed all of its government-guaranteed 
debt.  As  regards  the  recommendation  to  limit  the 
scope  and  the  number  of  tax  expenditures  and 
broaden  the  tax  base,  only  a  few  of  the  measures 
taken have the potential to broaden the tax base. A 
new spending review signals progress in enhancing 
the quality of expenditure. Some progress has also 
been  made  in  improving  social  infrastructure  and 
delivering  an  integrated package of  labour market 
activation policies. However, it remains difficult to 
access  affordable,  full-time,  quality  childcare. 
With  regard  to  the  lasting  reduction  of  non-
performing  loans  (NPLs),  Ireland  made  some 
progress  in  2017  as  the  stock  of  NPLs  decreased. 
Insolvency procedures, in- and out-of-court arrears 
resolution  avenues  remain  under-used.  The  credit 
register should become operational in 2018. 

in  reaching 

Regarding  progress 
the  national 
Europe 2020 strategy targets, Ireland is performing 
well  on  the  employment  rate  and  early  school 
leaving targets. It needs to do more on investing in 
R&D, 
emissions, 
increasing  the  proportion  of  renewable  energy, 
improving energy efficiency, reaching the national 
target for tertiary education and reducing poverty. 

reducing  greenhouse  gas 

Ireland  performs  relatively  well  on  most 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights,  while 
challenges remain. Ireland is tackling poverty and 
social  exclusion  and  preventing  early  school 
leaving.  Social  protection  systems  do  relatively 
well  in  reducing  poverty  and  promoting  social 
inclusion.  Work-life  balance  measures 
are 
improving  as  take-up  of  childcare  for  children 
under  three  years  has  increased  in  recent  years. 
Healthcare  and  homelessness  show  significant 
room 
its  many 
improvement.  Despite 
information  and  communication  technology  (ICT) 
graduates, the proportion of the overall population 
having basic digital skills in Ireland remains low. 

for 

findings  of 

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

in-depth 

the 

  Private  debt 

fall, 
improving  the  resilience  of  households  and 

levels  continue 

to 

Executive summary 

businesses. A large part of the stock of private 
debt  in  Ireland  is  attributed  to  multinational 
corporations with  more modest  linkages to the 
domestic  economy.  Domestic  economic  actors 
overall continue to reduce their debt bringing it 
broadly  in  line  with  fundamentals.  Hence,  the 
headline private debt levels somewhat overstate 
the  severity  of  this  imbalance.  The  growth  in 
house  prices 
the  net  worth  of 
households and reduced the number of those in 
negative equity.  

increased 

  Public  debt  continues  to  fall,  but  remains 
high.  As  a  percentage  of  GDP  it  significantly 
declined  to  72.8 %  in  2016,  on  the  back  of 
strong  nominal  GDP  growth.  However, 
including  some 
indicators, 
complementary 
which  strip  out  the  effect  of  multinationals, 
suggest that the burden of public debt remains 
significant  by  historical  and 
international 
standards, exposing Ireland to economic shocks 

  While Ireland's net international investment 
position  remains  very  negative,  risks  to  the 
external  position  of  domestic  sectors  seem 
contained.  The 
country’s  negative  net 
international investment position has improved 
somewhat  after  significantly  deteriorating  in 
2015,  but  remains  large.  The  non-financial 
corporate  sector  contributes  the  most  to  the 
negative  balance,  driven  by  the  activities  of  a 
small number of very large multinationals with 
few implications for the external sustainability 
of  the  domestic  sector.  The  risks  associated 
with the external liabilities of these companies 
are  mitigated  by 
factors  such  as  high 
profitability  and  offsetting  overseas  assets. 
Moreover,  these  liabilities  are  not  linked  to 
Irish  investors.  On  the  other  hand,  the  net 
external  position  of  the  domestic  sectors  has 
improved. 

  On  the  way  to  a  sustained  recovery  of  the 
financial  sector,  legacy  issues  still  create 
constraints.  Domestic  banks  have  remained 
profitable and strengthened their capital ratios. 
They  have  also  further  reduced  their  NPLs, 
even  though  their  stock  remains  considerable 
and  provisioning  coverage  ratios  fairly  low. 
Their  overall  good  performance  allows  for  a 
more  ambitious  NPL 
in 
particular  through  durable  restructurings  and 

reduction  pace 

2 

 
 
write-offs.  Long-term  mortgage  arrears  (over 
two  years  past  due)  remain 
the  biggest 
challenge.  Insolvency  procedures,  in-  and  out-
of-court  options  for  arrears  resolution  remain 
little  used.  A  fully  functioning  credit  register, 
expected in 2018, will be crucial for assessing 
the debt servicing capacities of borrowers.  

  Rapid  house  price  increases  are  observed 
countrywide.  Residential  property  prices  rose 
by 11.6 % y-o-y to November 2017, continuing 
the upward trend of the previous years. Private 
rents  have  continued 
increase, 
to 
sector 
peak.  The 
pre-crisis 
exceeding 
macroprudential 
is 
framework 
expected  to  ensure  that  new credit  is extended 
under  prudent  conditions,  preventing  any 
potential  credit  bubble.  This  is  especially 
important  given  the  current  high  demand  for 
mortgages.  

in  place 

their 

Other key structural issues analysed in this report, 
which  point  to  particular  challenges  for  Ireland’s 
economy, are the following:  

  Broadening the tax base could help improve 
revenue  stability  in  the  face  of  economic 
fluctuations.  In  particular,  taxes  on  corporate 
taxation 
income  as  a  proportion  of 
continued  to  rise.  In  Ireland’s  case  such  taxes 
are highly concentrated and prone to volatility. 

total 

  Debt  overhang  and  uncertainty  in  some 
exporting  sectors  affect  corporate  credit 
demand.  While  some  sectors  are  starting  to 
borrow again, companies that export to the UK 
may be delaying some  of their investment  and 
borrowing  decisions.  Collateral  and  guarantee 
requirements, alongside interest rates above the 
EU average, could be curbing demand further.   

  The strong labour market has had a positive 
impact  on  a  number  of  social  issues,  but 
some  challenges  remain.  Inactivity  is  still  a 
concern, with a large proportion of the working 
age  population  remaining  outside  the  labour 
force.  The 
to  affordable 
childcare  services  forces  many,  in  particular 
women,  into  inactivity.  The  employment  rate 
of people with disabilities is one of the lowest 
in  the  EU.  Skills  shortages  are  becoming 
increasingly  apparent,  most  notably  in  ICT, 

lack  of  access 

Executive summary 

financial  services  and  engineering.  Ireland  has 
a  relatively  low  level  of  the  population  with 
basic  digital  skills.  Many  people  have  yet  to 
reap the benefits of the economic upturn.   

  Some  indicators  suggest  that  Ireland’s  tax 
rules  are  used  by  multinationals  engaged  in 
aggressive  tax  planning  structures.  Ireland 
has  taken  steps  to  amend  some  aspects  of  its 
tax  system  that  may  facilitate  aggressive  tax 
planning  and  is  carrying  out  a  consultation  on 
further changes. However, the absence of some 
from 
anti-abuse 
withholding taxes on dividend payments  made 
by  companies  based  in  Ireland  suggest  that 
Ireland's corporate tax rules may still be used in 
tax avoidance structures.  

the  exemption 

rules  or 

  Addressing 

response, 

emerging 

spatial  planning, 

infrastructure 
bottlenecks  is  essential  for  sustainable  and 
balanced  growth  in  the  future.  Combined 
with  better 
improved 
infrastructure  services,  including  for  transport, 
energy  and  water,  are  critical  enablers  for  an 
the 
appropriate  housing  supply 
enhancement  of  private 
investment  and 
economic  development.  Finally,  infrastructure 
investment  as  well  as  intensified  efforts  in  the 
field of renewables will be essential for Ireland 
to  succeed  in  its  transition  towards  a  low-
carbon and environmentally resilient economy. 
The  new  Project  Ireland  2040  framework 
proposes  a  series  of  measures  to  address  the 
above-mentioned  bottlenecks  and  promote  a 
regionally balanced development model. 

for 

  A  comparatively  costly  healthcare  system, 
compounded  by  an  ageing  population, 
represent 
the 
important  challenges 
healthcare  system.  Demographic  changes  are 
projected to affect Ireland in the coming years, 
in  particular  the  fiscal  sustainability  of  its 
healthcare  system.  Multi-year  budgeting  and 
better  expenditure  control  would  support  the 
much 
universal 
healthcare.  Primary  and  community  care 
services  are  not  yet  capable  of  alleviating  the 
mounting  pressure  on  capacity  within  hospital 
care. 

towards 

needed 

shift 

  The  productivity  of  domestic  companies  is 
lower,  and  growing  at  a  slower  pace,  in 

3 

 
 
Executive summary 

comparison  with 
the  multinationals 
operating in Ireland.  Positive spillovers from 
the  multinationals  appear  when  domestic 
companies  are  integrated  with  them  in  value 
chains.  Spillovers  from 
the  multinationals 
could  be  greater 
if  domestic  companies 
invested more in R&D and innovation. Overall, 
Ireland  is  a  strong  innovator  and  continues  to 
improve its position in international innovation 
rankings,  but  low  public  expenditure  on  R&D 
remains a cause for concern. 

4 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

employment, also reflects the strength of domestic 
economic activity (Graph 1.2). 

Graph 1.2:  Modified Domestic Demand and Employment 

GDP growth 

The  Irish  economy  continues  to  grow  robustly. 
In  the  first  three  quarters  of  2017,  Ireland’s  real 
GDP increased by 7.4 % year-on-year (y-o-y), well 
above  the  euro  area  average. GDP  is  estimated  to 
further  increase  by  4.4 %  in  2018  and  3.1 %  in 
the  headline  figures  remain 
2019.  However, 
volatile and heavily influenced by the activities of 
multinational  enterprises  in  Ireland,  especially  in 
relation  to  contract  manufacturing (3)  and  aircraft 
leasing. 

Graph 1.1:  GNI* vs GDP 

Source: CSO, European Commission 

Output 
is  also 
in  the  domestic  economy 
increasing at a robust pace. In 2016, gross value 
added (GVA), output net of the inputs used for its 
production,  increased  by  5.3 %  y-o-y  in  domestic 
sectors  where  the  presence  of  foreign-owned 
multinationals  is  not  prevalent.  GVA  in  the 
multinationals-dominated  sectors 
increased  by 
4.9 %. A deceleration from the surge in 2015 was 
driven 
contract 
manufacturing.  Industrial  production  data  show 
that  the  output  in  domestic  sectors  declined  by 
0.7%  y-o-y  in  the  first  11  months  of  2017.  Over 
the  same  period,  the  output  in  sectors  dominated 
by  multinationals  fell  by  3.7%,  also  reflecting  the 
slowdown  in  contract  manufacturing  from  the 
previous year (Section 4.2.2).  

contraction 

the 

by 

in 

External  risks  to  the  macro-economic  outlook 
are tilted to the downside. They relate mostly to 
the  outcome  of  the  negotiations  between  the  UK 
and  the  EU  and  changes  to  the  international 
taxation environment.  

Source: CSO 

Domestic  demand  remains  strong.  Modified 
domestic  demand  (Box  1.1),  a  measure  of 
domestic  activity  that  strips  out  some  of  the 
distorting  impact  of  multinationals,  increased  in 
2016 and the first three quarters of 2017, supported 
by 
construction 
investment.  These  factors  are  expected  to  further 
boost  the  underlying  domestic  economy,  and  are 
projected to expand at an average rate of 4 % over 
the  next  two  years.  The  strong  and  broad-based 
growth  in  employment,  in  particular  full-time 

consumption 

private 

and 

(3)  Contract  manufacturing  refers  to  the  production  of  goods 
abroad  on  behalf  of  Irish-domiciled  companies  for 
exporting. 

5 

-10001002003009597990103050709111315Depreciation on aircraft leasingDepreciation on R&D related intellectual property importsFactor income of re-domiciled companiesGross National IncomeModified Gross National Income (GNI*)Gross Domestic ProductEUR billion801001201401601801.41.61.82.02.298000204060810121416Employment (age 20-64)Modified Final Domestic Demand (rhs)Million peopleEUR billion 
 
 
                                                           
 
1. Economic situation and outlook 

Box 1.1: GNI* and other new indicators of Ireland's domestic economic activity 

The Irish Central Statistical Office (CSO) published complementary adjusted measures of national indicators in an 
attempt to account for the effects of globalisation on measuring the Irish economy. In July 2016, the National Income 
and Expenditure Annual Results 2015 showed a massive surge in Irish GDP of more than 26%, due to relocations of a 
number  of  multinational  companies'  (entire)  balance  sheets  to  Ireland.  These  were  dominated  by  intangible  intellectual 
property (IP) assets, which added approximately EUR 300 billion to Ireland's capital stock. While there have always been 
difficulties with GDP in an Irish context, after the level shift in activity in 2015 it became broadly accepted that GDP and 
GNI  do  not  provide  a  complete  understanding  of  the  Irish  economy.  The  CSO  set  up  the  Economic  Statistics  Review 
Group (ESRG) to investigate alternative indicators of domestic economic activity. Based on its recommendations, in July 
2017,  the  CSO  published  an  adjusted  indicator:  the  Modified  Gross  National  Income*  (GNI*  -  read  as  GNI  "star"),  an 
adjusted  Balance  of  Payments  (BoP) and  additional  cyclical  indicators.  Further  metrics  are  to  be  developed  in  the  near 
future. 

Modified Gross National Income (GNI*) is an indicator designed to reflect aspects that distort the aggregate size of 
the domestic economic activity. Table 1 presents the compilation of the new GNI* measure. The transition from GDP to 
GNI has the largest quantitative impact. GNI*  excludes the retained earnings of re-domiciled public limited  companies 
(PLCs)  because  relocation,  often  motivated  by  tax  considerations,  may  not  be  associated  with  substantive  domestic 
economic  activity.  In  addition,  under  the  ESA2010  national  accounting  framework,  intangible  assets,  including  IP,  are 
treated  as  non-financial  assets  subject  to  depreciation.  The  significant  increase  in  2015  investment  therefore  led  to  an 
increase in depreciation charged in Ireland on what is a foreign-owned portion of capital stock. Since the depreciation on 
the foreign-owned capital stock is borne by foreign investors, it should not affect a measure that is intended to capture the 
resources  accruing  to  domestic  residents.  For  this  reason,  GNI*  also  deducts  this  element,  which  accounts  for 
approximately 70% of the gap between GNI and GNI*. The leased aircraft can be viewed as a physical asset for the host 
country. It involves depreciation charged in Ireland but ultimately borne by the (foreign) end user of the aircraft, with little 
or  no  impact  on  the  actual  domestic  economy.  This  is  why  GNI*  also  subtracts  the  depreciation  of  leased  aircraft.  
Furthermore,  it  is  published  only  on  an  annual  basis  and  in  nominal  terms.  While  GNI*  is  intended  as  an  additional 
indicator  to  provide  a  more  comprehensive  picture  of  the  domestic  economy,  GDP  continues  to  be  the  standard 
international measure used. 

Table 1: GDP and transition from GNI to GNI* 

Source: CSO  

Modified total domestic demand is defined as total domestic demand net of trade in aircraft by leasing companies 
and investment in intellectual property. The indicator also measures the domestic economy. It is designed  to be largely 
unaffected by the activities of multinational companies and to be more closely related to employment growth. In order to 
derive this measure, the CSO compiles an indicator for modified gross domestic fixed capital formation (GFCF*) which 
aims  to  better  indicating  the  physical  capital  used  to  produce  domestic  output.  GFCF*  then  replaces  GFCF  in  the 
calculation of modified total domestic demand. 

Modified  current  account  measure  (CA*)  adjusts  for  the  activities  linked  to  multinationals.  It  excludes  from  the 
current account balance (CA) the following: imports of R&D-related IP and aircraft for leasing, the depreciation of this 
foreign-owned  domestic  capital  and  the  factor  income  of  re-domiciled  companies.  Some  multinationals  in  Ireland 
purchase  IP,  or aircraft  for leasing,  from  their parent  company.  In  time,  they  repay  the  costs  from  the  profit  associated 
with  the  IP  or  aircraft  for  leasing.    These  import  costs  are  therefore  not  a  liability  for  Irish  residents  and    should  be 
excluded  from  the  CA.  The  CA*  also  substracts  the  depreciation  of  capital  assets  sometimes  held  outside  Ireland  and 
owned by Irish resident foreign-owned companies (such as IP and aircraft leasing), which is borne by foreign investors. 
This is especially the case if the relocated capital is not used in combination with domestic labour but in combination with 
overseas workers through contract manufacturing arrangements. The income flows on portfolio debt/equity are recorded 
on  a  cash  basis.  This  means  that  if  a  re-domiciled  company  opts  to  retain  its  net  income,  this  is  recorded  as  a  direct 
investment inflow and added to the stock of portfolio equity liabilities. The corresponding outflow is only recorded when 
dividends are paid to the foreign shareholders, and the CA will then decline accordingly. Therefore, if the earnings are 

6 

EUR billion20062007200820092010201120122013201420152016GDP (current prices)185.0197.2187.8170.1167.6171.9175.6180.3194.5262.0275.6less Net factor income from the rest of the world (which includes multinational companies profits) and EU taxes and subsidies-22.8-26.7-25.2-27.9-27.2-32.3-32.2-27.1-28.7-54.8-47.8GNI (current prices)162.2170.5162.6142.2140.4139.6143.4153.2165.9207.2227.7less Factor income  (mainly profits) of re-domiciled companies0.00.0-0.3-1.6-5.3-5.5-7.1-6.5-6.9-4.7-5.8less Depreciation on R&D-related IP imports-0.1-0.1-0.1-0.2-0.3-0.4-0.6-0.7-0.8-25.0-27.8less Depreciation on aircraft related to leasing-1.7-1.8-1.8-1.9-2.2-2.4-2.7-3.0-3.8-4.6-5.0=Modified GNI (or GNI*)160.4168.6160.4138.5132.6131.3133.1143.0154.5172.9189.2 
 
1. Economic situation and outlook 

retained the CA (and GNI) will be inflated by the non-payment of the dividend. In order to discount for the timing effect 
of divided payouts, the CA* subtracts the net incomes of these re-domiciled companies, treating them as income outflows 
regardless of whether they are distributed as dividends or retained.  

The new indicators will not be used as official instruments of economic surveillance, only as complementary where 
relevant.  One  of  the  purposes  of  economic  surveillance  is  to  ensure  that  the  indicators  are  comparable  across  EU 
countries. However, the new indicators represent a specific reaction to some major concerns for Ireland at the moment and 
they can add value to the analysis of the Irish economy. Therefore, they will be used as complementary indicators where 
relevant and possible.  

wages in total income and slightly increasing unit 
labour  costs.  Moderate  wage  developments 
coupled  with  dynamic  employment  growth  could 
indicate a persistent slack in the labour market. 

Graph 1.4:  Actual and predicted wage growth based on 

economic fundamentals 

Labour market 

labour  market  continues  to  perform 
The 
strongly. In the third quarter of 2017, employment 
increased across almost all economic sectors by an 
average  of  2.9 %  y-o-y  (Eurostat  definition,  age 
group  20-64).  Full-time  employment  increased  by 
7.1 %, exceeding the increase in total employment 
as  part-time  workers  start  working  full-time 
(Graph 1.3). The unemployment rate fell to 6.7 % 
in  2017.  With  the  improvements  of  the  labour 
market,  skills  shortages  have  been  reported  in  a 
number of sectors, in particular within information 
and communications technology. 

Graph 1.3: 

Employment developments 

(1) For 2015, the prediction has been set equal to actual 
wage growth by technical assumption to neutralise the 
effects of a statistical revision. 
Source: European Commission AMECO database and 
update of calculations by Arpaia and Kiss (2015). 

Social developments 

Source: European Commission 

Wage  growth  resumed  in  2014  reflecting  the 
economic  recovery,  and  remained  moderate  in 
2016  and  2017.  Nominal  compensation  per 
employee  increased  by  2 %  in  2016,  and  is 
expected to have increased to 2.6 % in 2017 (based 
on  estimates  by  Arpaia  and  Kiss,  2015).  This  is 
consistent  with  productivity  growth,  inflation  and 
the fall in unemployment (see Graph 1.4). It is also 
consistent  with  a  roughly  constant  percentage  of 

7 

Ireland's  social  situation  continues  to  improve. 
Absolute  poverty  levels  and  joblessness  have 
dropped since 2012, but the proportion of people at 
risk  of  poverty  or  social  exclusion  remains  high. 
This is mainly because there is a very high number 
Ireland. 
of 
Homelessness  has  also  increased  in  recent  years, 
with  the  situation  being  exacerbated  by  housing 
shortages (Section 4.4.3). 

low-work-intensity  households 

in 

Wealth inequality is decreasing from high levels 
as market prices of housing assets recover. The 

-250-200-150-100-50050100150Part-timeFull-timeTotalAnnual change in thousand people-6-4-20246820042005200620072008200920102011201220132014201520162017%Prediction based on inflation,productivity and unemploymentActual nominal wage growth 
 
 
Gini coefficient used to measure inequality for net 
wealth  was  75  in  2013,  among  the  highest  in  the 
EU  (4).  However,  this  was  driven  partly  by  high 
levels  of  negative  housing  equity  –  meaning  the 
value  of  the  mortgage  exceeded  the  market  value 
of the housing asset. When households in negative 
equity  are  excluded,  the  Gini  coefficient  falls  to 
65, which is in line with the euro area average. The 
recovery  in  the  value  of  housing  assets  in  recent 
years has led to a reduction in negative equity (see 
Section 4.2.3),  and  consequently  to  a  reduction  in 
wealth inequality. 

Inflation 

Consumer price inflation (HICP) remains fairly 
muted.  Inflation  rose  only  marginally  in  2017  by 
0.3 %. The upward pressure came from increasing 
energy  prices  and  services.  However,  currency 
depreciation  in  the  UK,  from  which  Ireland 
imports  approximately  25%  of  all  goods,  has 
contributed  to  the  persistently  negative  price 
inflation of goods, offsetting increases in the prices 
of  services.  The  negative  price  impetus  coming 
from the goods side is expected to continue in the 
short term. Prices for services and residential rents 
are  expected  to  remain  the  main  positive  driving 
force behind inflation in the next two years. 

Competitiveness 

External  competitiveness  appears 
to  have 
deteriorated  slightly  because  of  exchange  rate 
fluctuations.  The  depreciation  of  sterling 
in 
relation to the euro, contributed to the deterioration 
in  Ireland’s  competitiveness  in  2016.  This  was 
partly offset by weak consumer price inflation.    

External position 

The  activities  of  multinationals  have  a  major 
impact  on  Ireland’s  trade  and  external  sector 
statistics.  Contract  manufacturing  weighed  on 
exports figures in 2017 (5), even though it played a 

(4)  The Gini Coefficient on net wealth measures the extent of 
inequality in the wealth distribution. A Gini of 0 implies all 
households have the same net wealth; a Gini of 100 implies 
all wealth is owned by a single household..  

(5)  In  the  first  three  quarters  of  2017,  exports  of  goods, 
according  to  the  balance  of  payments  (BoP),  declined  by 
0.9%  y-o-y.  Meanwhile,  exports  of  goods,  implied  by  the 
international trade figures, increased by 3.4%. This contrast 
shows  that  the  contract  manufacturing,  estimated  as  the 
difference between exports in total trade balance (BoP) and 

1. Economic situation and outlook 

imports  of 

major positive role in Q3-2017. Overall, in the first 
three  quarters  of  2017,  total  exports  increased  by 
5.1 % y-o-y, mostly driven by exports of services. 
Total  imports  declined  by  5.8 % y-o-y  held  back 
by  extremely  volatile 
intellectual 
property services. As a result, a highly positive net 
external  trade  contributed  significantly  to  GDP 
growth  in  the  first  three  quarters  of  2017.  Under 
the  technical  assumption  of  no  disruption  to 
trading  relations  between  the  EU  and  the  UK, 
exports are projected to increase in line with global 
trade.  Imports  are  predicted  to  gather  momentum 
on the back of strong consumer demand, leading to 
a moderation of the positive impact of net exports 
on GDP growth.  

The  risks  to  the  external  position  of  domestic 
sectors  are  smaller  than  the  headline  figures 
suggest. The headline net international investment 
position  (NIIP)  deteriorated  markedly  in  2015. 
However, this is primarily related to the position of 
non-financial  corporations,  a  sector  dominated  by 
multinationals  with  limited  links  to  domestic 
activity.  By  contrast,  the  international  investment 
position  of  domestic  sectors,  such  as  the  Central 
Bank,  domestic  commercial  banks  and  general 
government,  improved.  Distinguishing  between 
domestic and multinational companies in the non-
financial  sector  is  necessary  to  better  interpret 
these headline figures. The marked deterioration in 
the  external  position  of  multinationals, 
in 
particular in 2015, considered as a whole, does not 
appear to threaten the domestic economy (Section 
4.2.2).  However,  the  high  negative  NIIP  warrants 
continuous monitoring. 

Financial sector 

improved  and 

Irish  banks  have 

The  financial  sector  remains  stable,  but  legacy 
assets remain a challenge. The capital buffers of 
the 
their 
profitability  levels  are  being  maintained  (Section 
4.2.1).  However,  legacy  assets,  overall  subdued 
credit  demand  and  the  interest  rate  environment 
are  preventing  them  from  significantly  improving 
their  profitability.  Their  stock  of  non-performing 
loans  is  declining  but  remains  high,  and  their 
provisioning  levels  are  below  the  EU  average.  In 
particular,  the  resolution  of  long-term  mortgage 

those  shown  by  the  international  trade,  weighed  on  total 
goods  exports  figures  in  2017.  For  more  details  on  trade 
indicators  and  related  ownership-based  adjustments  see 
CSO 2017c. 

8 

 
                                                           
                                                                                   
arrears  is  progressing  at  a  sub-optimal  pace. 
External  uncertainty  is  an  additional  concern  for 
parts of the financial sector with links to the UK. 

While  the  deleveraging  of  the  domestic  private 
sector  is  ongoing,  credit  demand  is  recovering 
for  certain  categories  of  loans.  This  is  the  case 
for  consumer  and  mortgage  loans,  as  well  as  for 
certain corporate activities. In 2017, new mortgage 
lending  increased  by  29 %  on  an  annual  basis. 
House  price  dynamics  have  also  increased  the 
average value of mortgages drawdown. A stronger 
recovery of demand for mortgages could, however, 
be  curbed  by  housing  supply  limitations.  The 
concentration  of  the  banking  sector  and  legacy 
assets  have  resulted  in  interest  rates  somewhat 
above  the  euro  area  averages.  Corporate  loans 
account  for  over  40 %  of  domestic  banks’  new 
lending, but net lending remains negative as SMEs 
continue  to  deleverage  (Section  4.2.5).  State-
supported  credit  measures  are  being  reshaped  to 
better  address  companies’  needs,  in  particular 
those of exporters to the UK. 

Investment and housing market 

investment 

Headline 
figures  remain  very 
volatile and should be interpreted with caution. 
Much of the surge in investment in 2016 (61 % y-
o-y),  attributable  to  intangible  assets,  was  related 
to intellectual property services, with no impact on 
GDP  because  these  services  are  imported.  Total 
investment  (gross  fixed  capital  formation)  in  the 
Irish economy declined by 15.6% y-o-y in the first 
three  quarters  of  2017,  but  the  quarterly  profiles 
have  been  extremely  volatile.  Investment 
in 
aircraft  has  also  contributed  to  the  swings  in  total 
investment.  

that 

core 

suggests 

Evidence 
domestic 
investment  continues  to  gain  momentum.  In 
particular, investment in residential property in the 
first  three  quarters  of  2017  increased  by  14.9 %, 
supported by government policies (Graph 1.5). The 
recent  dip  in  core  machinery  and  equipment 
investment  may  be  a  sign  that  investors  are 
reacting  to  external  uncertainties  (DBEI,  2017). 
The  European 
Investment  Bank  confirms  a 
deteriorating outlook for investment by companies, 
due largely to global uncertainties (EIB 2017). 

1. Economic situation and outlook 

Graph 1.5:  Core investment and its components 

Source: CSO 

the  Capital  Investment  Plan, 

Public investment is recovering. In its Mid-term 
the 
Review  of 
government  announced  an  additional  EUR  6 
billion for public investment over the period 2018-
2021, on top of the EUR 42 billion allocated in the 
initial  2015  Plan.  Capital  expenditure  is  now 
expected to reach 2.5 % of GDP in 2021. In 2018, 
the  government  plans  to  publish  a  new  10-year 
National  Investment  Plan  for  the  period  2018-
2027. 

In 

growth  has 
Residential  property  price 
accelerated  recently. 
terms  of  volume, 
residential  building  and  construction  output 
increased  by  37.7 %  y-o-y  in  the  third  quarter  of 
2017,  albeit  from  a  very  low  base.  Based  on 
current  estimates  (6),  market  participants  expect 
annual  house  completions  in  the  order  of  23 000 
units  in  2018.  The  number  of  house  completions 
seems  unlikely 
level  required, 
estimated in the range of 23 000 (rising to 32 000 
by  2024)  (Duffy  et  al,  2016)  to  50 000  (Lynons, 
2017)  new  homes  per  year.  The  overall  stock  of 
residential properties listed for rent has fallen. All 
these  factors  are  contributing  to  rising  prices  and 
rents  (Section  4.5.1).  House  prices  are  71.6 % 
higher  than  their  through  in  2013  and  the  price 
increases  accelerated  in  2017,  putting  pressure  on 
affordability. 

to  reach 

the 

(6)  This  is  based  on  the  official  housing  completion  figures 
estimated  using  new  connections  to  the  electricity  grid. 
There  are  some  widely  acknowledged  doubts  about  the 
accuracy of these estimates. 

9 

0200040006000800010000120001400013Q113Q213Q313Q414Q114Q214Q314Q415Q115Q215Q315Q416Q116Q216Q316Q417Q117Q2Intangible Assets excluding R&D related IP importsCore Machinery and EquipmentAll Building &ConstructionModified Gross Domestic Fixed Capital FormationEUR million 
 
                                                           
1. Economic situation and outlook 

uncertainties and the volatility of some sources of 
government revenues. 

Relying  on  volatile,  highly  pro-cyclical  sources 
of  revenue  remains  a  risk.  The  majority  of 
revenue-raising  measures  introduced  in  Budget 
2018  are  biased  towards  uncertain  tax  bases.  In 
particular,  the  increase  in  the  stamp  duty  rate  on 
commercial  property  purchases,  although  an 
additional yield, increases reliance on transaction-
based  taxes.  In  the  recent  past,  these  have  proved 
to be an unstable and highly pro-cyclical source of 
government  revenue.  The  reduction  in  capital 
intangible  assets  may  help 
allowances 
smoothen  corporate 
time. 
tax 
However,  it  will  not  impact  the  overall  tax 
receipts. 

revenue  over 

for 

Public debt, as a percentage of GDP, continues 
to  fall,  but  remains  elevated.  Gross  general 
government  debt  is  expected  to  have  declined  to 
69.6 %  of  GDP  in  2017,  from  72.8 %  of  GDP  in 
2016, and to further decline to 69.1 % in 2018 and 
67.2 %  of  GDP  in  2019.  This  is  contingent  on 
continued  robust  GDP  growth  and  the  realisation 
of 
surpluses.  However, 
complementary indicators, including debt-to-GNI* 
(Box  1.1),  show  that  the  burden  of  public  debt 
remains  considerable  (Section  4.1.1).  Favourable 
market  conditions  and  the  long-term  maturity  of 
the  debt  stock  are  expected  to  smooth  future 
refinancing operations. 

primary 

budget 

in 

Lasting housing shortages are being addressed, 
but it will take time for the measures to have an 
effect.  Many  companies  consider  the  housing 
infrastructure in their region inadequate. The slow 
growth 
is  a  direct 
total  housing  stock 
consequence  of  the  crisis  and  the  breakdown  in 
construction  production  capacity,  as  well  as 
bottlenecks  in  supporting  infrastructure.  Housing 
pressures are most chronic in Dublin.  Supply-side 
actions 
five-year 
Rebuilding  Ireland  Action  Plan  include  targeted 
enabling 
to  open  up 
strategic  residential  sites,  mainly  in  the  cities, 
activation of state-owned sites as well as fast-track 
planning procedures to speed up decision-making. 
The  new  National  Planning  Framework  could 
facilitate a more stable housing market by enabling 
a  coherent  spatial  distribution  of  housing  and 
infrastructure.  

infrastructure  provision 

government’s 

under 

the 

Public finances 

The  government  deficit  is  moving  closer  to 
balance.  The  general  government  deficit 
is 
expected  to  have  reached  0.4 %  of  GDP  in  2017, 
an  improvement  of  0.3  pps  compared  to  the 
previous  year’s  deficit.  Taking  into  account  the 
package of measures announced in the 2018 Draft 
Budgetary Plan, the deficit is still expected to fall 
further  to  0.2 %  in  2018  due  to  the  resilient 
outlook for GDP and domestic demand. However, 
risks  to  the  budgetary  projections  are  on  the 
downside.  They  relate  mainly  to  macroeconomic 

10 

 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators - Ireland 

(1)  NIIP excluding direct investment and portfolio equity shares  
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The metadata on tax rates  is available at: http://ec.europa.eu/eurostat/cache/metadata/en/earn_net_esms.htm  
Source: Eurostat and ECB as of 30 Jan 2018, where available; European Commission for forecast figures (Winter forecast 2018 
for real GDP and HICP, Autumn forecast 2017 otherwise) 

11 

2004-072008-122013-1420152016201720182019Real GDP (y-o-y)5.9-0.84.925.65.17.34.43.1Potential growth (y-o-y)4.20.12.724.35.05.14.94.7Private consumption (y-o-y)6.5-1.20.94.23.2...Public consumption (y-o-y)2.9-2.61.52.25.2...Gross fixed capital formation (y-o-y)8.3-6.16.528.260.8...Exports of goods and services (y-o-y)6.72.28.638.44.6...Imports of goods and services (y-o-y) 8.20.27.626.016.4...Contribution to GDP growth:Domestic demand (y-o-y)5.6-2.71.98.014.1...Inventories (y-o-y)0.00.00.6-0.50.2...Net exports (y-o-y)-0.31.92.418.6-9.2...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)1.2-1.60.31.71.51.81.71.5Capital accumulation (y-o-y)2.10.70.518.61.61.51.61.6Total factor productivity (y-o-y)0.91.02.04.01.91.81.71.6Output gap2.9-2.8-1.41.81.91.60.6-0.9Unemployment rate4.812.912.99.98.46.66.05.8GDP deflator (y-o-y)1.9-1.50.37.30.00.51.11.3Harmonised index of consumer prices (HICP, y-o-y)2.50.60.40.0-0.20.30.91.1Nominal compensation per employee (y-o-y)5.10.01.02.12.02.62.52.4Labour productivity (real, person employed, y-o-y)1.52.02.722.52.3...Unit labour costs (ULC, whole economy, y-o-y)3.6-1.9-1.7-16.6-0.20.70.81.2Real unit labour costs (y-o-y)1.7-0.4-2.0-22.3-0.20.2-0.30.0Real effective exchange rate (ULC, y-o-y)3.2-4.1-1.3-22.40.41.72.2-0.6Real effective exchange rate (HICP, y-o-y)1.4-2.20.4-6.71.30.11.8.Savings rate of households (net saving as percentage of net disposable income)-0.15.73.82.21.9...Private credit flow, consolidated (% of GDP)30.77.10.6-3.1-19.0...Private sector debt, consolidated (% of GDP)177.1260.3273.3306.5278.1...of which household debt, consolidated (% of GDP)85.7107.587.757.252.0...of which non-financial corporate debt, consolidated (% of GDP)91.4152.8185.6249.3226.1...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).8.317.311.710.3...Corporations, net lending (+) or net borrowing (-) (% of GDP)2.49.55.312.52.62.32.32.6Corporations, gross operating surplus (% of GDP)34.634.840.453.353.153.453.854.0Households, net lending (+) or net borrowing (-) (% of GDP)-9.10.81.0-0.1-0.5-0.9-1.4-1.9Deflated house price index (y-o-y)8.9-13.17.011.06.6...Residential investment (% of GDP)12.34.02.21.92.1...Current account balance (% of GDP), balance of payments-3.9-3.91.910.93.92.92.52.3Trade balance (% of GDP), balance of payments10.414.918.333.122.0...Terms of trade of goods and services (y-o-y)-1.1-0.6-1.14.5-0.2-0.20.20.1Capital account balance (% of GDP)0.20.1-2.0-0.5-1.6...Net international investment position (% of GDP)-31.4-120.7-146.3-195.1-176.2...Net marketable external debt (% of GDP) (1)1.3-231.1-319.4-228.2-233.5...Gross marketable external debt (% of GDP) (1)950.91388.41520.31312.21277.4...Export performance vs. advanced countries (% change over 5 years)9.9-0.7-3.643.055.3...Export market share, goods and services (y-o-y)-2.8-3.47.439.82.6...Net FDI flows (% of GDP)11.2-3.8-2.8-16.35.3...General government balance (% of GDP)1.5-14.7-4.9-1.9-0.7-0.4-0.2-0.2Structural budget balance (% of GDP).-7.8-4.3-2.1-1.9-1.3-0.50.3General government gross debt (% of GDP)25.584.0112.076.972.869.969.167.2Tax-to-GDP ratio (%)31.829.129.623.923.823.823.823.9Tax rate for a single person earning the average wage (%) (3)21.919.820.019.519.3...Tax rate for a single person earning 50% of the average wage (%) (3)7.14.53.63.13.1...forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

implementation  of 

Progress  with 
the 
recommendations  addressed  to  Ireland  in  2017 
(7)  has  to  be  seen  in  a  longer  term  perspective 
since the introduction of the European Semester 
in 2011. Looking at the multi-annual assessment of 
the  implementation  of  the  CSRs  since  these  were 
first  adopted,  80  %  of  all  the  CSRs  addressed  to 
Ireland  have  recorded  at  least  'some  progress'.  20 
% of these CSRs recorded 'limited' or 'no progress' 
(see  Figure  2.1).  Labour  market  policies  such  as 
job  creation  and  life-long  learning  have  been 
among the most successful. 

Graph 2.1: 

Level of implementation today of 2011-2017 
CSRs 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact 
(2) The multiannual CSR assessment looks at the 
implementation until 2018 Country Report since the CSRs 
were first adopted. 
(3) The assessment excludes the years when Ireland was 
under a macro-economic adjustment programme 
Source: European Commission 

Efforts with regard to the structural part of the 
fiscal  country-specific  recommendation  (CSR) 
are  mixed.  Ireland  has  achieved  considerable 
success  in  stabilising  its  public  finances  and  has 
been able to ensure a sustainable correction of the 
excessive  deficit.  The  government  deficit  has 
improved  from  3.6  %  in  2014  to  0.7  %  in  2016. 
The structural balance has also improved, but more 
slowly  in  recent  years.  Limited  progress  has  been 
made  in  broadening  the  tax  base.  Expenditure 
ceilings  now 
into  account  demographic 
pressures and carry-over effects, but their repeated 
changes remain a concern for budgetary execution. 
Measures  have  been  taken  to  increase  the  cost-
effectiveness of the healthcare system but many of 
them  are  still  in  their  infancy.  Public  investment 

take 

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

past, see in particular Section 4.  

related  deficiencies 

started to increase in 2014 and the government has 
outlined  some  of  its  investment  priorities  until 
2021.  The  insufficient  supply  of  housing,  as  well 
infrastructure  and 
as 
planning,  have  become  more  pressing  for  both 
economic  and  social  reasons.  The  government  is 
adopting  measures  to  support  supply,  including 
increasing  the  provision  of  social  housing  units 
and the vacant site levy. 

in 

reforms  over 

The  labour  market  recovery  has  also  been 
supported  by  CSR  implementation  since  2014. 
Ireland  has  implemented  a  range  of  active  labour 
market 
recent  years.  Support 
programmes  for  jobseekers  have  now  been  fully 
rolled  out.  Intreo  (Irish  Public  Employment 
Service)  centres  offering  activation  and  social 
protection measures have been set up. Reforms of 
further education and training, aimed at promoting 
re-skilling  and  up-skilling,  have  also  made 
continuous  progress.  Ireland  has  also  achieved 
some  success  in  addressing  child  poverty  by,  for 
example,  improving  inclusion  programmes.  The 
Housing  Assistance  Programme  and  the  Back  to 
Work Family Dividend have reduced disincentives 
to  return  to  work.  It  remains  difficult  to  access 
affordable,  full-time,  quality  childcare,  although 
the  situation  did  improve  in  2017.  The  policy 
measures  undertaken  are  in  line  with  the  EAR  3 
that  emphasizes  the  promotion  of  quality  job 
creation,  equal  opportunities  and  access  to  labour 
market,  fair  working  conditions,  as  well  as  social 
protection and inclusion. 

Progress  in  implementing  the  financial  sector 
CSR  has  been  made  since  2014,  but  the  high 
stock  of  non-performing  loans  (NPLs)  remains 
a  burden.  The  stock  of  NPLs  has  decreased 
considerably  but  their  ratio  to  total  gross  loans 
remains among the highest in the EU and the pace 
of  reduction  has  slowed  down  somewhat.  Long-
term  impaired  mortgages  have  proven  to  be  the 
most  difficult  to  restructure,  with  most  of  these 
cases  still  at  some  stage  of  the  lengthy  legal 
process.  The  supervisor  is  closely  monitoring  the 
banks’  non-performing  loan  reduction  strategies 
and  their  restructuring  practices.  Several  policy 
measures have been introduced to support debtors 
in  distress  and  increase  the  number  of  personal 
insolvency  arrangements,  but  take-up  of  these 
measures  remains  limited  overall.  The  central 

12 

No Progress10%Limited Progress10%Some Progress46%Substantial Progress27%Full Implementation7% 
 
 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2017 CSR Assessment 

Source: European Commission 

credit  register  is  supposed  to  be  ready  for  use  in 
early 2018. 

some (8)  progress 

Ireland  has  made 
in 
addressing  the  2017  CSRs.  Since  the  CSR 
adoption  in  July  2017,  some  windfall  gains  have 
been  used  to  accelerate  the  reduction  of  public 
debt,  but  the  country  has  taken  measures  with 
mixed  impact  on  the  tax  base.  This  means  that 
some progress was made on CSR 1. With regard to 
CSR  2,  which  is  reflective  of  both  EAR  2  and 

(8)  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.   

of 

the 

EAR  3,  a  new  spending  review  process  has 
improved 
expenditure. 
quality 
Improvements  have  also  been  made  in  social 
infrastructure and  an  integrated  package  of  labour 
market  activation  policies  has  been  proposed.  
However,  access  to  quality  childcare  and  the 
labour  market  participation  of  particular  groups, 
many 
remain 
problematic. Ireland has also made some progress 
on CSR 3. The stock of NPLs has continued to fall 
long-term 
but 
high,  while 
remains 
sustainability  and 
restructuring 
solutions  has  yet  to  be  proven.  As  noted  in  the 
EAR  4,  a  tangible  acceleration  of  NPL  resolution 
contributes to overall risk reduction.  

requiring  upskilling 

resilience  of 

support, 

the 

13 

Ireland Overall assessment of progress with 2017 CSRs:  Some progress CSR 1: Pursue a substantial fiscal effort in 2018 in line with the requirements of the preventive arm of the Stability and Growth Pact. Use any windfall gains arising from the strong economic and financial conditions, including proceeds from asset sales, to accelerate the reduction of the general government debt ratio. Limit the scope and the number of tax expenditures and broaden the tax base. Some progress   Some progress made in reducing the debt-to-GDP ratio.   Limited progress made in broadening the tax base.  CSR 2: Better target government expenditure, by prioritising public investment in transport, water services, and innovation in particular in support of SMEs. Enhance social infrastructure, including social housing and quality childcare; deliver an integrated package of activation policies to increase employment prospects of low-skilled people and to address low work intensity of households. Some progress   Some progress made in improving the quality of expenditure.   Some progress made in relation to social housing, and the affordability and accessibility of quality childcare but there are still concerns.  Some progress made, with the presentation of the Action Plan for Jobless Households, but groups furthest away from the labour market still require an integrated approach to helping them enter it.  CSR 3: Encourage a continued and more durable reduction in non-performing loans through resolution strategies that involve write-offs for viable businesses and households, with a special emphasis on resolving long-term arrears. Some progress   Some progress has been made as regards the continued and durable reduction of non-performing loans.     
                                                           
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: Tangible results delivered through EU support to structural change in Ireland 

Ireland is a beneficiary of European Structural and Investment Funds (ESI Funds) support and can 
receive up to EUR 3.4 billion until 2020. This represents around 7% of public investment1 annually over 
the period 2014-2018. By 31 December 2017, an estimated EUR 2.6 billion (79 % of the total) was allocated 
to projects on the ground. This has paved the way for over 31 000 enterprises (50% of the target) to have 
received  support  and/or  management  and  marketing  training,  for  over  850  enterprises  engaged  with  co-
funding  strategic  research  centres  and  over  550  new  researchers employed  in  supported  entities;  over  830 
new and 20 000 existing enterprises are supported, including for the creation of over 2 700 additional jobs 
and 36 000 trained persons for SMEs; over 400 000 people benefit from training and education programmes; 
and 500 farm partnerships have been created, leading to generational renewal in agriculture. 

implement  country-specific 
structural  policy  challenges  and 
ESI  Funds  help  address 
recommendations.  These  include  prioritising  public  investment  in  innovation  in  particular  in  support  of 
SMEs,  incentivising  employment  and  increasing  the  flexibility  of  the  labour  market  and  labour  market 
access. The ESI Funds also support the implementation of CSRs by helping strengthen activation measures, 
innovation  and  research.  ESI  Funds  address  wider  structural  obstacles  to  growth  and  competitiveness, 
including upskilling people within and outside the labour force in order to meet future skill needs, enlarging 
the coverage of superfast broadband; incentivising innovation and private investments; and supporting and 
training  workers  of  several  thousand  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,  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. ESI Funds are also mobilised to 
improve the digital skills of the working age population which is highlighted as a challenge for Ireland in the 
Social Scoreboard supporting the European Pillar of Social Rights. 

Ireland  is  advancing  in  the  take  up  of  the  European  Fund  for  Strategic  Investments  (EFSI).  As  at 
December 2017, the overall financing volume of operations approved under the EFSI amounted to EUR 982 
million,  which  is  expected  to  trigger  total  private  and  public  investment  of  EUR  3.9  billion.  More 
specifically, 14 projects involving Ireland have been approved so far under the Infrastructure and Innovation 
Window  (including  7  multi-country  projects),  amounting  to  EUR  733  million  in  EIB  financing  under  the 
EFSI. This is expected to trigger EUR 2.6 billion in investments. Under the SME Window, six agreements 
with  financial  intermediaries  have  been  approved  so  far.  European  Investment  Fund  financing  enabled  by 
the EFSI amounts to EUR 249 million, which is expected to mobilise approximatively EUR 1.3 billion in 
total investment. Over 13 600 smaller companies or start-ups will benefit from this support. Energy ranks 
first in terms of operations and volume approved, followed by SMEs, social and environment. 

Funding under Horizon 2020, the Connecting Europe Facility and other directly managed EU funds is 
additional to the ESI Funds. By the end of 2017, Ireland has signed agreements for EUR 96 million for 
projects under the Connecting Europe Facility.  

https://cohesiondata.ec.europa.eu/countries/IE 

(1) Public investment is defined as gross fixed capital formation + investment grants + national expenditure on agriculture 

and fisheries. 

important 

ESI  Funds  are 
in  addressing  key 
challenges to inclusive growth and convergence in 
Ireland,  notably  by  prioritising  public  investment 
in  innovation  in  support  of  SMEs  throughout  the 
country, supporting institute-company cooperation 
to  make  Irish-owned  firms  more  competitive  to 
produce products and services in demand in global 
markets  and  incentivising  innovation  and  private 
investments.  ESI  Funds  are  also  instrumental  for 

upskilling the labour force in order to meet future 
skill needs, increasing the flexibility of the labour 
market and labour market access. 

14 

 
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE 

MACROECONOMIC IMBALANCE PROCEDURE IN-DEPTH 
REVIEW 

as 

stock 

identified 

liabilities, 

The  in-depth  review  for  the  Irish  economy  is 
presented  in  this  report.  In  spring  2017,  Ireland 
was 
having  macroeconomic 
imbalances, in particular relating to the high levels 
of  private  and  public  debt,  the  negative  net 
high 
the 
external 
of 
non-performing 
the  rapidly  rising 
loans  and 
property prices. The 2018 Alert Mechanism Report 
concluded  that  an  in-depth  review  should  be 
undertaken  for  Ireland  to  assess  developments 
relating to identified imbalances. Analyses relevant 
for  the  in-depth  review  can  be  found  in  the 
following  sections:  public  debt  in  Section  4.1.1, 
financial  sector 
in  Section  4.2.1, 
imbalances 
external  imbalances  in  Section  4.2.2,  private 
indebtedness  in  Section  4.2.3,  and  the  property 
market in Section 4.5.1 (9). 

3.1 Imbalances and their gravity 

remains 

sector  debt 

fewer  connections 

While  private 
a 
vulnerability, the underlying flows signal strong 
continued deleveraging. A large part of the stock 
of  private  debt  is  attributable  to  multinational 
corporations  with 
the 
to 
the  domestic 
domestic  financial  system  and 
economy as such. There is continued evidence that 
domestic economic actors are still deleveraging in 
general,  with  some  credit  recovery  in  specific 
categories  such  as  larger  corporate  and  mortgage 
loans. The rise in housing prices increased the net 
worth  of  households  and  reduced  the  number  of 
those  in  negative  equity,  but  certain  cohorts  of 
borrowers remain particularly vulnerable. 

Irish  public  indebtedness  has  decreased  in 
recent  years,  while  remaining  elevated.  As  a 
proportion of GDP it has significantly declined, to 
72.8 %  in  2016,  on  the  back  of  strong  GDP 
growth.  However,  in  Ireland’s  case,  the  GDP 
figure  overstates  the  actual  size  of  the  domestic 
economy.  Measured  as  a  proportion  of  GNI*, 
public debt amounted to 106 % in 2016. Although 
policy  measures  are  being  taken  to  make  public 
finances  more  resilient,  high  public  debt  makes 
Ireland vulnerable to economic shocks. 

(9)  An  asterisk  indicates  that  the  analysis  in  the  section 

contributes to the in-depth review under the MIP. 

The  stock  of  NPLs  decreased  steadily  in  the 
year  to  June  2017,  albeit  more  slowly  than 
before.  The  aggregate  NPL  ratio  for  domestic 
banks  was  14.4 %  at  the  end  of  June  2017,  down 
from 17.2 % in the previous year. The reduction in 
the stock of NPLs is the result of a combination of 
restructuring  activities  and  portfolio  sales,  with 
varying  degrees  of  success  among  individual 
to  be  a 
banks.  Long-term  arrears  continue 
challenge,  accounting  for  more  than  half  of  total 
mortgage  NPLs  and  more  than  a  third  of  total 
NPLs.  

The  country’s  very  negative  net  international 
investment  position  (NIIP)  is  improving.  After 
significantly  deteriorating  in  2015  to  -244 %  of 
GDP, it recovered to -170 % in the third quarter of 
2017.  While  the  risks  to  the  external  position  of 
domestic  sectors  seem  contained,  it  is  difficult  to 
assess them fully. 

Persistent  supply  shortages,  coupled  with 
increasing  demand,  continue  to  fuel  property 
price increases. After two years of already strong 
increase, real house prices grew by 6.6 % in 2016  
and continued to increase in 2017. This is a trend 
observed  countrywide.  House  prices  do  not  yet 
seem  to  be  overvalued,  but  affordability  may 
become  a  concern.  Supply  shortages  remain  the 
prime  driver  of  the  increase  in  house  prices  and 
rents.  While  supply  is  forecast  to  fall  short  of 
demand  for  some  time,  construction  activity  is 
gaining  momentum.  Starting  from  a  low  base, 
housing  completions  are  estimated  to  have  picked 
up by 42.3 % y-o-y in November 2017.  

3.2 Evolution, prospects and policy responses 

Domestic  private  sector  deleveraging  could  be 
reaching a turning point for some categories of 
borrowers.  While  debt  reduction 
is  overall 
expected to continue, some firms are seeking credit 
again. Household debt also stopped contracting in 
2017. However, credit expansion for both of these 
categories  is  limited  by  current  housing  supply 
shortages 
external 
as  well 
uncertainty for some businesses. 

as  heightened 

15 

 
 
                                                           
4.1. Public finances and taxation 

introduced 

Some  measures  have  been 
to 
accelerate  the  reduction  of  public  debt.  The 
2018 Draft Budgetary Plan estimates gross debt to 
have fallen to 70.1 % of GDP in 2017 and to reach 
69.0 %  in  2018,  contingent  on  continued  strong 
GDP growth and the realisation of primary budget 
surpluses.  The  government  has  also  used  some 
proceeds,  notably  income  from  the  sale  of  shares 
in state-owned banks, to accelerate debt reduction. 

financing 
in 

and 
investment 

resources 
for 
development 
commercial 
housing.  The 
government  published  draft  guidelines  including 
measures  reducing  some  restrictions  on  apartment 
building, to make it more attractive and affordable. 
The 2017 review of mortgage-related measures left 
the existing macroprudential framework largely in 
place. 

in-court 

procedures, 

increased  since 

Insolvency 
and 
out-of-court  arrears  resolution  avenues  remain 
under-used.  The  number  of  personal  insolvency 
applications  has 
the  Abhaile 
aid-and-advice scheme was set up. However, there 
has been an increase in creditors’ rejections of the 
proposed insolvency arrangements, which transfers 
the  cases  to  court,  reducing  the  number  of 
arrangements  concluded.  Collateral  repossessions 
are  still  quite  rare.  The  credit  register  should 
become fully operational in 2018. 

turned  positive 

The  external  position  of  the  domestic  sectors 
has  improved.  As  banks  restored  their  access  to 
market funding, the NIIP for the domestic banking 
sector 
in  2016  and  further 
increased  in  2017.  This  in  turn  improved  the 
Central  Bank’s  net  external  position,  which  stood 
at  6.5 % of GDP  in  the  second quarter  of 2017,  a 
5.5  pps  annual 
improvement.  The  general 
government  position  remains  negative  but  is 
improving.  Overall,  the  predominantly  negative 
level  of  its  NIIP  appears  to  be  driven  by  the 
activities  of  multinationals  in  Ireland,  with  few 
implications  for  the  sustainability  of  the  domestic 
economy (Section 4.2.2). 

The  government  has  repeatedly  intervened  in 
the  residential  property  market  to  help  boost 
supply, but it will take time for the measures to 
have  an  effect.  Building  on  Rebuilding  Ireland  – 
Action  Plan  for  Housing  and  Homelessness  (see 
Country Report 2017), the 2018 Budget envisages 
a  number  of  additional  measures  aimed  at 
addressing  the  housing  shortage,  including  social 
housing and changes to the vacant site levy. A new 
National Planning Framework, intended to replace 
the 2002 National Spatial Strategy, could facilitate 
a  more  stable  housing  market  by  enabling  a 
coherent  spatial  distribution  of  housing  and 
infrastructure. Other measures include speeding up 
the  planning  permission  process,  making  land  in 
state/semi-state ownership available for residential 

3.3 Overall assessment 

the  deficit 

the  negative  net  position  of 

The  levels  of  external,  public  and  private  debt 
and  the  share  of  NPLs  are  a  source  of 
vulnerability for the economy. After declining in 
2016, household debt remained broadly unchanged 
in  2017  against  the  background  of  a  recovery  in 
credit  demand,  while  most  domestic  companies 
continued  reducing  their  debt.  Public  debt  is  on  a 
firm  downward 
is 
trajectory  and 
projected  to  move  closer  to  balance.  The  level  of 
NPLs is declining and the banks’ capital positions 
have  improved,  which  makes  them  well  placed  to 
further  intensify  NPL  restructuring  efforts.  The 
country’s very negative NIIP is by and large due to 
the operations of some multinational companies in 
2015  and 
the 
International  Finance  Services  Centre  (IFSC)  (10), 
with  limited  exposure  to  the  domestic  sector,  and 
therefore  to  its  external  sustainability.  Property 
prices  continued  to  increase  over  the  course  of 
2017 but to date there is no significant evidence of 
overvaluation. Unlike in the pre-crisis period, bank 
credit  is  not  driving  current  price  developments. 
Comprehensive  policy  measures  have  been  taken 
to  address  these  vulnerabilities.  They  include 
reducing government debt by using windfall gains 
and  measures  to  reduce  the  high  stock  of  NPLs. 
The  government  has  repeatedly  intervened  to 
tackle the undersupply of housing, but it will take 
time 
to  have  an  effect. 
Macroprudential rules have also been put in place 
to ensure the resilience of households and banks by 
preventing  unsustainable  credit  growth.  High 
uncertainty  surrounds  the  final  outcome  of  the 
negotiations between the UK and the EU. Possible 
changes  to  international  tax  and  trade  policies 
could also be a source of asymmetric shock. 

the  measures 

for 

(10)  The  International  Finance  Services  Centre  is  a  hub  for 
international financial transactions that has little connection 
with the financing of the domestic economy. 

16 

 
 
                                                           
4.1. Public finances and taxation 

Table 3.1: 

MIP assessment matrix (*) — Ireland 2017 

(Continued on the next page) 

17 

  Severity of the challenge Change and prospects Policy response  Imbalances (unsustainable trends, vulnerabilities and associated risks) Private debt  Private sector consolidated debt stood at 267.3 % of GDP in June 2017.  At end-June 2017, private sector debt stood at 214 % of GDP and 53.4 % of GDP for corporates and households respectively.  It is difficult to precisely disentangle the corporate debt component of private debt held by indigenous Irish companies and that connected to foreign-owned/re-domiciled ones (Section 4.2.3)., The debt held by these firms strongly inflates the overall private debt levels and consequently, the severity of the imbalance.  Household debt stopped decreasing in mid-2017, on the back of a recovery in credit demand, mostly for mortgages. Deleveraging is aided by strong real and nominal GDP growth. Rising property prices have led to an increase in the net worth of households and reduced the number of households in negative equity, but pockets of vulnerability remain.  Some Irish companies have started borrowing again, but real-estate legacy debt repayments are still dominant. This is also reflected in a significant decrease of indebted SMEs, from 77% in September 2013 to 50% three years later. Both households' and indigenous companies' corporate debt levels seem close to what fundamentals would suggest. Applications for personal insolvency procedures have increased slightly as a result of the government-backed Abhaile aid-and-advice scheme for distressed mortgage debtors.  Public debt  Gross general government debt remained high at 72.8 % of GDP in 2016. However, public debt is subject to low interest rates and average debt maturity was 12 years at the end of 2016. This mitigates risks and reduces refinancing needs in the short-term (Section 4.1.1).   Gross general government debt fell by 4.1 pps in 2016, mostly due to high nominal GDP growth, a decrease in the headline deficit and asset operations. It is projected to fall further as a proportion of GDP to 69.6 % in 2017, 69.1 % in 2018 and 67.2 % in 2019.   In 2016, the general government deficit fell to 0.7 % of GDP. It is projected to have fallen to 0.4 % of GDP in 2017 and to further decrease to 0.2 % of GDP in 2018. Taking into account one-off factors, the underlying deficit in 2016 was 0.8 % of GDP, an improvement of 0.3 pps compared to the previous year's underlying position. This is projected to decline to 0.2 % of GDP by 2018.  Based on the information provided in the 2018 Draft Budgetary Plan, there is a risk of a significant deviation from the recommended adjustment path towards the medium-term objective over 2016 and 2017 taken together, and some deviation over 2017 and 2018 taken together. The government has used some proceeds, notably income from the sale of government shares in state-owned banks, to accelerate debt reduction.  The redemption by the National Asset Management Agency of the final government-guaranteed debt of EUR 500 million (around 0.2 % of GDP) further eliminated a contingent liability dating from the height of the financial crisis. The government has announced that, once the medium-term objective had been achieved, a Rainy Day Fund would be set up. The authorities have set a debt-to-GDP ratio target of 45 %, to be achieved by the end of the next decade. More recently, the government has introduced an intermediary target of 55 % until its major capital projects are completed. Financial sector challenges  The aggregate NPL ratio for the Irish banks was 14.4% at the end of June 2017, down from 17.2% one year before. In June 2017 13% of all mortgages were in arrears in balance terms (10.6% of the primary residence and 23.3% of the buy-to-let portfolio). The level of bank provisions against non-performing loans is among the lowest in the EU, partly due to their use in NPL restructuring.  Over 70% of the arrears balance pertains to mortgages with payments due for over two years. Safe for a few specific categories of companies, SME lending volumes remain quite low, as a result of the subdued demand for credit and the comparatively high interest rates. The high stock of NPLs continues to decline, albeit at a slower pace. Loans in long-term arrears remain a challenge as only a part of these debtors engages eventually. The use of insolvency and bankruptcy schemes remains limited. The number of pending court cases indicates that these will take a long time to reach a conclusion. Repossessions are rare in number indicating difficulties in collateral access. Bank profitability continues to recover. This should enable banks to be better prepared for the coming regulatory changes, rate normalisation and any potential deterioration in market outlook, while supporting further NPL reductions.  New lending to the private sector has been increasing, from a very low base. Going forward, amounts of new lending could be limited by housing supply shortages and some hesitation from SMEs to borrow given higher business uncertainty.  Bank-specific close monitoring of problematic loans continues. Progress is being made in implementing restructuring solutions. The 2016 and 2017 reviews of the macroprudential  measures (coming into effect on 1 January 2017 and 2018 respectively) have resulted in relatively minor changes to the loan-to-value ratio, leaving the bulk of the framework intact. The central credit register, expected to be fully operational in 2018, is to serve as basis for adequate credit risk assessment of borrowers.  EUR 544 million of credit was extended by banks through the state-supported Strategic Banking Corporation of Ireland (SBCI) scheme in 2016, of which 84% for investment purposes. The SBCI aims to further expand its range of products and increase the number of on-lenders, as well as the use of European financial instruments.  It will also manage the EUR 300 million Brexit Loan Scheme.   
 
 
 
 
4.1. Public finances and taxation 

Table (continued) 

(*)  first column summarises ‘gravity’ issues, aiming to put the imbalances in order of magnitude. The second column reports 
findings concerning the ‘evolution and prospects’ of these imbalances. The third column reports recent and planned 
measures. Findings are reported for each source of imbalance and adjustment issue. The final three paragraphs summarise 
the overall issues, in terms of their gravity, developments and prospects and the policy response to them. 
Source: European Commission 

18 

External sustainability   Ireland had a negative NIIP of 176 % of GDP in Q4-2016. Non-financial companies net liabilities: 135.5 % of GDP  The International Financial Services Centre negative net position: 40 % of GDP along with gross positions of over 1214 % of GDP.  The general government sector negative net external position: 45 % of GDP.  Non-IFSC financial intermediaries: net assets of 70 % of GDP.  The large drop in NIIP in 2015 was primarily due the on-shoring of intellectual property assets to Ireland, a possible consequence of internal reorganizational processes across global value chains. Even though these companies are very large compared to the Irish economy they have 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 is gradually improving. In particular, the banking sector's net position became positive in 2016, and further improved the external position of the Central Bank. The external position of the government has improved as well by 5 pps. over 2016. The public debt is largely long-term and remains generally favourable (Section 4.1.1). Property market  Real residential property prices increased by 6.6 % in 2016 after two years of already stronger increases.  Rents are above their peak 2008 level.  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. Persistent supply shortages coupled with increasing demand continue to drive strong increases in residential property prices and rents. Data point out to further property price increases in the course of 2017, with an annual increase of 11.6 % in November 2017, moderating from more than a two-year high in September. If not addressed, constraints limiting the supply of housing could contribute to imbalances building up. The government continues to address housing supply constraints. The 2018 Budget has anticipated a number of extra measures aimed at addressing the housing shortage, including social homes and changes to the vacant site levy. Within the Action Plan for Housing and Homelessness, social housing building is now expected to amount to 3 800 homes in 2018. The new National Planning Framework is intended to replace the 2002 National Spatial Strategy. It could contribute to a targeted delivery of new homes and the appropriate supporting infrastructure.  The Local Infrastructure Housing Activation Fund is also expected 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.  Conclusions from IDR analysis  External, public and private debt levels are still high and constitute vulnerabilities, but the associated above the threshold values of the MIP scoreboard; however the flow variables have continued to improve. While the stock of non-performing loans (NPLs) is declining, it remains elevated. Banks are well capitalised, which makes them well placed to intensify NPL restructuring efforts. Housing supply constraints persist and, together with increasing demand, translate into price increases; however at this stage there is no evidence of overvaluation.   Household debt remained broadly unchanged in 2017 amid a recovery in credit demand, mostly for mortgages. While the situation of non-financial corporations is more difficult to interpret given the weight of multinationals on total corporate debt, it is clear that most indigenous companies keep reducing their debt. Public debt is on a firm downward trajectory and the deficit is moving closer to balance. While the high negative NIIP appears to be driven by factors that are unrelated to the domestic economy, the external sustainability of the domestic sector is gradually improving due to current account surpluses. The stock of NPLs continues to decline, albeit more slowly. Property prices continued to increase over the course of 2016 and 2017. However, unlike, in the pre-crisis period, bank credit is not driving current price developments are not associated with marked credit expansion.  Comprehensive policy measures have been taken in recent years to address all the vulnerabilities highlighted above. These include using windfall gains to reduce government debt and measures to reduce the high amount of NPLs. The government has repeatedly intervened to tackle the undersupply of housing, but it will take time for the measures to have an effect. Furthermore, macroprudential rules are also in place to ensure the resilience of households and banks by preventing unsustainable credit growth. High uncertainty surrounds the final outcome of the negotiations between the UK and the EU.    
 
 
 
 
4.1. Public finances and taxation 

4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  FISCAL POLICY*(PUBLIC DEFICIT AND 

DEBT DEVELOPMENTS)  

than in 2015, and it is projected to further decline 
to 2.8 % in 2018. 

Graph 4.1.1:  Alternative debt indicators (EU countries, 2016) 

Irish  public  debt  remains  elevated.  In  nominal 
terms,  it  peaked  at  EUR  215  billion  (or  120 %  of 
GDP) at the end of 2013, a five-fold increase from 
what  it  was  shortly  before  the  crisis.  Since  then, 
Irish  public  debt  as  a  proportion  of  GDP  has 
significantly  declined,  reaching  72.8 %  in  2016 
(EUR  201  billion),  on  the  back  of  strong  GDP 
growth. However, when assessed using a range of 
other  metrics,  including  debt-to-GNI*  (see  Box 
1.1), Ireland’s stock of public debt remains high by 
historical  standards  and by  comparison with other 
EU countries (Graph 4.1.1). 

remains 

situation 

In  spite  of  its  high  debt  levels,  the  country’s 
comfortable. 
financing 
Government bond yields have fallen sharply since 
the  end  of  2013  and  remain  low  by  historical 
standards. This reflects Ireland’s continuing strong 
economic  and  fiscal  performance,  as  well  as  the 
ongoing  ECB  bond  purchases  under 
its 
quantitative easing programme. Almost EUR 15.8 
billion  were  raised  in  2017  via  benchmark  bond 
the 
sales.  This 
government’s  initial  plans,  with  the  additional 
issuance linked to the early repayment of EUR 5.5 
billion in EU-IMF programme loans.  

in  excess  of 

is  somewhat 

Public debt is largely long-term, at a fixed rate. 
At  the  end  of  2016,  it  amounted  to  EUR 201 
billion,  89.7 %  of  which  had  a  maturity  of  more 
than one year. Over half of the medium- and long-
term debt — around EUR 102 billion — consisted 
of  fixed  rate  treasury  and  amortising  bonds  while 
EUR 19.5  billion  were  floating  rate  notes.  After 
the early loan repayment in late 2017, around 26 % 
long-term  marketable  and  official  debt 
of 
represented  official 
the  EU-IMF 
loans  from 
programme partners. The combination of currently 
very  favourable  market  conditions  and  sensible 
debt management operations has contributed to the 
decline  in  the  effective  interest  rate.  It  was 
estimated at around 3.1 % in 2016, 0.3 pps. lower 

(1) The bars represent the distribution of the EU Member 
States with the relative percentiles for each indicator. For 
GNI and Domestic Demand (DD) the graph also shows the 
position of Ireland according to the modified indicator.  
(2) NDI stands for national disposable income 
Source: European Commission and CSO 

in 

expected 

the  average 

long  maturities,  an 
Despite 
amortisation  hump 
the 
is 
forthcoming  years.  The  weighted  average 
maturity  of  Irish  public  debt,  above  10  years,  is 
one of the longest in the EU. However, there will 
be  a  noticeable  amortisation  hump  of  bonds  and 
programme loans, amounting to an average annual 
financing  need  of  around  6 %  of  GDP,  between 
2019  and  2020.  The  redemption  profile  of 
European  Financial  Stability  Facility  (EFSF)  and 
European  Financial  Stabilisation  Mechanism 
(EFSM)  loans  currently  extends  until  2042,  with 
the  next  principal  repayment  due 
in  2018. 
However, the 2018 EFSM maturities are expected 
to be refinanced, owing to the maturity extensions 
granted 
loan 
repayment  is  also  expected  to  improve  debt 
sustainability  by  locking  in  low  interest  rates  and 
longer maturities.  

this  regard,  early 

in  2013.  In 

19 

050100150200250p90p80p30-p70p20p10IEIE*EA=10 
 
4.1. Public finances and taxation 

Graph 4.1.2:  Bonds and EU-IMF programme loans 

repayment schedule (end-December 2017) 

that, 

Debt  sustainability  has 
improved.  A  debt 
sustainability  analysis  by  the  Commission (13) 
based  on  the  2017  Autumn  Economic  Forecast, 
in  a  baseline  no-policy-change 
projects 
scenario,  Ireland's  public  debt  will  decrease  by 
about  21.7 %  of  GDP  between  2017  and  2028,  to 
around  48.3 %  of  GDP.  The  analysis  also  shows 
that  adverse  shocks  to  real  GDP  growth  —  of  a 
magnitude 
the  country’s  historical 
variability  of  output  (14)  —  would  increase  the 
public  debt-to-GDP  ratio  by  19.2  pps.  by  2028 
compared to the baseline scenario, to about 67.5%.   

reflecting 

Government  contingent  liabilities  are  waning. 
State  guarantees,  most  of  which  are  linked  to  the 
support  granted 
institutions,  fell 
to  financial 
sharply to 1.9 % of GDP at the end of 2016, down 
from 4.8 % in 2015. In October 2017, the National 
Asset  Management  Agency  (NAMA)  redeemed 
the  final  EUR  500  million  of  its  government-
guaranteed debt, three years ahead of target. 

Long-term  fiscal  sustainability  risks  related  to 
the cost of ageing remain. According to the most 
recent  long-term  assessment  approved  by  the 
Economic  Policy  Committee  Ageing  Working 
Group, the cost of ageing presents a medium fiscal 
sustainability  risk  over  the  long-term.  Despite 
more favourable population projections than those 
assumed in the previous assessment undertaken in 
2015,  total  age-related  expenditure  is  forecast  to 
rise  by  4.1 pps.  of  GDP  during  2016-2070,  with 
total  pensions  alone  rising  by  1.6 pps.  of  GDP 
(European  Commission,  2018a).  Moreover,  while 
the Irish authorities have legislated a wide range of 
reforms to contain public pension expenditure, the 
total pension system deficit will grow significantly 
from  1.7 %  of  GDP  in  2016  to  2.7 %  of  GDP  in 
2070.  

(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. 
See European Commission (2018b)  

(14)  The  negative  enhanced  sensitivity  test  on  real  GDP  is 
designed  based  on  a  one  standard  deviation  reduction  in 
real GDP growth for first two projection years. Afterwards, 
-0.5/+0.5 pp. permanent shocks on GDP growth would be 
applied until the end of the projection period. 

(1) The figures in the table are unaudited figures and include 
the  effect  of  currency  hedging  transactions.  Rounding  can 
affect  totals.  (2)  EFSF  loans  reflect  the  maturity  extensions 
agreed  in  June  2013.  (3)  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.  The  table  and  graph  above  reflect  both 
original and revised maturity dates of individual EFSM loans. 
(4) While the principal repayment of index linked bonds will 
be  linked  to  the  Eurostat  Harmonised  Index  of  Consumer 
Prices  (HICP)  for  Ireland,  excluding  tobacco,  it  is  protected 
against a fall in the index over the life of the bond. 
Source: National Treasury Management Agency 

The  decision  to  repay,  early  and  in  full,  some 
outstanding loans is expected to further reduce 
the  interest  burden.  In  December  2017 (11),  the 
Irish authorities repaid the outstanding IMF loans, 
together with the bilateral loans from Denmark and 
Sweden,  early  and  in  full.  The  intention  was  to 
make  use  of  the  currently  favourable  market 
conditions  and  the  healthy  cash  position (12)  to 
improve Ireland’s debt sustainability. According to 
the  National  Treasury  Management  Agency 
(NTMA)  these  early  repayments  are  expected  to 
generate  interest  savings  of  around  EUR  150 
million over the remaining life of the loans, while  
smoothening  and  extending  the  debt  maturity 
profile. 

(11)  Ireland's  outstanding  IMF  loans  stood  at  SDR  3.8  billion 
(circa EUR 4.5 billion) corresponding to 109% of Ireland's 
IMF  quota,  while  the  bilateral  loans  from  Sweden  and 
Denmark  stood  at  EUR  0.6  and  EUR  0.4  billion 
respectively. 

(12)  After  the  repayment,  at  end-2017  the  Exchequer  still  had 
about  EUR  10.5  billion  in  cash  and  liquid  assets.  The 
recent sale of a part of the State's shares in the Allied Irish 
Banks (AIB) raised EUR 3.4 billion. 

20 

051015202520182019202020212022202320242025202620272028202920302031-352036-402041-452046-502051-53EUR billionEFSMEFSFBilateralIMFFloating Rate BondsIndex Linked BondFixed Rate/Amortising Bonds 
 
                                                           
                                                           
4.1. Public finances and taxation 

4.1.2.  FISCAL FRAMEWORKS AND SPENDING 

4.1.3.  TAXATION  

REVIEWS  

Overall  government  expenditure  in  2017  was 
within  budget  allocations.  The  overall  spending 
remained on target. In some departments, however, 
slippages  of  around  EUR 480  million  emerged, 
driven  by  current  healthcare  expenditure  and 
increased  capital  spending  on  housing.  This  was 
offset mainly by a lower than expected EU budget 
contribution  and  debt  interest  payments.  Current 
primary  expenditure  was  up  4.0 %  y-o-y  and  on 
profile.  Capital  expenditure  was  up  9.3 %  y-o-y 
and above profile (EUR 44 million). The overruns 
were 
the 
supplementary  2017  expenditure  agreed  by  the 
parliament in December 2017. 

accommodated  within 

largely 

Budget 2018 has benefited from a new spending 
review  process.  The  government  carried  out  a 
spending  review  of  current  expenditure  to  help 
prepare  Budget  2018,  by  analysing  the  current 
spending  package  and  new  policy  proposals.  The 
spending  review,  in  its  first  three-year  cycle, 
focused  on  specific  critical  spending  areas, 
representing  around  30 %  of  current  government 
expenditure. Examples would be drug costs in the 
healthcare  sector,  disability  and  employment 
support in the area of social protection, and public 
transport  (European  Commission,  2018c).  The 
process 
three-year 
expenditure  ceilings  and,  more  generally,  the 
medium-term budgetary framework, could also be 
reviewed. Despite the evident improvements in the 
expenditure management framework, year-on-year 
departmental  budgeting  has 
repeated 
changes  to  expenditure  ceilings,  which  ultimately 
weakened multi-annual spending planning. 

for  setting  and 

revising 

led 

to 

A  Rainy  Day  Fund  could  contribute  to  more 
sustainable  growth.  The  resilience  of  public 
finances  to  economic  fluctuations  and  adverse 
shocks could be strengthened. In its 2017 Summer 
Economic Statement the government proposed that 
EUR  500  million  per  year  (around  0.2 %  of 
projected  2019  GDP)  of  the  2019-2020  fiscal 
space be deployed in a Rainy Day Fund. However, 
the  details  of  this  fund  still  need  to  be  set  out 
(European  Commission,  2018c).  As  discussed  in 
the  Irish  Fiscal  Advisory  Council's  pre-budget 
2018 statement (IFAC, 2017), it is unclear how the 
design of the Rainy Day Fund could ensure that it 
is truly countercyclical. 

Tax  revenues  have  increased  a  lot  in  recent 
years,  but  the  volatility  of  certain  sources  of 
revenue  remains  a  concern.  On  the  back  of  the 
strong  economic  recovery,  tax  revenues  increased 
at  an  average  annual  rate  of  around  7%  over  the 
period  2011-2017.  However,  as  a  proportion  of 
GNI*  (Box  1.1),  they  were  just  below  28 %  in 
2016,  2  pps.  lower  than  the  historical  average 
(1995-2015).  Corporate 
taxes  as  a 
percentage  of  total  taxation continued  to  increase, 
amounting to 11.6 % of total taxation in 2016, the 
highest level since 2006 and an increase of 3.3 pps. 
since 2014. As outlined in the 2017 country report 
(Section  4.1.3),  corporate  tax  revenue  is  highly 
concentrated and prone to volatility. However, the 
reduction  in  capital  allowances  for  intangible 
assets  may  help  smoothen  corporate  tax  revenue 
over time. 

income 

Broadening  the  tax  base  can  help  improve 
in  the  face  of  economic 
revenue  stability 
fluctuations.  According 
a  EUROMOD 
simulation  (15),  however,  the  personal  income  tax 
base  has  been  narrowed 
few 
budgets (16). The measures in Budget 2018 show a 
mixed  picture  in  terms  of  their  impact  on  tax 
bases (European Commission, 2018c). 

last 

the 

to 

in 

Some  measures  in  Budget  2018  seem  to  shift 
towards more volatile sources. Proposals such as 
increasing  the  stamp  duty  rate  on  commercial 
property  purchases  —  although 
to 
residential 
towards 
rebalance 

development 

intended 

the  main  elements  of  direct 

(15)  EUROMOD  is  the  tax-benefit  microsimulation  model  for 
the  EU.  It  simulates  the  benefit  entitlements  and  tax 
liabilities  (including  social  security  contributions)  of 
individuals  and  households  according  to  the  tax-benefit 
rules  in  place  in  each  Member  State.  The  simulations  are 
based  on  representative  survey  data  from  the  European 
Statistics on Income and Living Conditions (EU-SILC) and 
taxation,  social 
cover 
contributions and non-contributory benefits. It is conducted 
by the European Commission (Joint Research Centre).   
(16)  The  weight  of  income  tax  expenditures  on  the  Irish  tax 
system,  assessed  by  comparing  a  baseline  scenario  with 
one that excludes the main tax credits and expenditures (i.e. 
tax  credits,  relief,  allowances)  and  the  income  tax  entry 
threshold, increased by 1.2 % of total possible tax revenue 
between 2014 and Budget 2018. The combined tax base of 
personal  income  tax  and  the  universal  social  charge  has 
narrowed by 0.7 % since 2014. This exercise did not imply 
any normative approach to the benchmark Irish tax system 
when eliminating tax allowances and tax credits. 

21 

 
                                                           
 
4.1. Public finances and taxation 

Tax  Practices.  While  the  economic  evidence  for 
the  effectiveness  of  patent  boxes  in  encouraging 
R&D  remains  limited  (CPB,  2014),  they  may  be 
used  as  a  tax  competition  tool  (Alstadsæter  et  al., 
2017).  The  government  has  published  an 
Independent Review of the Corporation Tax Code 
(Coffey,  2017)  and  is  carrying  out  a  consultation 
on  some  of  its  recommendations  (Department  of 
Finance,  2017b).  The  provisions  of  the  Anti-Tax 
Avoidance  Directives  (ATADs)  will  have  to  be 
transposed  into  national  law  by  the  end  of  2018 
and 2019. This will introduce new anti-abuse rules 
(21).  Once  it  is  clear  whether  additional  changes 
will be brought forward following the consultation, 
it will be important to assess to what extent these, 
in  conjunction  with  the  effect  of  the  transposition 
of the ATADs and steps such as the change of the 
tax  residency  rule,  limit  the  scope  for  aggressive 
tax planning in Ireland. 

Graph 4.1.3:  Charges paid for the use of intellectual 

property 

Source: Eurostat 

property — increase reliance on transaction-based 
taxes,  a  highly  pro-cyclical  source  of  government 
revenue. The high proportion of corporate taxation, 
and  the  dependence  on  a  small  number  of  major 
taxpayers,  remains  a  source  of  uncertainty,  prone 
to  economic  fluctuations  potentially  stemming 
from swift decisions made by multinationals. 

that 

suggest 

indicators 

Some 
Ireland's 
corporate  tax  rules  are  used  in  aggressive  tax 
planning  structures.  As  shown  in  a  study, 
Ireland's  high  inward  and  outward  FDI  stock  (17) 
can  only  partly  be  explained  by  real  economic 
activities taking place in Ireland (IHS,  2018). The 
high level of dividend payments and, in particular, 
charges for using intellectual property, suggest that 
the country’s tax rules are used by companies that 
engage 
(Graph 
4.1.3) (18).  Exemptions  from  withholding  taxes  on 
dividend  payments  made  by  companies  based  in 
Ireland  (19)  may  lead  to  those  payments  escaping 
tax altogether, if they are also not subject to tax in 
the  recipient  jurisdiction.  This  may  facilitate 
aggressive 
the 
existence  of  some  provisions  in  bilateral  tax 
treaties  between  Ireland  and  some  other  countries 
may be used by companies to overrule the new tax 
residence rule put in place in Ireland in 2015 (20). 

tax  planning.  Furthermore, 

in  aggressive 

tax  planning 

tax 

residency 

Ireland  has  taken  measures  to  amend  some 
aspects  of  its  system  that  were  facilitating  tax 
planning.  Changes 
rules 
to 
implemented  in  2015  have  reduced  opportunities 
for  aggressive  tax  planning,  although  existing 
companies  are  able  to  use  the  previous  rules  until 
the  end  of  2020.  The 
Irish  Knowledge 
Development  Box,  introduced  in  2015,  has  been 
approved  by  the  Code  of  Conduct  on  Business 
Taxation Group and the OECD Forum on Harmful 

(17)  The  inward  and  outward  FDI  stocks,  expressed  as  a 
proportion  of  GDP,  were  both  290 %  in  2016  (among  the 
five highest levels in the EU). 

(18)  Dividends  paid  amounted  to  7.0%  of  GDP  (5th  highest  in 

the EU) in 2016.  

(19)  Dividends distributed to countries with which no tax treaty 
has  been  concluded  are  tax-exempt  in  Ireland  where  the 
company  receiving  the  dividend  in  the  non-tax  treaty 
country  is  controlled  by  persons  resident  in  another  EU 
Member State or in a tax treaty state (ZEW, 2016). 

(20)  A  company  is  deemed  to  be  tax  resident  if  it  was 
incorporated in Ireland on or after 1 January 2015, unless it 
is  treated  as  a  tax  resident  company  in  another  country 
under  a  Double  Taxation  Agreement.  If  a  company  was 
incorporated  before  1  January  2015,  there  is  a  transition 
period up to 31 December 2020. 

its 

can 

that 

system 
tax 
objectives.  Revenues 

Ireland  has  further  potential  to  improve  the 
support 
way 
environmental 
from 
environmental taxes are above the EU average as a 
percentage  of  total  taxation  (7.9 % for  Ireland 
to  an  EU-28  average  of  6.3 %). 
compared 
However, the different tax treatment of diesel and 
gasoline  for  road  use  is  still  to  be  addressed.  In 
Ireland diesel is taxed at a lower rate both in terms 
of  carbon  and  energy  content,  although  it  also 

(21)  Such  as  controlled  foreign  company  rules, 

interest 

limitation rules and rules countering hybrid mismatches. 

22 

051015202530IENLLUMTHUBESKCZSEPLFRHRDKSIATUKROESPTFICYBGDEITEELTLVELin % of GDP20152016 
                                                           
 
                                                           
4.1. Public finances and taxation 

emits  more  air  pollutants.  The  tax  advantage  in 
favour  of  diesel  currently  stands  at  11  cents  per 
litre (Department of Finance, 2017). 

23 

 
 
4.2.  FINANCIAL SECTOR AND INDEBTEDNESS 

on the staffing expenses side, in view of a potential 
tightening  of  the  labour  market  and  the  possible 
relocation  of financial  companies  from  London  to 
Dublin.   

Graph 4.2.1:  Profitability of the main domestic banks 

4.2.1.  BANKING SECTOR*   

its 

financial 

sector  keeps 

The 
stable 
performance  course  amid  heightened  external 
uncertainties. Domestic banks remain susceptible 
to external spillovers, most notably from the UK’s 
decision  to  leave  the  EU.  As  a  result,  the  stock 
prices  of  Irish  banks  remained  relatively  flat  in 
2017, trading below the euro area financial indices. 
Despite  these  conditions,  state-owned  Allied  Irish 
Banks  (AIB)  successfully  completed  its  initial 
public  offering  in  June  2017  with  the  sale  of  a 
25 % stake, raising EUR 3.4 billion.  

largely  possible  due 

The  capital  buffers  of  Irish  banks  improved. 
The  aggregate  Common  Equity  Tier  1  (CET1) 
capital position of Irish banks was 17.3 % in June 
2017,  up  from  16.8  %  at  the  end  of  2016.  This 
improvement  was 
to 
increasing  net  interest  margins,  NPL  reduction, 
and  a  reversal  of  provisions.  In  addition  to  the 
external  uncertainties,  relatively  weak  lending 
volumes  and  the  impacts  of  new  regulatory 
measures may lower capital buffers in the medium 
term.  An  eventual  tightening  of  monetary  policy 
could  have  a  positive  impact  on  interest  income 
but  could  also  increase  debt  servicing  costs  for 
borrowers.  The  restructured  mortgage  accounts 
could  be  especially  vulnerable  to  changes  in  the 
interest rate environment.  

to 

The  banks  are  preparing 
fulfil  new 
regulatory  requirements.  The  impact  of  the 
upcoming  IFRS9  reforms (22)  is  expected  to  be 
manageable,  and  progress  is  also  made  towards 
achieving the minimum requirement for own funds 
and eligible liabilities (MREL) (23). 

The  profitability  levels  achieved  in  2014  are 
being maintained (Graph 4.2.1). Irish banks have 
relatively  high  net  interest  margins  compared  to 
their  peers.  They  have  managed  to  further  reduce 
their  deposit 
their 
administrative  costs  stable.  Pressures  could  arise 

funding  costs  and  keep 

(22)  The  International  Financial  Reporting  Standard  (IFRS)  9 
will  be 
the  new  accounting  standard  for  financial 
instruments,  replacing  the  current  IAS39  from  1  January 
2018. It will especially affect the impairment methodology, 
as the focus on expected credit losses will require banks to 
recognize their losses earlier. 

(23)  MREL  –  the  minimum  financial  resources  required  to 
absorb  losses  and  recapitalise,  if  needed,  a  failing  bank. 
Introduced in the Bank Recovery and Resolution Directive, 
they will be phased-in between 2020 and 2022. 

Source: Central Bank of Ireland 

NPLs  are  reducing  as  a  result  of  debt 
restructuring  activities  and  portfolio  sales,  but 
remain  high.  The  acceleration  of  NPL  resolution 
is  paramount  for  the  systemic  risk  reduction  as 
noted  in  EAR  4.  The  three  main  domestic  banks 
have  put  a  lot  of  work  into  reducing  their  non-
performing loan book (Graph 4.2.2), although with 
varying  success.  Their  distressed 
loan-books 
reduced  by  about  EUR  4.5  billion  between 
September  2016  and  September  2017,  with  the 
most  progress  being  made  in  commercial  real 
estate and corporate portfolios. The aggregate NPL 
ratio for the domestic banks was 14.4 % at the end 
of  June  2017.  It  stood  at  11.6%  when  accounting 
for  foreign  branches  and  subsidiaries.  The  banks 
are required to submit their portfolio-specific NPL 
reduction  plans  and  projections  to  the  supervisor. 
In  September  2017  12.7  %  of  the  total  mortgage 
stock was in arrears (CBI 2017).  

The  level  of  bank  provisions  against  NPLs  is 
among the lowest in the EU, and declining. The 
average coverage ratio (24) of Irish banks was 32.6 
%  in  June  2017,  compared  with  the  45.8  %  euro 
area  average.  While  some  provision  releases  are 
linked  to  debt  resolution  activities  and  domestic 

(24)  The coverage ratio is expressed as provisions/total NPLs. 

24 

-30-20-10010202010201120132014201520162017OtherImpairment on financial and non-financial assetsDepreciationAdministation CostsTrading and otherNet Fee &Commission IncomeNet Interest IncomeTotal profit/loss before tax from continuing operationsEUR billion 
 
                                                           
 
                                                           
4.2. Financial sector and indebtedness 

real estate price increases, it is important for them 
to remain at prudent levels.  

properties to qualify and to make the scheme more 
flexible and accessible to borrowers. 

Graph 4.2.2:  NPL reduction by portfolio - domestic banks 

(1) CRE: Commercial real estate 
Source: Central Bank of Ireland 

Long-term  mortgage  arrears  resolution 
is 
progressing  more  slowly  because  there  are 
difficulties  in  restructuring  certain  difficult 
cases.  The  stock  of  mortgage  arrears  declined  by 
about  EUR  1.8  billion  in  the  year  to  September 
2017.  Recent  research  also  shows  that  since  2013 
the share of permanent (durable) mortgage arrears 
restructurings has increased significantly (McCann 
2017b).  Still,  over  70  %  of  the  remaining  arrears 
to  mortgages  with  payments 
balance  relates 
overdue  for  longer  than  2  years.  By  the  end  of 
2016, only 61 % of these debtors had engaged with 
their creditors. Of those who engaged, 13 % never 
concluded  a  modification  arrangement,  64 % 
received  a  temporary  modification  (some  of  these 
have  already  elapsed)  and  only  16  %  received  a 
permanent  modification,  (McCann,  2017).  The 
number  of  personal  insolvency  applications  has 
increased since the introduction of the Abhaile aid-
and-advice  scheme,  but  it  is  still  quite  low.  The 
number  of  actual  arrangements  has  declined, 
largely  due  to  the  increase  in  cases  currently 
subject  to  court  reviews.  These  are  sought  by  the 
debtor  when  the personal  insolvency  proposal  has 
been rejected by creditors. Following a Review of 
to  Rent  Scheme,  a  range  of 
the  Mortgage 
its  eligibility  criteria  and 
amendments 
administration  came  into  effect  to  enable  more 

to 

The mismanagement of a significant number of 
tracker mortgages by banks is being addressed 
through  an  industry-wide  examination  led  by 
the  CBI  (CBI  2017a) (25).  As  of  mid-December 
2017,  approximately  33,700  mortgage  accounts 
have  been  identified  as  having  been  put  on  an 
incorrect interest rate, resulting in overcharging or 
even  property  loss.  The  examination  continues 
with  around  EUR  297  million  paid  out  by  the 
banks to affected customers so far. 

Macroprudential  policy  is  gaining  importance 
amid  the  current  housing  sector  dynamics. 
Current housing market pressures, resulting from a 
scarcity  of  residential  properties,  highlight  the 
importance  of  having  prudent  loan-to-value  and 
loan-to-income limits in place. The second review 
of the framework currently in place, completed in 
November  2017,  recognised  this  by  retaining  the 
binding  loan-to-value  and  loan-to-income  ratios.  
The  change  that  will  be  in  force  from  January  1, 
2018 pertains to the size of the banks' discretionary 
buffer  (lending  above  the  loan-to-income  cap)  for 
non-first-time  buyers,  from  20%  to  10%  of  the 
value  of  new  lending.  The  implementation  of  the 
credit  register  is  in  its  final  phase,  after  several 
delays.  The  register  should  become  operational  in 
early  2018  and  cover  all  types  of  lending  by  the 
end of 2018. It will be a crucial tool for accurately 
assessing the debt servicing capacity of borrowers.  

4.2.2.  EXTERNAL SUSTAINABILITY*  

External  sustainability  risks  to  the  domestic 
economy seem limited. The analysis presented in 
the  2017  country  report  (European  Commission, 
2017a)  showed  that  a  substantial  proportion  of 
Ireland’s  external  liabilities  are  attributable  to 
multinational  companies  with  little  connection 
with  the  domestic  activity.  The  risks  associated 
with the external liabilities of these companies are 
mitigated by a number of factors such as their high 
profitability  and  offsetting  overseas  assets. 
Moreover,  their  liabilities  are  not  linked  to  Irish 

(25)  A  tracker  mortgage  is  characterised  by  an  interest  rate 
(ECB)  main 
tracking 
the  European  Central  Bank 
refinancing  operations  rate,  to  which  it  adds  a  defined 
margin. 

25 

0510152025NPL stock in Sep 2017peakEUR billion 
 
                                                           
4.2. Financial sector and indebtedness 

relate 

to  non-resident 

default  (29).  However,  the  majority  of  these 
liabilities 
funding  of 
intellectual  property  (IP)  assets  (CSO,  2017b).  In 
2015,  the  negative  financial  worth  of  Ireland 
dropped by 70 % y-o-y, at EUR -531 billion. The 
sharp decline was due to an increase in equity and 
fund  shares  used  to  fund  IP  assets  and  machinery 
and  equipment,  including  aircraft  for  leasing,  as 
non-financial assets registered in Ireland (30). 

Graph 4.2.3:  International investment position by 

institutional sector, non-IFSC 

(*) Domestic sectors include general government, Central 
Bank, domestic commercial banks and other financial 
intermediates 
Source: CSO 

The current account (CA) balance remains very 
volatile  and  difficult  to  assess.  The  headline  CA 
experienced  a  substantial  level  shift  in  2015, 
surging  to  a  surplus  of  around  11 %  of  GDP, 
linked  to  the  activities  of  multinationals.  These 
activities  also  disrupted  the  services  trade  and  the 
primary  income  balance  on  account  of  large 
imports of IP services.  

(29)  On the other hand, payments on equity, such as dividends, 
are  only  allocated  when  the  shareholders  decide  to  do  so. 
They  are  therefore  not  dependent  on  a  defined  timeline, 
making the probability of default lower. 

(30)  The  value  of  machinery  and  equipment  (including  aircraft 
for leasing) and IP assets increased from EUR 154 billion 
in  2014  to  EUR  384  billion  at  the  end  of  2015.  The  split 
between  these  two  asset  types  is  not  published  for 
confidentiality reasons (CSO, 2017c). 

investors. IMF analyses reach similar conclusions, 
showing  that  external  debt  not  related  to  the 
International Financial Services Centre (IFSC) (26) 
to  standardised 
is  only  moderately  sensitive 
shocks, i.e. interest rate (IMF, 2017). 

international 

The  headline  net 
investment 
position  is  improving  but  remains  negative. 
Ireland’s  net  international  investment  position 
(NIIP) had been falling rapidly before 2015, when 
it  fell  at  -244 %  of  GDP  (Q1-2015) (27).  By  the 
third quarter of 2017, it had improved to -170 % of 
GDP  but  it  remains  significantly  negative.  It  is 
expected  to  improve  further  in  2018,  on  the  back 
of GDP growth and current account surpluses. 

is 

international 

investment  position  of 
The 
domestic  sectors 
improving  slightly.  In 
sectoral terms, and excluding the IFSC, the largest 
proportion  of  the  NIIP  is  attributable  to  the 
non-financial  sector.  It  consists  of  multinationals 
—  including  re-domiciled  PLCs28,  aircraft  leasing 
and  contract  manufacturing  companies.  In  the 
second  quarter  of  2017 
these 
multinationals was -154.1 % of GDP. The trends in 
the net position of domestic sectors — the Central 
Bank,  non-IFSC  banks,  general  government  — 
gradually improved in 2016 (Graph 4.2.3). 

the  NIIP  of 

in 

the 

accounted 

The  composition  of  the  NIIP  is  biased  towards 
riskier  instruments,  but  these  mostly  belong  to 
multinationals.  In  2016,  debt  instruments  (for  all 
for 
economy) 
sectors 
approximately -234 % of GDP in net terms, but the 
foreign  direct  investment  (FDI)  and  equity  shares 
instruments  had  a  positive  net  position  (57 %  of 
GDP). The concentration of debt liabilities, such as 
bonds and fund shares, increases the sustainability 
risk  as  these  instruments  require  payments  of 
principal and interests at defined moments in time 
and  irrespective  of  the  liabilities’  performance, 
which  means  they  carry  a  higher  probability  of 

(26)  The  IFSC  is  a  hub  for  international  financial  transactions 
that has little connection with the financing of the domestic 
economy.  It  has  very  large  gross  positions  but  its  net 
position is much smaller (European Commission, 2017a) 
(27)  This happened as a result of the relocation of large balance 
sheets  into  Ireland  by  a  small  number  of  very  large 
multinationals,  a  possible  consequence  of 
internal 
reorganizational processes across global value chains. 
(28)  Re-domiciled PLCs are companies that relocate their legal 
group  headquarters.  In  the  case  of  relocations  to  Ireland, 
often  motivated  by  tax  considerations,  this  may  not  be 
associated  with  significant  economic  activity  (CSO, 
2016a). 

26 

-300-200-1000100200Non-financial companiesOther financial intermed.Monetary Financial Inst.Central BankGeneral governmentTotal NIIPNIIP (Pre-revision)NIIP Domestic sectors(*)% of GDP 
                                                           
 
                                                           
4.2. Financial sector and indebtedness 

Graph 4.2.4:  Current account balance benchmark 

Graph 4.2.5:  CA vs CA* 

Source: European Commission 

The fundamentals suggest a higher CA surplus 
than  the  headline  figures  show.  The  European 
Commission’s 'norm' CA benchmarks suggest that 
domestic fundamentals, such as demographics, are 
responsible for around 2.5 pps of the Irish surplus 
over  the  period  2013-2016.  The  overall  average 
increase of the CA during this period was 3.7 pps 
(Graph 4.2.4). In 2015, when the CA experienced 
the level shift to 10.9 % of GDP, the fundamentals 
suggested  a  CA  surplus  of  only  around  3.6 %  of 
GDP.  The  gap  is  largely  explained  by  the  strong 
impact  of  multinational  activities  in  2015.  Policy 
factors  such  as  the  government  balance,  or  the 
decline  in  credit  for  construction  in  the  aftermath 
of  the  crisis,  also  account  for  a  considerable 
proportion  of  the  CA  gap.  In  2016,  the  surplus 
attributable  to  fundamentals  was  around  5.5 %, 
versus a headline figure of 3.3 % (31)(32). 

(31)  As  shown  in  graph  4.2.4,  in  2016  the  CA  balance 
attributable fundamentals stood at 5.5 % of GDP. However, 
this headline figure was disrupted by the surge in GDP in 
2015,  as  the  output/person,  one  of  the  fundamental 
variables 
the  European  Commission’s 
empirical  CA  benchmark  model,  is  expressed  in  lagged 
terms  in  order  to  correct  for  its  endogeneity  in  relation  to 
the output. 

included 

in 

(32)  The  current  account  'norm'  benchmark  is  derived  from 
reduced-form  regressions  capturing  the  main  determinants 
of  the  saving-investment  balance,  including  fundamental 
determinants (e.g. demographics, resources), policy factors 
and global financial conditions. The methodology is akin to 
that  followed  by  IMF  External  Balance  Assessment.  See 
also  European  Commission,  2017, 
'Empirical  current 
account benchmarks: modelling the impact of demographic 
variables', LIME Working Group, 24 April 2017. 

(1) Note from CSO: CA* = CA less (IP Depreciation + Aircraft 
Leasing Depreciation + Re-domiciled Incomes) adding back 
(Imports of related to Leasing Aircraft + R&D related IP 
Imports) 
Source: CSO 

to 

the  global 

The  CSO  published  a  modified  CA  balance 
(CA*)  (Box  1.1)  in  an  attempt  to  clarify  the 
reading  of  the  underlying  developments.  It 
shows  a  slightly  more  positive  balance  for  2016 
than  the  traditional  CA  indicator  (Graph  4.2.5). 
From 2009 to 2010 there was a substantial increase 
the  Irish 
income  returned 
in 
headquarters  of  re-domiciled  companies  as  an 
increasing number of multinationals relocated their 
headquarters  to  Ireland  from  the  UK,  the  US  and 
Bermuda  (CSO,  2016a).  From  2014  to  2015,  the 
contribution  of  IP  depreciation  increased  from 
EUR  0.8  billion  to  over  EUR  25  billion  on  the 
back  of  multinationals  relocating  these  assets  to 
Ireland. In 2016, this depreciation was outpaced by 
the imports of IP services and aircraft for leasing. 
Consequently,  the  CA*  was  4.9 %  of  GDP  by 
comparison  with  the  headline  CA  balance  of 
3.3 %. CA* surplus stood at 7.1 % as a percentage 
of GNI*.   

4.2.3.  PRIVATE INDEBTEDNESS*  

While  private  sector  debt  remains  high,  the 
underlying flows signal continued deleveraging. 
At end-June 2017, private sector debt stood at 214 
% of GDP and 53.4 % of GDP for corporates and 
households  respectively.  The  observed  overall 
deleveraging  trend  continued  in  2017,  with  some 

27 

-10-5051015939597990103050709111315Global fin. factors / NIIPResidualCyclePolicy factorsFundamentalsCA % of GDP% of GDP-20-15-10-505101520-20-15-10-50510152098000204060810121416Re-domiciledIncomeR&D-relatedIP ImportsR&D-relatedIP depreciationAircraft LeasingImportsAircraft LeasingDepreciationCACA*CA* (% of GNI*) (rhs)% of GDP% of GNI* 
 
                                                           
 
4.2. Financial sector and indebtedness 

Graph 4.2.7:  Composition of corporate debt 

ratio 

renewal of credit demand appearing (Graph 4.2.6). 
The  private  debt-to-GDP 
is  heavily 
influenced by multinational corporations' activities 
affecting both the numerator and the denominator. 
Their  debt,  with  few  connections  to  the  domestic 
banks,  accounts  for  a  substantial  part  of  the  total 
(European Commission 2016).  

Graph 4.2.6:  Private debt evolution 

(1) ROW: rest of world 
Source: CSO, European Commission 

A  continued  focus  on  post-crisis  balance  sheet 
repair  by  individuals  and  companies  alike  is 
reflected in an overall reduction in outstanding 
(net) debt. Real-estate legacy debt repayments are 
still dominant. A low degree of market competition 
among  lenders  and  interest  rates  somewhat  above 
the euro-area averages (especially for firms) affect 
the  overall  interest  burden  and  might  also  be 
curbing demand for new credit. 

Amid  continued  favourable  macroeconomic 
conditions,  a  recovery  in  credit  demand  is 
observed for certain categories of loans. This is 
especially  visible 
in  specific  areas  such  as 
consumer  and  mortgage  loans  as  well  as  certain 
corporate activities (CBI 2017b). However, overall 
this  trend  remains  muted  as  the  pick-up  comes 
from a very low base.  

Some  Irish  companies  have  started  borrowing 
again.  They  account  for  over  40  %  of  domestic 
banks’  outstanding  lending.    Non-financial  non-
property corporate credit has been increasing since 
2016  (Graph  4.2.8).  This  is  mostly  accounted  for 
by credit extended to larger companies. SMEs are 
still in deleveraging mode resulting in a significant 
decrease in the share of indebted SMEs, from 77 % 
of all SMEs in September 2013 to 50 % three years 
later.  An  environment  of  heightened  uncertainty 
could  be  inducing  firms,  especially  exporters,  to 
postpone a part of their investment decisions.  

(1) NFC: non-financial corporations, HH: households 
Source: Central Bank of Ireland 

Risks  stemming  from  high  debt  levels  of  the 
indigenous  sector  are  decreasing,  but  the 
headline numbers still require monitoring. Debt 
owed  by  foreign-owned  companies  to  foreign 
lenders doubled in 2015 to almost 150 % of GDP, 
before  declining  slightly  to  123.6  %  in  2016.  On 
the other hand, debt held by indigenous companies 
and  households  was  visibly  less  than  half  of  the 
total  private  debt  stock  in  2016.  Indigenous 
companies seem to have deleveraged to prudential 
levels,  bringing  the  domestic  private  sector  debt 
levels  are  now  broadly  in  line  with  fundamentals 
(Graph 4.2.7) (33). 

(33)  Fundamental-based benchmarks are derived from reduced-
form regressions capturing the main determinants of credit 
growth. Stocks benchmarks are obtained by cumulating the 
credit flows predicted by the model.  Prudential thresholds 
represent  the  debt  threshold  beyond  which  the  probability 
of a banking crisis is high, obtained from the minimisation 
of  the  probability  of  missed  crisis  and  that  of  false  alerts. 
The  methodologies  are  explained  in  detail  in  European 
Commission  (2017),  "Benchmarks  for  the  assessment  of 
private debt", Note for the Economic Policy Committee. 

28 

0100200300400500600700800900050100150200250300350Private sector debt (rhs)HH debt / GDPNFC debt / GDPPrivate sector debt / GDPEUR billion% of GDP05010015020025020122013201420152016Re-domiciled PLCsForeign Parent (RoW Debt)Foreign Parent (Irish Debt)Irish Parent (RoW Debt)Irish Parent (Irish Debt)Irish Parent and/ or Irish DebtFundamentals-based benchmark adjusted for domestic debt (NFCs)Prudential threshold (NFCs)% of GDP 
 
                                                           
 
4.2. Financial sector and indebtedness 

Graph 4.2.8:  Credit advanced to Irish companies 

mortgage  lending  in  the  first  half  of  2017  was  33 
%  higher  than  during  the  same  period  in  2016.  A 
surge  in  mortgage  lending  is  being  curbed  by  the 
in  place,  which 
macroprudential 
ensures that the size of loans remains prudently in 
line  with  the  property’s  value  and  the  household 
income.  The  overall  volumes  of  mortgage  credit 
are  being  restrained  by  the  limited  supply  in 
residential property (Section 4.5.1).  

framework 

Graph 4.2.9:  Households’ financial assets 

Source: Central Bank of Ireland 

increased 
Rising  property  prices  have 
households’ net worth and reduced the number 
of households in negative equity, but pockets of 
vulnerability  remain.  In  June  2017  household’s 
net  worth  was  59.6  %  higher  than  the  trough  in 
mid-2012, reflecting mostly a recovery in the value 
of  housing  assets.  During  2016  both  household 
debt-to-disposable-income ratio (DTI) and debt-to-
asset  ratio  (DTA)  declined  as  a  result  of  active 
deleveraging and an improvement in income (CBI 
2017c  and  d) (34).  However,  certain  categories  of 
borrowers  remain  heavily  indebted,  in  negative 
equity  and/or  in  mortgage  arrears.  Moreover, 
tracker  mortgages,  particularly  vulnerable  to  any 
potential  interest  rate  change,  still  represent  over 
40%  of 
in 
September  2017).  Younger  borrowers  are  more 
likely  to  be  on  a  tracker  rate  and  generally  have 
larger  mortgages  and 
loan 
durations (McIndoe-Calder, 2017).  

total  mortgages  (about  42.5  % 

longer  remaining 

loans 

After  years  of  debt  reduction,  Irish  households 
could  be  approaching  a  turning  point  in  credit 
demand.  The  stock  of 
to  households 
increased in 2017, for the first time since 2009 (3.2 
%  y-o-y  in  September  2017),  Close  to  EUR  7.3 
billion  of  mortgages  were  drawn  down  in  2017, 
more than double the yearly amounts drawn down 
in  the  period  2011-2013,  but  still  just  a  small 
fraction of the peak EUR 40 billion in 2006. New 

(34)  The DTI declined from 155.4 % in Q1 2016 to 145.2 % in 
Q1 2017 and the DTA from 19.1 % in Q1 2016 to 17.3 % 
in Q1 2017. 

(1) Total financial assets acquired excludes other accounts 
payable 
Source: Eurostat 

The move from variable to fixed-rate mortgage 
products  reduces  uncertainty  in  relation  to  the 
fixed-rate 
interest  rate  burden.  However, 
mortgages  in  the  Irish  market  usually  have  a 
fixation  term  of  up  to  five  years  (only).  CBI 
research  on  household  lending  in  the  first  half  of 
2017  shows  an  increase  in  average  loan  sizes  and 
residential  property  values.  First  time  buyers  saw 
an  increase  in  income  levels  and  lower  average 
interest rates.  

4.2.4.  SME ACCESS TO FINANCE  

While debt repayments are still dominant, new 
SME credit is growing. Total new lending to non-
financial  SMEs  in  the  second  quarter  of  2017 
increased by 4.3 % y-o-y and by 34.7 % compared 
to mid-2015. In June 2017, the outstanding lending 
to  Irish  non-financial  SMEs  had  fallen  by  13.5  % 
y-o-y and by 32.7 % compared to mid-2015 (CBI 
2017e).   

29 

-20-15-10-50510Total credit to IE companiesTotal ex FinancialTotal ex Financial and PropertySME Total ex Financial and Propertyannual growth rate (%)-10-505101520Q4 03Q4 04Q4 05Q4 06Q4 07Q4 08Q4 09Q4 10Q4 11Q4 12Q4 13Q4 14Q4 15Q4 16net other accountsmiscellaneous assetssecurities & equityother insurancepension & life insurancedepositstotal fin. assets acquirednew loans borrowed% of GDP 
 
                                                           
 
4.2. Financial sector and indebtedness 

underlying businesses and cash-flows can improve 
in order for them to price risk more adequately.  

Graph 4.2.10: New SME lending: volumes and interest rates 

Source: Central Bank of Ireland 

through 

State-supported  measures  are  being  re-shaped 
to  better  cater  for  companies’  needs.  EUR  544 
million  were  on-lent (35) 
the  State-
supported  Strategic  Banking  Corporation  of 
Ireland (SBCI) scheme in 2016, 84 % of which for 
investment  purposes.  Close  to  one  quarter  of 
beneficiaries are from the agricultural sector.  The 
SBCI aims to further expand its range of products 
and increase the number of general and specialized 
on-lenders,  as  well  as  the  use  of  EU  financial 
instruments.  It  will  also  manage  the  EUR  300 
million Brexit Loan Scheme (36). 

(35)  Using  the  scheme  effectively  lowers  the  interest  rate  on 

bank credit for SMEs by 1 % on average. 

(36)  The measure, announced in the 2018 Budget, will be open 
to trading companies employing fewer than 500 people. 

Debt  overhang,  market  concentration  and 
heightened  uncertainty 
in  some  exporting 
sectors  weigh  on  the  demand  for  SME  credit. 
Approximately one in five SME loans is in default, 
with  some  differences  across  sectors  and  regions 
(CBI  2017f).  Recent  surveys 
indicate  some 
hesitation  when  it  comes  to  investment  decisions 
of  exporters  to  the  UK,  as  export  volumes  and 
especially  margins  have  already  decreased  due  to 
the devaluation of sterling (DJEI 2017).  

When borrowing, Irish companies remain mostly 
reliant on internal funds and on banks. Close to 
75  %  of  their  investment  is  financed  using  own 
funds, substantially above the EU average of 60 % 
(EIB, 2017).  The share of SMEs applying for any 
banking  product,  decreasing  since  2015,  currently 
stands at 20 %, with larger SMEs tending to make 
greater use of banking products (CBI 2017f). New 
loans  and  overdrafts  make  up  an  increasingly 
larger proportion of total bank lending, as opposed 
to  old  loan  renewals  and  restructurings.  As  bank 
products  account  for  about  85  %  of  total  external 
financing  for  Irish  companies,  there  is  significant 
scope  for  a  more  intensive  use  of  non-bank 
financing,  with  54  %  of  companies  considering 
leasing  as  a  relevant  source  of  financing.  Venture 
capital  is  also  gaining  prominence.  In  2016,  Irish 
SMEs raised a total of EUR 888 million, compared 
to EUR 522 million in 2015 and EUR 242 million 
in 2008 (IVCA).  

While present, the difficulties in obtaining bank 
credit do not appear acute at this stage. Interest 
rates  for  new  SME  loans  have  been  decreasing 
since 2016 but remained quite flat in 2017 at above 
4  %  (Graph  4.2.10).  They  are  still  comparatively 
high compared to larger loans and euro area peers. 
The  difference  between  domestic  and  euro  area 
SME credit interest rates is the result of difficulties 
in  collateral  access,  market  concentration  and  the 
perception  of  risk  (Carroll  and  McCann,  2017). 
While bank rejection rates for SME financing have 
increased over the past year, certain surveys report 
that  domestic  companies  do  not  regard  bank 
interest  rates  and  credit  conditions  as  primary 
concerns at the moment (SAFE).  

Irish  banks  more  often  require  collateral  for 
large  or  longer  maturity  loans,  as  well  as  for 
riskier  borrowers  (Carroll  and  McCann,  2017b). 
Over  50  %  of 
issued  are  secured. 
Stakeholders hope that the banks’ understanding of 

loans 

30 

34560.00.20.40.60.81.01.2New SME lending - quarterlyInterest rates - new SME credit (rhs)Interest rates - SME credit outstanding (rhs)EUR billion% 
 
                                                           
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  LABOUR MARKET   

but 

by  most 

The  improvements  of  the  labour  market  were 
long-term 
groups, 
felt 
unemployment remains a challenge. The positive 
developments  in  the  labour  market  continued  in 
2017  in  line  with  the  robust  economic  expansion, 
while  wage  growth  remained  moderate  (see 
Section 1). Employment (20-64) grew in the third 
quarter  of  2017  by  1.5  pp  compared  to  the  same 
quarter  in  the  previous  year,  reaching  73.2%  with 
60  000  new  jobs  created.  Unemployment  fell  to 
6.7%  in  2017,  from  8.4%  a  year  earlier,  while 
youth unemployment fell below the EU average, to 
14.7%.  As  a  proportion  of  total  unemployment, 
long-term  unemployment  was  at  42.2%  in  Q3-
2017,  inching  down  below  the  EU  average  of 
44.4%.  Very-long-term  unemployment  (over  two 
years) amounted to 28.9% of all unemployment in 
the  same  quarter,  in  comparison  with  the  EU 
average of 27.7%.  

remains  a 
Labour  market  participation 
problem.  The  activity  rate  (37)  has 
largely 
recovered  from  a  slight  fall  during  the  crisis.  It 
stood  at  78.2 %  (20-64  age  group)  in  the  third 
quarter  of  2017)  edging  above  the  EU  average 
(78.1 %).  Compared  to  the  rest  of  the  EU,  the 
percentage of people not working is comparatively 
high  because  of  inactivity,  not  unemployment 
(Graph 4.3.1). This suggests that there is untapped 
potential outside the labour force.  

inactivity  of  women  due 

One  of  the  main  drivers  of  the  low  labour 
market participation is the gender activity gap. 
The 
to  caring 
responsibilities  is  among  the  highest  in  the  EU 
(especially  in  the  55-64  age  group).  The  gender 
employment  gap  is  also  higher  than  the  EU 
average.  The  design  of  family  leaves  does  not 
support  a  balanced  sharing  of  work  and  caring 
and  men. 
responsibilities  between  women 
Although 
two  weeks  of 
introduction  of 
paternity  leave  in  September  2016  represents  a 
positive  development,  parental 
is  not 
compensated,  which  deters  men,  often  first-
earners,  to  take  it.    The  high  cost  of  childcare 
services  (see  section  4.3.2)  also  represents  an 
obstacle  to  female  participation  in  the  labour 
market. 

leave 

the 

(37)  The  activity  rate  is  the  percentage  of  the  economically 
active population in the total population of the same age. 

Ireland  also  has  one  of  the  lowest  employment 
rates of people with disabilities in the EU (only 
29.1% vs EU 47.4% in 2015) and one of the widest 
employment  gaps  between  people  with  and 
without disabilities (41.3 pps, EU 25.7 pps). 

While  employment  rates  have  improved,  there 
are  sizeable  disparities  between  employment 
levels  for  different  skills  groups,  pointing  to 
skills mismatches. Ireland has a high overall level 
of  skills,  with  a  good  performance  in  terms  of 
basic skills and one of the highest levels of tertiary 
attainment in the EU (52.9 % of those aged 30-34 
in  2016  –  see  Education  and  Skills  section). 
However,  there  are  large  discrepancies  of  labour 
market  outcomes  across  skills  groups.  This 
the 
to 
there 
suggests 
employment  of  some  groups  of 
low-skilled 
individuals.  There  are  also  large  discrepancies  in 
the  unemployment  and  long-term  unemployment 
rates  of  various  skills  groups.  The  differences 
between the employment rates of low, medium and 
highly skilled labour were among the highest in the 
EU  in  2016.  The  employment  rate  was  almost  10 
pps  lower  in  2016  for  the  low-skilled  than  before 
the economic crisis (Graph 4.3.2). 

remain  barriers 

that 

Graph 4.3.1:  Unemployment and inactivity as a percentage 

of the population aged 25-54 

Source: European Commission (2017f) 

Skills  mismatches  are  related  to  shifts 
in 
economic activity since 2008. Employment in the 
construction  sector  increased  by  6.9 %  between 
Q3-2016  and  Q3-2017 
it 
employed  about  100 000  fewer  workers  in  Q1 
2017  than  in  Q1  2008  (Graph  4.3.3).  Significant 

(CSO),  although 

31 

0510152025303540SECZDEATSINLUKLTEEDKLUHUPLPTSKFIFRLVBEMTEU28ROCYBGIEHRESITELShort-term unemployedLong-term unemployedMarginally attachedOther inactive 
 
                                                           
 
retail 

(wholesale  and 

net  employment  growth  occurred  in  the  tradable 
service  sectors 
trade, 
transport,  accommodation  and  food  services)  and 
in  the  public  sector.  There  are  skill  shortages  in 
ICT,  engineering,  science,  business  and  finance, 
healthcare  and  construction  sectors  (SOLAS, 
2016)  as  well  as  a  lack  of  digital  skills  in  the 
light  of  skills 
general  population,  which 
shortages is particularly worrying for those on the 
labour  market  (see  box  4.3.3  below).  Skills  needs 
in Ireland are being tackled through training efforts 
(see  also  Education  and  Skills  section below)  and 
through  migration.  Between  14  000  and  30  000 
people  are  estimated  to  cross  the  border  daily  for 
work.(38)  Moreover,  in  2016,  there  was  a  total  of 
182  thousand  third-country  nationals  and  384 
thousand  EU  citizens  living  in  Ireland,  of  which 
121 thousand were UK citizens.(39) 

in 

Graph 4.3.2:  Employment rates by level of education 

4.3. Labour market, education and social policies 

the  programme,  26 %  got  a 

completed 
job 
(JobPath  Performance  Data  2017).The  chances  of 
employment  improved  by  as  much  as  42.5 % 
following  participation  in  JobPath,  according  to  a 
2017  evaluation.  The  programme  has  proven 
particularly  successful  for  people  who  have  been 
unemployed for more than three years. 

As unemployment declines further, the inactive 
population  is  increasingly  being  targeted  in 
order to improve social inclusion and maximise 
available  human  capital.  A  key  recent  initiative 
to  tap  into  underused  human  capital  outside  the 
labour  force  is  the  Action  Plan  for  Jobless 
Households. It is part of the overarching Pathways 
to  Work  strategy.  Two  key  target  groups  are 
inactive  single  parents  and  spouses  of  benefit 
recipients. The idea is to extend activation services 
to these groups and to remove systemic barriers to 
their 
through 
coordinated case management across agencies and 
a  joint  approach  to  helping  jobless  couples.  It 
remains to be seen how the strategy is being rolled 
out  but  its  focus  addresses  the  needs  identified  in 
the 2017 country report. 

labour  market 

participation 

Graph 4.3.3:  Change in employment by sector 

Source: European Commission 

Government 
intervention  has  helped  bring 
down  long-term  unemployment.  The  JobPath 
activation  programme  has  now  been  fully  rolled 
out  and  the  first  results  suggest  that  it  has 
contributed  significantly  to  the  drop  in  long-term 
unemployment.  Of  the  20 447  participants  who 

(38)  Joint Committee on the Implementation of the Good Friday 
Agreement  (2017),  Brexit  and  the  Future  of  Ireland 
Uniting  Ireland  &  Its  People  in  Peace  &  Prosperity  - 
August 2017 

(39)  Based on Eurostat Migration data. 

(1) Employment — domestic concept (thousand), sum of y-
o-y changes based on non-seasonally adjusted data, first 
quarter of each year. Tradable services are:  wholesale and 
retail trade, transport, accommodation and food service 
activities 
Source: European Commission 

32 

304050607080902001200220032004200520062007200820092010201120122013201420152016% population 20-64High skilledMedium skilledLow skilled-300-250-200-150-100-50050100150200250TotalAgricultureIndustryConstructionTradable servicesNon-tradable servicesPublic sector2008-20102010-2017Total change 
 
                                                           
 
4.3. Labour market, education and social policies 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The  European  Pillar  of  Social  Rights,  proclaimed  on  17  November  2017  by  the  European  Parliament,  the 
Council and the European Commission, sets out 20 key principles and rights to benefit citizens in the EU. In 
light  of  the  legacy  of  the  crisis  and  changes  in  our  societies  driven  by  population  ageing,  technological 
change  and  new  ways  of  working,  the  Pillar  serves  as  a  compass  for  a  renewed  process  of  convergence 
towards better working and living conditions. 

the  Social  Scoreboard 

Ireland  performs  relatively  well  on  most 
(1) 
indicators  of 
supporting  the  European  Pillar  of  Social 
Rights,  while  challenges  remain.  The  Irish  tax 
and  benefits system  is  very effective in  reducing 
poverty  and  inequalities.  In  the  fifth  year  of  the 
labour  market  recovery,  Ireland  shows  relatively 
good employment-related outcomes. At the same 
time,  a  low  percentage  of  the  population  has  at 
least basic digital skills. 

The  integration  of  digital  skills  in  education 
continues  to  be  one  of  the  challenges  and 
priorities  for  educational  policy.  Only  44 %  of 
individuals have at least basic digital skills, which 
is  one  of  the  lowest  levels  in  the  EU,  with  no 
significant  improvement  in  recent  years.  The 
priority  given  to  integrating  digital  skills  in 
education  and  providing  the  digital  skills  needed 
on the market was confirmed in the 2017 Action 
Plan  for  Education.  The  2014  ICT  Skills  Action 
Plan  moreover  sets  a  target  of  meeting  74 %  of 
industry  demand  for  high-level  ICT  skills  from 
the  education  system  by  2018,  as  well  as  targets 
for  the  number  of  ICT  graduates.  However, 
efforts  to  improve  the  digital  skills  of  working 
age  adults  currently  not  in  full-time  education 
remain limited.  

Early  school  leaving  rates  are  lowering  and  a 
high  percentage  of  the  population  acquires  a  tertiary  education.  Ireland's  relatively  good  education-
related  outcomes  are    in  part  due  to  a  promising  education  programme  in  disadvantaged  areas  called 
'Delivering  equality  of  opportunity  in  schools'  (DEIS).  It  promotes  equity  and  access  to  education  with 
ambitious targets for school completion and participation in higher education. 

(1)    The  Social  Scoreboard  includes  14  headline  indicators,  of  which  12  are  currently  used  to  compare  Member  States 
performance.  The  indicators  "participants  in  active  labour  market  policies  per  100  persons  wanting  to  work"  and 
"compensation  of employees  per  hour  worked  (in  EUR)"  are  not  used  due  to  technical  concerns  by  Member  States. 
Possible alternatives will be discussed in the relevant Committees. GDHI: gross disposable household income. 

and 

While  Ireland  does  not  intend  to  introduce  a 
fully-fledged  one-stop  shop  system  combining 
employment 
their 
integration  and 
coordination  have  been 
improved.  The  government  is  piloting  open  days 
where service providers across the board join up to 
provide  integrated  advice  to  the  groups  that  are 

services, 

social 

to 

room 

is  still 

reach.  There 

for 
hardest 
improvement  in  terms  of  offer  flexibility,  but 
cooperation  between  training  providers  and  the 
local  Irish  Public  Employment  Service  offices 
(Intreo  centres)  has  improved  in  recent  years  and 
employer-centred services have been strengthened. 

33 

IRELAND Equal opportunities and access to the labour market Early leavers from education and training (% of population aged 18-24) Better than average Gender employment gap On average Income quintile ratio (S80/S20) On average At risk of poverty or social exclusion (in %) Better than average Youth NEET (% of total population aged 15-24) On average Dynamic labour markets and fair working conditions Employment rate (% population aged 20-64) On average Unemployment rate (% population aged 15-74) On average GDHI per capita growth  On average Social protection and inclusion Impact of social transfers (other than pensions) on poverty reduction Better than average Children aged less than 3 years in formal childcare On average Self-reported unmet need for medical care On average Individuals' level of digital skills To watch Members States are classified according to a statistical methodology agreed with the EMCO and SPC Committees. The methodology looks jointly at levels and changes of the indicators in comparison with the respective EU averages and classifies Member States in seven categories (from "best performers" to "critical situations"). For instance, a country can be flagged as "better than average" if the level of the indicator is close to EU average, but it is improving fast. For methodological details, please consult the draft Joint Employment Report 2018, COM (2017) 674 final.   
 
4.3. Labour market, education and social policies 

(part of Budget 2017) extends the social protection 
for  self-employed  by  giving  them  access  to 
treatment  benefits  and  non-means  tested  income 
support in case of injury or illness. 

With  the  launch  of  the  Action  Plan  for  Jobless 
Households  in  September  2017,  Ireland  has 
made  a  major  commitment  to  combating 
joblessness  and  low  work  intensity.  The  plan 
adopts  a 
to  case 
family-focused  approach 
management  to  reducing  households’  joblessness 
and  sets  two  new  headline  targets  for  2020.  The 
first is to reduce the proportion of households that 
are jobless to 13 % or less. The second is to reduce 
the percentage of the 18-59 population resident in 
such  households  to  less  than  8 %  (12 %  in  2015). 
The plan is to reach these targets by extending the 
existing  activation  support  measures  to  adults  in 
jobless households, especially those with children. 
The  new  target  group  will  not  have  to  fulfil 
availability and job-search requirements otherwise 
associated with the activation system.  

those 

opportunities 

While  income  inequality (41)  is  comparatively 
low,  there  are  nonetheless  concerns  related  to 
from 
the 
a 
for 
disadvantaged  background.  While 
the  high 
degree  of  income  tax  progressivity  and  high  cash 
benefits are effective in equalising highly unequal 
market  incomes  (European  Commission  2017f), 
there  is  a  high  risk  of  poverty  (57 %  of  the  total 
cohort)  for  households  with  dependent  children 
and  very  low  work  intensity.  The  availability  of 
medical  cards  for  the  unemployed  and  inactive 
significantly  reduces  health  inequalities  for  the 
poorest households, but middle-income households 
face  a  comparatively  high  level  of  unmet  medical 
examination needs due to the cost of meeting such 
needs  (EU-SILC).  Access  to  tertiary  education  is 
also linked to socioeconomic background. Students 
from  fee-paying  secondary  schools  were  nearly 
twice  as  likely  (65 %)  to  attend  one  of  Ireland’s 
seven  universities  in  2015  than  their  non-fee-
paying  counterparts.  The  situation  is  particularly 
bad  in  Dublin,  where  students  from  more  affluent 
areas  go  on  to  attend  university  at  a  rate  of  up  to 
four times that of those from disadvantaged areas. 
According to analysis carried out by the European 
Social  Policy  Network  for  the  upcoming  Pension 

(41)  Market  income inequality is the highest in the EU but the 
tax/benefit system brings final income inequality below the 
EU average. 

In  relation  to  work  incentives  to  people  with 
disabilities,  the  Irish  Government  has  announced  
changes to make it easier to return to the disability 
allowance  scheme  and  to  take  up  employment 
the  allowance.  Since 
while  benefitting  from 
October  2015, 
the  Employment  Strategy  for 
People  with  Disabilities  has  steered  efforts  to 
improve  the  labour  market  attachment  of  people 
with  disabilities  and  the  Action  Plan  for  Jobless 
Households is expected to support this. 

it  more  difficult 

Social  dialogue  is  well  organised,  with  social 
partners mostly playing only consultative roles. 
The  social  partnership  model  was  considerably 
altered  during  and  after  the  economic  crisis, 
making 
reach  binding 
agreements  and  giving  more  weight  to  tripartite 
discussions.  In  2015  the  government  created  a 
structured  forum  for  national  economic  dialogue 
where  social  partners  have  the  opportunity  to  be 
heard,  in  a  consultative  rather  than  a  negotiating 
capacity.  The  consultative  nature  of  social 
dialogue in Ireland still remains unchanged. 

to 

4.3.2.    SOCIAL POLICY  

Absolute  poverty  levels  and  joblessness  have 
fallen  since  2012,  but  social  transfers  remain 
essential for the most vulnerable groups. Severe 
material deprivation has dropped since 2013 but is 
still  considerably  higher  than  before  the  crisis,  at 
7.5 %  of  the  population  in  2016.  The  at-risk-of-
poverty-or-social-exclusion  rate  (percentage  of 
total  population)  is  on  a  right  track  but  still 
remained high in 2016, at 24.2 %. The main reason 
for  this  is  the  high  proportion  of  people  living  in 
households  with  low  work  intensity,  almost  twice 
as high as the EU average. The at-risk-of-poverty-
or-social-exclusion  rate  for  children  also  remains 
higher  than  the  EU  average.  Income  support  for 
the unemployed ranks Ireland above EU average in 
terms  of  adequacy  of  unemployment  benefits  and 
minimum  income.  The  unemployment  benefit  is 
just below the EU average in terms of the length of 
weeks  required  to  access  benefits  and  on  average 
in  terms  of  the  duration  (for  a  1  year  work 
record)(40).  The  New  Deal  for  the  Self-Employed 

(40)  According  to  the  benchmarking  exercise  in  the  area  of 
unemployment  benefits  and  active  labour  market  policies 
conducted  within  the  EMCO  Committee.  See  the  draft 
Joint Employment Report 2018 for details. 

34 

 
                                                           
                                                           
4.3. Labour market, education and social policies 

Adequacy Report, social welfare pensions are very 
redistributive  due  to  their  flat-rate  payments  and 
earning-based  contributions.  Social  transfers  in 
Ireland  effectively  prevent  older  people  from 
falling into poverty during their retirement (the at-
risk-of-poverty or social exclusion rate (% of total 
population)  was  16.5  %  for  65  +  in  2015, 
considerably below the average in Ireland) (42). 

Graph 4.3.4:  Main social indicators 

of 

part-time  work 

because 
cost  of 

Accessibility to affordable, full-time and quality 
childcare remains difficult. The employment rate 
of  women  remained  below  the  EU  average  in 
2016, at 64.2 %, with many moving into inactivity 
caring 
or 
responsibilities.  The 
is 
particularly  high  (European  Commission  2017c) 
and  can  act  as  a  barrier  to  accessing  paid 
employment, 
income 
in 
households, 
including  single  parents.  OECD 
figures show that childcare costs are the highest in 
the  EU  in  Ireland.  The  figure  shows  that  in  2015 
the  net  cost  for  a  lone  mother  with  two  children 
and 
the 
low  earnings  amounts 
disposable income (OECD 2017e). 

to  42%  of 

particularly 

childcare 

low- 

A  Bill  providing  for  the  Single  Affordable 
Childcare Scheme was approved and published 
in  December  2017,  and  is  currently  proceeding 
through  the  Houses  of  the  Oireachtas  (Houses  of 
Parliament)  with  a  view  to  enactment  as  early  as 
possible  this  year.  Preparation  for  implementation 
of  the new  scheme  is  expected  to  progress during 
2018.  Delays  reflect  the  complexity  of  the  IT 
system  being  developed  for  the  scheme.  Pending 
introduction  of  the  Single  Affordable  Childcare 
Scheme, current childcare benefits have been made 
more  generous  and  accessible.  Their  having  been 
made  more  generous  might  result  in  childcare 
supply  constraints  but  there  are  no  signs  of  a 
capacity  shortage  for  the  time  being,  with  more 
places  currently  being  offered.  A  capital 
investment  scheme  is  in  place  for  childcare 
providers.  There  are  reports  of  a  constraint  in  the 
supply of qualified childcare workers, although the 
number  of  graduates  in  the  field  is  increasing. 
Overall, 2018 will see a further increase in funding 
for the Department of Children and Youth Affairs. 
While  pre-school  childcare  services  are  already 
regulated,  the  Government  has  committed  to 
introducing  the  regulation  of  school-age  childcare  
in 2018. 

Homelessness continues to increase according to 
the  latest  census,  although  the  absolute  figures 
are  still  quite  low.  Homelessness  increased  by 
81 %  in  the  period  2011-2016  (CSO,  2016). 
Family  homelessness  is  a  particular  concern  as  it 
increased  by  200 %  within  the  same  period. 
International  comparisons  on  homelessness  are 
notoriously  difficult  to  make  due  to  different 
national  definitions  but  the  OECD  Homeless 
Population  Report  from  2016  estimates  Ireland's 

Source: CSO 

Recent  reform  efforts  have  tried  to  tackle  the 
problem  of  weak  work  incentives  for  low-
income groups, including partners who are out 
of work. Ireland has addressed those disincentives 
by  tapering  the  withdrawal  of  benefits  when 
returning  to  work.  In  2015  the  Back  to  Work 
Family  Dividend  was  brought  in.  The  Housing 
Assistance  Payment  Scheme,  designed  to  tackle 
work  disincentives  in  previous  housing  support 
schemes,  was  fully rolled out by  March 2017.  By 
November 2017 over 29 800 households had their 
the  scheme.  The 
housing  needs  met  under 
government  also  committed  itself  to  bringing  in  a 
Working  Family  Payment  to  promote  work  by 
supplementing  on  a  gradual  basis  the  income  of 
households,  at  the  same  time  incentivising  more 
working  hours  and  full-time  work.  The  analysis 
leading up to the proposal has suggested that rather 
than  introducing  a  new  benefit,  a  package  of 
changes to existing schemes would be required to 
address the particular disincentives identified.  

(42)  Pension Adequacy Report 2018 – forthcoming 

35 

05101520253035200520062007200820092010201120122013201420152016% of populationIEAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households 
 
                                                           
4.3. Labour market, education and social policies 

is 

improving 

continuously 

Ireland 
its 
performance  and  lowering  early  school  leaving 
rates,  but  disparities  remain  at  local  level.  The 
percentage of early school leavers fell to 6.3 % of 
young people aged 18-24 in 2016, well below the 
Europe  2020  national  target  of  8 %  and  the  EU 
average  of  10.7 %.  Ireland  has  made  significant 
progress,  effectively  halving  its  rate  since  2009. 
No  major  gap  is  visible  between  native-  and 
foreign-born  students.  There 
is,  however,  a 
persistent  gap  between  girls  (4.6 %)  and  boys 
(7.8 %).  The  2017 national  reform  programme 
highlights  the  renewed  ‘Delivering  equality  of 
opportunity  in  schools’  initiative  (Department  of 
Education 
in 
disadvantaged areas. The proportion of 15-24 year-
olds  not  in  employment,  education  or  training  is 
13.0 %,  slightly  above  the  EU  average  of  11.5 % 
in  2016,  indicating  there  is  still  potential  to  do 
more to reduce early school leaving.  

and  Skills 

(DES), 

2017a) 

improved  slightly 

In terms of basic skills, Ireland has continued to 
perform  well,  especially  in  reading,  ranking 
high  among  EU  countries.  In  the  OECD’s  2015 
Programme  for  International  Student  Assessment 
(PISA)  survey,  Ireland 
in 
mathematics  compared  with  previous  results.  In 
science,  it  remained  above  the  EU  and  OECD 
averages,  but  with  a  significant  drop  from  2012 
(ERC, 2016a). The proportion of low achievers is 
the  lowest  in  the  EU  in  reading  (10 %)  (Graph 
4.3.5)  and  among  the  lowest  in  maths  (15 %)  and 
science  (15 %).  The  impact  of  socioeconomic 
status  on  performance  is  also  relatively  limited 
(OECD,  2016b).  Gender  gaps  are  among  the 
narrowest  in  the  EU  in  all  three  test  areas 
(European Commission, 2016). 

level of homelessness at 0.08 % of the population. 
While  this  places  Ireland  in  the  better  performing 
half of the countries analysed in the report, Ireland 
uses  a  rather  narrow  definition  of  homelessness 
compared  with  other  countries.  Ireland  continues 
to  implement  the  Action  Plan  for  Housing  and 
Homelessness,  with 
3 000 
sustainable  exits  from  homelessness  during  2016 
(up  31 %  from  2015).  However,  the  provision  of 
social  housing  remains  insufficient,  posing  a 
serious challenge (Section 4.5.1).  

approximately 

4.3.3.  EDUCATION AND SKILLS  

Public  spending  on  education  is  progressively 
returning to its pre-crisis level. The proportion of 
general  government  expenditure  on  education 
relative to GDP stood at 3.7 % in 2015, compared 
to 4.9 % in the EU. This was in the context of an 
anomalous  rise  in  measured  GDP  that  year.  As  a 
percentage  of  government  expenditure,  in  2015 
education  accounted  for  a  stable  12.4 %,  against 
10.3 % for the EU. In the light of emerging labour 
market  skills  shortages,  priority  is  being  given  to 
strengthening  the  system  of  further  education  and 
training. 
ambitious 
infrastructure  investment  plan  for  education  at  all 
levels. Capital investment in education at all levels 
is again on the rise since 2015-2016. 

Ireland 

also 

has 

an 

its 

and 

Despite  high  participation  in  early  childhood 
accessibility, 
care, 
education 
affordability  and  full-time  provision  remain 
problematic.  The  early  childhood  education  and 
care  participation  rate  in  Ireland  was  92.7 %  in 
2015,  against 
the  EU  average  of  94.8 %. 
Attendance  has  fallen  by  5.4  pps  since  2013  and 
the availability  and cost of full-time provision are 
still  problematic.  The  quality  of  early  childhood 
education  and  care  is  supported  by  Síolta,  the 
national  quality  framework  for  the  sector,  and  by 
Aistear, a curriculum framework published by the 
National Council for Curriculum and Assessment. 
There  is  more  engagement  with  stakeholders  on 
issues  of  concern  and  on  policy  delivery.  There 
have also been important changes to the minimum 
qualifications required for staff in the sector and a 
reorganisation  of  the  inspection  system  for  pre-
schools in order to encourage the full participation 
of children, including those with disabilities. 

36 

 
4.3. Labour market, education and social policies 

target 

Ireland ranked among the highest in the EU on 
tertiary  educational  attainment  and  has  an 
ambitious  national 
for  2020.  The 
proportion  of  30-34  year-olds  with  higher 
education was 52.9 % in 2016, well above the EU 
average  of  39.1 %.  The  ambitious  national  target 
for 2020 is 60 %. There is a clear gender gap, with 
(at 
women 
46.6 %). Migrant students have a higher attainment 
rate  (58.4 %  in  2016)  than  native-born  students 
(50.5 %).  The  employability  of  tertiary  graduates 
is also improving. In 2016 the employment rate of 
recent  graduates  increased  by  3.3  pps  from  the 
previous  year  to  86.7 %,  against  the  82.8 %  EU 
average. 

(at  58.5 %)  outperforming  men 

Future  funding  for  higher  education  is  on  the 
agenda and a new higher education reform was 
tabled  on  15  January  2018.  The  Department  of 
Education and Skills published both the Review of 
for  Funding  Higher 
the  Allocation  Model 
Education  Institutions  and  the  Higher  Education 
System  Performance  Framework  for  2018-2020, 
paving  the  way  for  a  new  tertiary  sector  agenda 
(DES, 2018). 

to 

(VET) 

compared 

The  attractiveness  of  vocational  education  and 
training 
academic 
education  remains  a  challenge.  The  rate  of 
participation  in  VET  in  Ireland  is  below  that  of 
other  EU  countries,  due  to  the  fact  that  it  takes 
place for the most part at post-secondary education 
level.  Adult  participation  in  lifelong  learning 
remained low in 2016, at 6.4 %, well below the EU 
average  of  10.8 %.  The  employability  of  recent 
VET  graduates  is  visibly  improving  and  getting 
closer 
the 
those  with  secondary 
employability 
education  was  67.2 %,  compared  to  the  EU 
average  of  72.6 %.  In  the  case  of  those  with 
tertiary  education  it  was  86.7 %  compared  to 
82.8 %.  This  makes  Ireland  one  of  the  EU 
countries  with 
the 
employment  rates  of  people  with  different  skill 
levels (Eurostat, 2017). 

the  widest  disparities 

the  EU  average. 

In  2016 

rate  of 

in 

to 

strategic  vision  and 

Ireland’s  National  Skills  Strategy  for  2025 
provides  a 
specific 
objectives  for  meeting  the  country’s  future 
skills  needs.  There  is  an  increased  focus  on 
lifelong  learning  and  an  ambitious  target  to 
increase participation in adult learning to 15 % by 
the 
2025.  One  option  being  explored 

is 

Graph 4.3.5:  Progress towards reaching the benchmark of 

low achievers in reading, 2009-2015 

Source: OECD (PISA, 2009 - 2015) 

include  maintaining 

The  Action  Plan  for  Education  2017  sets 
ambitious targets to improve PISA mathematics 
performance.  They 
the 
proportion  of  low  achievers  below  10 %,  while 
increasing the percentage of top performers to the 
level  of  the  OECD  average  by  2025  (DES, 
2017) (43).  It  also  recognises  that  policies  are 
needed to strengthen the capacity of school leaders 
and teachers to address the growing linguistic and 
cultural  diversity  among  students 
from  an 
increasingly 
background 
varied 
(Eurydice, 2017). 

immigrant 

Nevertheless,  some  basic  skills  gaps  persist  for 
disadvantaged  groups,  such  as  pupils  from  an 
immigrant  background  or  the  children  of 
Travellers.  There  is  a  performance  gap  between 
non-immigrants  and  first-  and  second-generation 
immigrants  (OECD,  2016c).  Recent  research  has 
highlighted  the  continuing  insufficient  levels  of 
the  Traveller 
educational  attainment  among 
community (44) (Watson et al., 2017).  

(43)  In  PISA  2015,  9.8 %  of  the  students  surveyed  in  Ireland 
were  top  achievers  in  mathematics  (level  5  or  above), 
against  the  OECD  general  average  of  10.7 %  (OECD, 
2016b). 

(44)  The  term  Travellers  refers  to  ‘the  community  of  people 
who are commonly called Travellers and who are identified 
(both  by  themselves  and  others)  as  people  with  a  shared 
history,  culture  and  traditions  including,  historically,  a 
nomadic  way  of  life  on  the  island  of  Ireland.’  (Ireland, 
Equal Status Act, 2000, Sec 2 (1)). 

37 

17.610.010.2-7.419.517.819.70.2-10-50510152025200920122015%IEEUEU benchmarkVariation 2009 -2015 (pp) 
 
                                                           
4.3. Labour market, education and social policies 

still  in  their  infancy.  More  can  be  done  to  pool 
funding models and align care planning locally and 
regionally. 
Ireland’s  current  Health  Service 
Executive  governance  structure  has  been  deemed 
unfit for purpose (Houses of the Oireachtas, 2017) 
and plans are afoot to set up an independent board 
to strengthen oversight and performance. 

The  shift  towards  universal  healthcare 
is 
complicated  by  an  unwieldy  two-tier  system. 
Public  hospitals  operate  at  nearly  full  capacity  all 
year  round.  Long  waiting  lists  for  public  health 
patients  represent  an  immediate  challenge  for 
improving  access  to  acute  care.  These  are  fuelled 
by  capacity  challenges  and  create  demand  in  the 
private insurance market, which provides fast-track 
access to a range of treatments. Private insurance, 
in  turn,  plays  a  much  bigger  role  in  financing 
healthcare  than  in  most  other  EU  countries.  The 
system  also  creates  perverse  incentives  for  public 
hospitals  to  favour  private  practice,  with  most 
doctors  dependent  on  private  revenue.  However, 
untangling  the  public-private  links  would  disrupt 
the private insurance industry and, as such, require 
Ireland  to  confront  powerful  vested  interests.  It 
also  risks  jeopardising  the  funding  model  for  the 
public sector. 

An ambitious reform agenda to address quality 
and access to healthcare has been put forward. 
This  will  see  a  shift  from  acute,  hospital-centric 
care  to  primary  and  community  care  (see  below), 
focus  on  coordination  and 
with  a  strong 
integration.  As  regards  accessibility,  the  vision  is 
to  progress  towards  a  universal,  one-tier  system. 
However, it is unclear whether the costing exercise 
underpinning  key  reform  measures  is  sufficiently 
robust. An independent impact assessment is being 
carried out to validate the costings and look at the 
possible  unintended  consequences  of  gradually 
removing  private  practice  from  the  acute  care 
system. 

is 

Primary  and  community  care  services  are  not 
yet capable of taking on some of the burden of 
the  only  western 
hospital  care.  Ireland 
European  country  without  universal  primary  care 
coverage (OECD/European Observatory on Health 
Systems  and  Policies,  2017).  A  greater  role  for 
primary  care  would  reduce  unnecessary  hospital 
admissions,  reinforce  prevention  activities  and 
play  a  crucial  role  in  tackling  health  inequalities. 
Though  vulnerable  groups  are  protected  by  a  GP 

redeployment  of  spending  from  the  National 
Training Fund. SOLAS (the further education and 
training  authority)  is  overseeing  the  development 
of  a  framework  for  employee  skills  development 
(Irish  Government,  2017).  However,  considerable 
investment 
in 
those 
employment in order to reach national targets. 

in  upskilling 

is  needed 

New types of apprenticeship schemes are being 
introduced and promoted by relevant actors. A 
key  measure  is  to  provide  50 000  upskilling  and 
reskilling  places  in  higher  education  by  2021. 
These will fill identified skills gaps in the economy 
and support an increase in lifelong learning (DES, 
2017) (45).  At  the  lower  skills  end,  ongoing 
preparations 
the 
Upskilling  Pathways  Recommendation  should 
benefit the reintegration of the inactive population.  

implementation  of 

the 

for 

4.3.4.  HEALTHCARE  

costly 

health 

comparatively 

A 
system 
compounded with  the  overall process of ageing 
makes  the  need  for  health  system  reform 
pressing  in  Ireland.  That  said,  demographic 
changes  are  projected  to  affect  the  country  in  the 
coming  years, with  expenditure  on  healthcare  and 
long-term  care  expected  to  increase  by  2.9  pp  of 
GDP  (1.0  due  to  health  care  and  1.9  due  to  long-
term  care)  from  2016  to  2070,  above  the  EU 
average of 2.1 (0.9 and 1.2 respectively). This will 
increase  the  pressure  on  the  healthcare  system, 
which  is  already  comparatively  costly  to  run (46). 
In  the  absence  of  reform,  there  are  likely  to  be 
losses of effectiveness, accessibility, resilience and 
fiscal sustainability. 

be 

for 

relevant 
overhauling 

Multi-year  budgeting  and  better  expenditure 
supporting 
control  would 
mechanisms 
Irish 
the 
healthcare  system.  Consecutive  budget  increases 
cover 
than  a 
significant  expansion  of  service  provision.  Many 
of  the  cost-containment  measures  introduced  are 

repeated  overspending 

rather 

(45)  Of these places, 6 000 are annual upskilling and reskilling 
courses,  currently  provided  under  Springboard+,  which 
incorporates the ICT skills conversion programme. 

(46)  For  2018,  the  government  allocated  additional  healthcare 
expenditure of EUR 685 million, bringing the total budget 
to a record level of almost EUR 15.3 billion, reflecting an 
increase of around 5 % on the 2017 budget.to a record level 
of  almost  EUR  15.3  billion,  reflecting  an  increase  of 
around 5 % on the 2017 budget. 

38 

 
                                                           
4.3. Labour market, education and social policies 

visit  card,  a  significant  proportion  of 
the 
population must pay out-of-pocket. There are also 
serious  capacity  problems.  Primary  care  centres, 
focused on coordination and integration, are being 
introduced  successfully  across  the  country,  but 
additional  negotiations  with  general  practitioners’ 
representatives  will  be 
increase 
capacity. Renegotiated capitation rates would need 
to  reflect  existing  tight  market  conditions  for 
medical  labour  supply,  as  well  as  the  cost  to 
private  GPs  of 
foregone  out-of-pocket 
the 
payments due to a shift to universal coverage. 

required 

to 

is 

at 

the 

centre  of 

Ensuring sufficient staffing is a policy challenge 
in  both  primary  and  acute  care.  The  healthcare 
workforce 
changing 
demographics  and  changing  models  of  care.  Task 
shifting  is  progressing  well,  with  a  number  of 
routine  procedures  being  done  by  nurses  (despite 
significant  shortages)  and  pharmacists.  Yet  the 
remains 
number  of  healthcare  professionals 
inadequate,  constituting  a  major  hurdle 
for 
reducing  hospital  waiting  lists,  making  the  shift 
towards  primary  care  and 
tackling  broader 
population ageing. A new national framework was 
launched 
the 
recruitment  and  retention of the  right  mix  of  staff 
across the healthcare system. 

in  November  2017 

to  support 

39 

 
4.4. 

INVESTMENT 

4.4.1.  INVESTMENT FOR BALANCED AND 

SUSTAINABLE GROWTH 

Recent developments 

investment  continues 

Headline investment figures remain volatile and 
changes  should  be  interpreted  with  caution. 
Much of the surge (61 % y-o-y) in total investment 
(gross  fixed  capital  formation)  in  2016  can  be 
attributed  to  R&D-related  intellectual  property 
(IP), which has a neutral effect on GDP as they are 
largely  imported.  Investment  in  aircraft  has  also 
contributed  to  the  swings  in  total  investment 
(Graph  4.4.1).  However,  evidence  suggests  that 
core  domestic 
to  gain 
momentum (Graph 1.6 in Section 1). In particular, 
investment  in  residential  property  was  stronger  in 
the first half of 2017 when it increased by 14.9 %, 
supported  by  government  policies.  On  the  other 
hand,  some  surveys 
in 
companies’ propensity to invest compared to 2016 
(EIB  2017),  as  well  as  a  significant  qualitative 
change.  Replacing  old  assets  was  still  the  main 
purpose of investment in fixed assets in 2016, but 
towards  product 
investment  priorities  shifted 
innovation  and  capacity  expansion  in  2017  (EIB 
2016 and 2017). 

report  a  decrease 

Graph 4.4.1:  Total investment and main drivers 

(*) for 2016 the index was at 542.8 
Source:  European Commission 

Public  investment  is  increasing.  It  dropped 
during  the  crisis  to  levels  that  were  barely 
sufficient  to  meet  the  depreciation  of  the  existing 
for  Public 
stock  of 

(Department 

capital 

Expenditure and Review (DPER), 2017). This was 
the result of a policy decision to prioritise current 
expenditure  with  the  aim  of  mitigating  the  social 
consequences  of  the  crisis.  Transport  and  housing 
were  the  areas  most  affected  by  this  reduction 
(Graph  4.4.2).  The  Capital  Investment  Plan 
announced  in  2015  allocated  EUR  42  billion  to 
capital  expenditure  over  the  period  2016-2021. 
Thanks  to  sustained  economic  growth  and  the 
stabilisation  of  public  finances  an  additional 
EUR 6  billion  have  been  allocated  for  the  period 
up to 2021.  Public capital expenditure is expected 
to  reach  2.5 %  of  GDP  in  2021  (or  3.8  %  of 
GNI*),  from  an  average  of  1.9 %  over  the  period 
2013-2016.  As  a  percentage  of  total  government 
expenditure  this  would  put  it  at  9.9 %,  above  the 
long-term average and the euro area average (47).  

Graph 4.4.2:  Capital expenditure by the general 

government sector 

(1) The projections are based on the data in the Review of 
the Capital Plan 2016-2021from August 2017 
Source: European Commission, Department for Public 
Expenditure and Review 

Investment bottlenecks and related policies 

investment 

impact  on 

A  number  of  barriers  could  have  a  significant 
in  Ireland. 
negative 
Infrastructure  bottlenecks, 
lack  of 
superfast  broadband  for  all  economic  operators, 
insufficient  public 
innovation, 
rigidities  in  the  regulatory  environment,  specific 
aspects  of  access  to  finance  (Section  4.2.4)  and  a 

investment 

including 

in 

(47)  According 

to 

the  European  Commission  Autumn 
Economic  Forecast  and  Irish  Fiscal  Advisory  Council 
(IFAC), 2017 pp. 86-87. 

40 

-5005010015020025030035019951997199920012003200520072009201120132015Total investmentTotal constructionIntellectual property (*)Aircraft (proxy)Index (2010=100)201602468101214012345678199519971999200120032005200720092011201320152017CommunicationWater supplyHealthEducationHousing developmentTransportTotal investment (rhs)projectionsEUR billion% of governmentexpenditure 
 
 
 
                                                           
4.4. Investment 

lack  of  skilled  labour  in  some  areas  hamper 
investment  (Box  4.4.1).  In  addition,  uncertainties 
related  to  the  global  economic  environment  also 
put a check on it (Section 1). 

Framework  (NPF)  is  intended  to  facilitate  a  more 
stable housing market by enabling a more coherent 
spatial  distribution  of  economic  activity,  housing 
and infrastructure (Section 4.5.1). 

its 

an 

(NCC), 

challenge’ 

‘immediate 

long-term  average 

Infrastructure  bottlenecks  have  been  identified 
(National 
as 
2017c). 
Competitiveness  Council 
Investment in transport is one of the most pressing 
issues,  with  the  level  of  investment  remaining 
below 
(Graph  4.4.2). 
According to the Strategic Investment Framework 
for  Land  Transport,  EUR  9.6  billion  have  been 
allocated  to  transport  infrastructure  over  the  next 
seven  years,  with  EUR  3.6  billion  earmarked  for 
public  transport  and  EUR  6  billion  for  roads 
(DPER,  2017).  So  far,  road  transport  investments 
have  mainly  aimed 
to  maintain  and  renew 
strategically  important  parts  of  existing  networks, 
reduce  urban  congestion  and  increase  efficiency 
and  safety.  To  this  end,  the  widening  the  Naas 
Bypass  and  the  Sallins  Bypass  and  the  upgrading 
of  roads  in  the  vicinity  of  Grangecastle  Business 
Park  were  started  in  2017  in  the  Greater-Dublin 
long-term  objectives  of  regionally 
area.  The 
balanced  growth 
and 
upgrading of the existing transport network as well 
as the expansion of its capacity in several areas of 
the country. As regards public transport in Dublin, 
work  on  planning  and  designing  the  new  Metro 
North has started and the Luas Cross City tramline 
has been operating since December 2017. Deficits 
in  transport  infrastructures  are  not  limited  to  land 
transport.  Ports  are  critical  for  international  trade 
and their importance has been enhanced by recent 
developments (Section 4.4.2) (NCC, 2017c). 

require  maintenance 

and 

distribution 

treatment 
Water 
infrastructure  bottlenecks  persist.  Challenges 
remain  as  regards  ensuring  a  good  infrastructure 
and  service  standard.  This  includes  waste  water 
the 
treatment,  reducing 
quality of drinking water (Section 4.5.4). 

leaks  and 

improving 

Housing  provision  and  spatial  planning  have 
become  most  pressing.  Alongside  measures 
already 
to  address  housing  shortages 
(Section  4.5.1),  a  planned  new  National  Planning 

taken 

Climate  policy  objectives  are  an  important 
criterion  to  consider  when  addressing  key 
infrastructure priorities. Ireland is not on track to 
achieve  its  greenhouse  gas  emission  reduction 
objectives  domestically  (Section  4.5.4).  Public 
investment  will  have  to  play  an  important  role  in 
achieving 
economic 
include 
growth.  Particularly 
investment  in  public  transport,  including  in  rail, 
supporting  infrastructure  for  low-carbon  private 
transport, 
and 
infrastructure  investments  that  support  the  spatial 
planning objectives. 

energy-efficient 

sustainable, 

low-carbon 

buildings 

relevant 

issues 

Skills  shortages  in  some  areas  are  a  growing 
challenge  for  investment  and  competitiveness, 
especially  for  smaller  companies.  Some  sectors 
and  regions  are  more  affected  than  others,  in 
particular  the  information  and  communications 
technology  and  healthcare  sectors  (Section  4.3). 
Wages  in  multinationals  of  EU  origin  are  64  % 
higher than in domestic companies. The difference 
is  74  %  for  multinationals  of  non-EU  origin 
(Siedschlag,  I.,  Di  Ubaldo,  M.  and  Tong  Koeclin, 
M., 2017). Under these circumstances, Irish SMEs 
have  difficulties  recruiting  and  retaining  skilled 
workers,  hindering  their  growth  and  exporting 
potential (Hays, 2016;  NCC, 2017b). The National 
Skills Council was launched on 27 April 2017 with 
the  purpose  of  anticipating  and  responding  to  the 
rapidly changing skills needs across all sectors, as 
well as responding to changes in relationships with 
key  trading  partners,  in  particular  the  UK.  Nine 
Regional Skills Fora were also launched with a key 
role to deliver economic growth and drive regional 
development.  Each  forum  will  work  closely  with 
the enterprise base in their region, as well as with 
IDA,  Enterprise  Ireland  and  the  Local  Enterprise 
Offices.  The  RSF  will  provide  a  structure  for 
enterprises,  employers  and  the  education  and 
training to work together to rapidly respond to the 
identified skills needs of their regions. 

41 

 
4.4. Investment 

Box 4.4.1: Investment challenges and reforms in Ireland 

Section 1. Macroeconomic perspective 

In  the  immediate  aftermath  of  the  crisis,  investment  fell  faster  in  Ireland  than  in  the  euro  area  average.  While 
multinational  companies  continue  to  distort  national  investment  figures,  domestic  investment  is  increasing  driven  by 
strong construction activity (Section 1). Public investment declined sharply in the wake of fiscal consolidation following 
the  crisis,  but  it  has  been  increasing  gradually  since  2016,  and  is  expected  to  reach  9.3%  of  total  general  government 
expenditure by 2021, above the euro area average (Section 4.4.1 and Section1). 

Section 2. Assessment of barriers to investment and ongoing reforms  

Barriers  to  investment  relate  to  infrastructure  bottlenecks,  rigidities  in  the  regulatory  environment,  specific  aspects  of 
access  to  finance  and  a  lack  of  skilled  labour  in  some  areas.    These  affect  multinationals  and  indigenous  companies 
differently. Ireland remains a very competitive destination for foreign direct investment.  

Main barriers to investment and priority actions underway 

1. Inadequate infrastructures are a major barrier (National Competitiveness Council (NCC 2017b). The World Economic 
Forum ranks Ireland 52nd in the world in terms of the quality of its infrastructure (WEF 2017) due to challenges related to 
land transport, sea ports, water distribution and broadband infrastructure.  The uneven distribution of infrastructure across 
regions  hinders  balanced  growth.  For  this  reason,  the  Capital  Investment  Plan  tackles  key  infrastructure  bottlenecks 
(Section 4.4.1). It remains to be seen to what extent the different constraints will be addressed. 

2.  Housing  shortages  and  the  insufficient  provision  of  related  infrastructures  have  become  a  serious  concern.  The 
government  has  taken  a  number  of  measures  to  promote  residential  construction,  including  the  2016  Action  Plan  for 
Housing  and  Homelessness  and  a  new  National  Planning  Framework  (Section 4.5.1),  but  it  will  take  time  for  some  of 
these measures to have an effect.  The lack of affordable housing, may discourage domestic and foreign investments as 
these problems add to other difficulties to attract qualified employees. The supply-side response to these housing deficits 
is slow for several reasons.  The procedures for obtaining permits to build houses, and for commercial and other types of 
construction, although improved, remain quite rigid. For example, save for exemptions in the case of some minor works, 
there are no alternative, simpler procedures for obtaining full building permits, such as notification schemes based on self-
certification  or  type  approvals  (Ecorys,  2017).  This  lack  of  flexibility  may  discourage  new  providers  from  entering  the 
Irish construction market, deterring competition, which may lead to inefficiency and higher prices, affecting the economy 
at large.  

3.  Public  R&D  expenditure  remains  an  issue.  Ireland  is  a  strong  innovator  and  continues  to  improve  its  position  in 
international  innovation  rankings.  However,  the  domestic  economy  could  benefit  more  from  the  large  presence  of 
multinationals  by  increasing  public  and  domestic  private  sectors  R&D  investment.  So  far,  public  support  for  business 
R&D has mainly relied on tax credits. Better targeted policy mixes and other measures more suitable to address the needs 
of indigenous SMEs are being put in place (Section 4.5.3).  

economic 

investment, 

Regional imbalances across the country remain 
in 
growth, 
competitiveness  and  innovation.  The    National 
Planning  Framework  to  be  set  in  law  aims  at 
guiding the spatial patterns of projected population 
growth  and  investments  to  build  up  on  the 
strengths  and  potential  of  the  regions  in  order  to 
improve regional performances to become more in 

throughout 

line with that of the greater Dublin area. The NPF 
targets  balanced  development 
the 
country  in  particular  with  physical,  digital  and 
research  infrastructures  to  attract  investment  and 
imbalances  are 
create 
compounded  by  a  reliance  in  certain  regions  on 
indigenous  companies,  in  traditional  sectors  such 
activities  agrifood  and  construction  (strongly 

jobs.  The 

regional 

42 

Regulatory/ administrative burdenTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency 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 

focused  on  reviewing  projects  in  specific  critical 
spending  areas  representing  around  30 %  of 
current  government  expenditure.  Given 
the 
multiple  demands  for  higher  public  spending  in 
different  areas,  the  process  can  provide  useful 
guidance for prioritising expenditure and selecting 
projects,  helping  to  improve  the  efficiency  and 
quality of public investment.  

4.4.2.  COMPETITIVENESS* AND THE BUSINESS 

ENVIRONMENT  

remains  high.  Since  2016 

The  external  competitiveness  of  the  Irish 
economy 
the 
depreciation of sterling and, more recently, the US 
dollar, with respect to the euro, is taking its toll on 
Irish competitiveness. But productivity is the main 
driver of competitiveness in the long-run. 

in 

indigenous 

(GVA).  The  spread 
across 

Monitoring  productivity  in  Ireland  requires  a 
careful  consideration  of  the  heterogeneous 
composition  of  the  economy.  As  a  small  open 
economy, productivity levels are influenced by the 
the 
prominent  presence  of  multinationals 
economy,  accounting  for  approximately  40 %  of 
gross  value  added 
in 
productivity 
and 
levels 
multinational  companies  is  considerable.  Some 
multinationals  operating  in  Ireland  also  often 
engage  in  contract  manufacturing and  register  the 
value  added  from  those  activities  in  Ireland, 
although  they  do  not  involve  domestic  labour  or 
capital  in  the production process.  This  means  that 
aggregate productivity indicators do not gauge the 
actual  productivity  levels  of  economic  activities 
carried  out  only  in  Ireland.  This  was  particularly 
the  case  in  2015,  when  total  factor  productivity 
(TFP)  increased  by  around  16  pps  (European 
Commission 2017a).  

Differences 
productivity growth 

in  productivity 

levels  and 

are 

differences 

considerable 

There 
in 
productivity  across  companies  and  sectors. 
Understanding 
them  could  help  policymakers 
make  better  decisions.  Microdata  show  large 
differences  in  labour  productivity  (Graph  4.4.3) 
and TFP (Graph 4.4.4) between multinationals and 
indigenous Irish companies. In addition, within the 
group  of  multinationals,  multinationals  from  EU 
Member States show lower productivity than those 

reliant  on  the  UK  market)  as  a  source  of  quality 
sustainable  employment. 
  The  new  National 
Planning  Framework  and  Capital  Investment  Plan 
recognise the need to proactively boost the ability 
of  these  regions  to  create  and  grow  sustainable 
enterprises,  to  maximise  the  potential  of  the 
planned  investment  in  particular  in  human  capital 
and  digital  infrastructure  investment,  in  particular 
through  the  development  of  regional  innovation 
capability. 

The  investment  plans  in  place  or  envisaged 
focus  on  key  socioeconomic  objectives.  The 
Capital  Investment  Plan  and  the  NPF  tackle  the 
infrastructure  bottlenecks  that  have  emerged  as  a 
consequence  of  reduced  public  investment  in  the 
aftermath  of  the  crisis  in  areas  such  as  housing, 
transport  and  water  infrastructure.  The  Capital 
Investment  Plan  also  addresses  other  sectors  such 
as  education  and  healthcare,  given  the  impact  of 
population  growth  and  ageing  on  these  sectors. 
Against  this  backdrop,  the  2018  Budget  includes 
to 
measures 
the 
increase  growth  potential,  balance 
economy, 
challenges 
development 
(Department  of  Public  Expenditure 
(DPER), 
2017a; Department of Finance, 2017e). To this end 
a  new  long-term  planning  process  —  the  10-year 
National Investment Plan for the period 2018-2027 
—  is  envisaged  in  2018,  integrated  with  the  new 
National Planning Framework (DPER 2017) (48). 

resilience  of 

improve 

social 

other 

and 

the 

Aligning  the  planned  frameworks  with  each 
other would help promote sustainable, balanced 
and  inclusive  growth.  An  integrated  approach  to 
investment  planning,  encompassing  the  strategies 
mentioned above, would help to ensure a balanced 
regional  development.  This  also  requires  good 
interdepartmental 
stakeholder 
involvement  and  a  balanced  application  of  social 
choice and economic efficiency criteria. Increasing  
should  also  be 
public  capital  expenditure 
consistent  with  economic  and  fiscal  sustainability 
requirements  (DPER,  2017)  in  order  to  avoid  a 
renewed pro-cyclical pattern (IFAC, 2017). 

coordination, 

is 
The  ongoing  spending  review  process 
expected 
for 
prioritising  public  investment.  So  far,  it  has 

to  provide  useful  guidance 

(48) The National Development Plan and the National Planning 

framework were published on February 16, 2018. 

43 

 
                                                           
 
4.4. Investment 

originating from non-EU countries. The former are 
25 % more productive than Irish companies, while 
multinationals  of  non-EU  origin  are  43 %  more 
productive  in  TFP  terms  (Siedschlag,  I.,  Di 
Ubaldo, M. and Tong Koeclin, M., 2017) (49). 

Graph 4.4.3:  Labour productivity across sectors and firms, 

2014 

Graph 4.4.4:  Distribution of TFP values and means by 

quintile, indigenous companies vs 
multinationals, 2014 

(1) log(TFP) on Y-axis calculated as Solow residuals. 
Source: Siedschlag, Di Ubaldo and Tong Koecklin (2017) 

Source: Siedschlag, Di Ubaldo and Tong Koecklin (2017) 

Productivity  growth  differences  between  Irish 
and  multinational  companies  are  even  greater. 
Foreign non-EU multinationals are increasing their 
productivity  much  faster  than  other  companies 
operating  in  Ireland  (Graph  4.4.5).  Some  Irish 
companies  have  high  productivity  growth  rates, 
even  higher 
of  EU 
the 
multinationals.  These  figures  suggest  increasing 
convergence 
levels  between 
companies of Irish and EU origin. 

in  productivity 

affiliates 

than 

Labour  productivity  differentials  are  reflected 
in wage differentials. Wages in multinationals of 
EU  origin  are  64 %  higher  than  in  domestic 
for 
difference 
companies.  The 
multinationals of non-EU origin. 

74 % 

is 

the 

It  appears 

The Irish economy benefits from the activity of 
multinationals,  but 
evidence  around 
spillovers  is  limited.  Multinationals  create  jobs 
and  contribute  to  aggregate  domestic  demand. 
They  also  help  local  companies  diversify  export 
destinations  and  volumes. 
that 
indigenous  companies  acquiring  inputs  from  or 
selling  to  multinationals  of  EU  origin  increase 
their  numbers  of  exported  products  and  export 
destinations 
(Siedschlag,  Di  Ubaldo,  Tong 
Koecklin,  2017). However, there is relatively little 
evidence of intra-sector or regional spillovers from 
Irish 
multinationals 
companies 
their 
sometimes 
performance  when  they  are  integrated  into  value 
chains  with  multinationals.  For  example,  there  is 
some  evidence  of  productivity  improvements  in 
Irish 
to 
multinationals  (Di  Ubaldo  M.,  Lawless  M.  and 
Siedschlag I., forthcoming). 

to  domestic  companies. 
improve 

that  provide 

companies 

services 

can 

(49)  In  labour  productivity  terms,  multinationals  operating  in 
Ireland  were  3.4 
than  Irish 
companies  in  2014.  This  difference  is  much  higher  with 
respect to non-EU multinationals. 

times  more  productive 

44 

050100150200250300350400450500All companiesDomesticcompaniesEUmultinationalsNon-EUmultinationalsAll foreign-ownedaffiliatesServicesManufacturingGVA/Person employed(thousands EUR)11.522.533.544.555.5Log TFPIrish             Foreign EU      Foreign Non-EUMean 1stQuintileMean 2ndQuintileMean 3rdQuintileMean 4thQuintileMean 5thQuintile 
 
 
                                                           
 
4.4. Investment 

Graph 4.4.5:  Average growth rate of labour productivity 

productivity  of  indigenous  companies  remains 
important for competitiveness. 

foreign 

investments  and  ensuring 

Foreign  investment  contributes  to  the  overall 
competitiveness  of  the  Irish  economy.  The  Irish 
Industrial Development Agency (IDA Ireland) has 
a  long  and  successful  record  in  attracting  FDI. 
New  activities  include  the  sectoral  diversification 
of 
their 
contribution  to  regionally  balanced  growth.  The 
2018 Budget contains measures for improving the 
regional geographic balance of FDI. These include 
targeted  funding  in  support  of  the  IDA  regional 
property/advanced 
and 
EUR 60  million  in  competitive  regional  funding 
through  Enterprise  Ireland  and  local  enterprise 
offices  (a  further  EUR  25 million  is  envisaged) 
(Department of Finance, 2017f).. 

facilities  programme 

The  cooperation  between 
local  companies, 
multinationals  and  the  national  science  and 
research  community  can  play  a  key  role  in  the 
adoption  and  diffusion  of  new  technologies. 
Enterprise Ireland provides examples of successful 
collaborative  engagement  between  multinationals 
and  indigenous  SMEs  in  areas  ranging  from  3D 
printing to advanced materials for aerospace. 

tax 

Incentive  provides 

Ireland’s  Employment 

A number of tax incentives for investment have 
and 
been  adopted. 
Investment 
relief  on 
investments  in  medium-term  equity  capital  for 
companies that would ordinarily find it difficult to 
raise such funding. It has been identified as a good 
example 
terms  of  achieving  additional 
objectives of incentivising employment and R&D. 
However,  the scheme  (which is to  be  reviewed  in 
2018)  in  certain  areas,  for  example  tax  relief  on 
investment returns and adaption of its target to the 
age  of  the  business  in  question  as  well  as 
broadening  out  the  target  audience  for  investment 
(PwC & HIS, 2017). 

in 

Sectoral  and  geographic  diversification  of 
exports 

Diversification of export destinations remains a 
challenge  given 
the  global  uncertainties 
(Department  of  Finance,  2017c;  NCC.  2017c). 
This  is  all  the  more  important  in  the  context  of  a 
concentration  in  export  markets  towards  the  US 
and  the  UK.  Domestic  companies  export  only  a 
limited  number  of  products.  In  2015  the  median 

(1) Average labour productivity growth rates are calculated 
relative to 2008. 
Source: Di Ubaldo, Lawless, and Siedschlag (forthcoming). 

Productivity  improvements  are  more  likely  to 
appear  in  cases  where  Irish  companies  engage 
in  R&D  and  innovation  activities.  For  example, 
in  the  services  sector,  only  companies  that  invest 
in  R&D  are  able  to  increase  their  productivity 
when  supplying  inputs  to  multinationals.  The 
benefits for Irish companies may therefore depend 
on  their  capacity  to  innovate  (Di  Ubaldo  M., 
Lawless  M.  and  Siedschlag  I.,  forthcoming). 
Attracting  foreign  investment  is  not  enough  to 
ensure  a  positive 
the  domestic 
economy’s productivity. 

impact  on 

Innovation  

and 

support 

growth 

innovation  among 

innovation  contribute 

High  rates  of 
to 
competitiveness. 
sustainable 
Enterprise  Ireland  and  local  enterprise  offices 
effectively 
Irish 
companies.  With  over  170  schemes  in  place, 
Enterprise  Ireland  has  been  very  successful  in 
developing Irish start-ups and scale-ups (EI, 2017). 
Overall,  Science  Foundation  Ireland  and 
the 
European  Regional  Development  Fund  (ERDF) 
co-invest  35 %  of  the  total  ERDF  allocation  in 
innovation performance with high absorption rates 
and  interim  outputs.  The  2018  Budget  contains 
measures 
international 
competitiveness of the indigenous production base. 
The  National  Competitiveness  Council  (NCC, 
2017b)  has  also  underlined  that  improving  the 

strengthen 

the 

to 

45 

-20-100102030405060708090200920102011201220132014IRISHIRISHFOREIGN EUFOREIGN EUFOREIGN NON-EUFOREIGN NON-EUTop 10 percentile Remaining 90 percentile % 
 
4.4. Investment 

Changes  to  the  national  planning  framework  that 
could  create  barriers  to  entry,  may  deter  the 
innovation  and  productivity  as  well  as 
the 
increased consumer choice such entry can bring. 

as 

small  businesses 

in  the  market  for 

Barriers 
legal  services 
continue  to  represent  a  challenge.  They  affect 
they  hamper 
mostly 
competition and increase litigation costs. The new 
Legal  Services  Regulation  Act  led  to  the  creation 
of  the  Legal  Services  Regulatory  Authority  in 
October  2016,  but  the  key  regulatory  work  that 
needs to be done for the Act to be implemented has 
been  slow.  Furthermore,  regulations  are  not 
expected  to  take  full  advantage  of  open-ended 
provisions  in  order  to  minimise  the  impact  on 
competition  and  reduce  costs  of  legal  services. 
Public 
to 
implementing  legislation  (50),  are  experiencing 
significant delays.  

consultations, 

pre-requisite 

a 

the 

judicial 

appointments 

The  envisaged  composition  of  a  new  body  for 
proposing 
raises 
concerns regarding the level of participation of 
in  that  body.  The  proposed 
the  judiciary 
composition  of 
Judicial  Appointments 
Commission, which would comprise only 3 judges 
over 13 (including a lay chairperson accountable to 
the Oireachtas) would not be in line with European 
standards  (Paragraph  47  of  Recommendation 
CM/Rec(2010)12  adopted  by  the  Committee  of 
the  Council  of  Europe  on  17 
Ministers  of 
the 
November  2010),  and  was  opposed  by 
Association of judges in Ireland. As to efficiency, 
the  average  length  of  proceedings  in  the  High 
Court  hearing  civil  and  commercial  cases 
(excluding divorce) at first instance increased from 
680  days  in  2015  to  772  in  2016  (CS,  2016).  For 
claims  of  at  least  EUR  1  million  and  other  major 
the  High  Court’s 
commercial 
Commercial  proceedings  List  offers 
short 
disposition  time  (approx.  21  weeks  to  trial  from 
entry). 

disputes, 

(50)  On subjects such as the regulation of legal partnerships and 
multidisciplinary practices and whether to introduce direct 
professional access to barristers (both important aspects of 
correcting market imperfections). 

number  of  products  exported  was  5,  compared  to 
11  for  multinationals  (European  Commission 
2017a). Budget 2018 contains measures to address 
these  challenges.  However,  there  is  considerable 
uncertainty regarding a number of factors affecting 
the export performance of Irish-owned companies. 

Part  of  the  trade  between  Ireland  and  the  rest 
of  the  world  relies  on  UK  infrastructure  and 
logistics.  The  UK  plays  an  important  role  as  a 
‘bridge’ between Ireland, the continent and the rest 
of  the  world.  Changes  in  current  trade  patterns 
would have an impact on logistics and the physical 
infrastructure  of  critical  importance  for  the  Irish 
trade (Lawless and Morgenroth, 2017) in particular 
for key Irish exports such as livestock, minerals or 
refrigerated merchandise. They are also crucial for 
the  provision  of 
Irish 
companies.  Disruptions 
logistics  and  port 
infrastructure  adequacy  would  add  to  the  already 
high cross-border trading costs of Irish companies 
(for 
the  methodology  for 
calculating  trading  costs  see  The  World  Bank 
(2017a). 

imports  needed  by 

the  description  of 

in 

Higher  interest  rates  can  also  affect  SMEs' 
exports.  At  a  time  when  the  diversification  of 
geographic  and  product  markets 
is  a  stated 
the  Irish  government,  financing 
objective  of 
constraints for SMEs are likely to deter them from 
exporting.  Research  has 
Irish 
companies reporting to have experienced financing 
difficulties  are  less  likely  to  engage  in  exporting 
activities  (Siedschlag,  Di  Ubaldo,  Tong  Koecklin,  
2017).  The  fear  of  application  refusals  and  high 
interest  payments  are  among  the  main  constraints 
for the exporting decisions of SMEs. 

shown 

that 

Business environment 

Ireland  offers  an  attractive  environment  for 
doing  business.  The  regulatory  environment  is 
business-friendly  and  it  has  a  high  quality  public 
administration and governance framework (OECD, 
2017a).  Ireland  has  recently  emerged  as  an  ideal 
range  of 
location 
government-supported  programmes,  a  highly 
educated  young  workforce  and  access  to  the 
modern technology (IVCA, 2017).  

for  start-ups  due 

to  a 

In  the  retail  sector,  it  is  important  to  ensure 
that  entry  barriers  do  not  hinder  entry  of 
retailers. 
Irish-owned 

foreign-owned 

and 

46 

 
                                                           
4.5.  SECTORAL POLICIES 

4.5.1.  PROPERTY MARKET*  

Rapid  house  price 
increases  are  observed 
country-wide. Residential property prices rose by 
11.6 %  y-o-y  to  November  2017,  continuing  the 
upward  trend of  the  previous  years  (Graph  4.5.1). 
While price growth was similar across the country, 
significant regional differences remain in absolute 
terms,  with  the  median  price  of  dwellings  sold  in 
Dublin  in  2016  being  EUR 320 000,  compared  to 
EUR 196 000 nationally. 

Graph 4.5.1:  House price increases 

albeit  from  a  low  base  (Section  4.2.3).  In  the 
second  quarter  of  2017,  34 %  of  household 
transactions 
(largely 
based on cash) (CBI, 2017d). 

remained  non-mortgaged 

Graph 4.5.2:  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 the period1995-
2016. 
Source: European Commission 

Source: CSO 

Private  sector  rents  have  continued  to  trend 
upwards  and  exceeded  their  pre-crisis  peak. 
Private rent inflation was 9.5 % year on year in the 
third quarter of 2017, with rents 7.0 % above their 
peak  level  recorded  in  the  fourth  quarter  of  2007 
(RTB, 2017). This is expected to be related to the 
tight  housing  market  conditions,  fuelling  rental 
demand. Moreover, the labour market increasingly 
requires  a  more  mobile  workforce,  possibly 
diverting  demand  to  the  rental  market  (Tax 
Strategy Group, 2017).  

House prices do not appear to be overvalued at 
this stage, but, affordability is a concern. Based 
on  price-to-rent  indicators  or  regression-based 
equilibrium  price  indicators,  prices  did  not  seem  
overvalued  in  2016  (Graph  4.5.2).  However,  the 
price-to-income  (affordability)  indicator  has  been 
increasing  steadily  since  2012  and  exceeded  its 
quarterly long-term average in the fourth quarter of 
2016. New mortgage credit is starting to increase, 

Housing  supply  is  increasing,  although  from  a 
very  low  level.  The  total  national  housing  stock 
grew  by  only  8 800  dwellings  between  2011  and 
2016,  compared  to  the  growth  of  some  225 000 
units  recorded  between  2006  and  2011.  This  is  a 
direct consequence of the real estate bubble burst. 
Starting  from  this  low  base,  housing  completions, 
the  basis  of  new  electricity 
estimated  on 
in 
connections,  picked  up  by  42.3 %  y-o-y 
November  2017.  While 
that 
housebuilding  is  growing  rapidly,  alternative  data 
based  on  energy  rating  statistics  suggest  that  in 
absolute terms figures may be much lower (51). 

clear 

is 

it 

Despite  an  increasing  need  for  higher-density 
housing, semi-detached houses remain the most 
popular  type  of  new  homes  built.  Although  the 
percentage of apartments increased over the period 
2011-2016,  semi-detached  homes  still  represented 
in  2016. 
most 

(41.2 %)  new  completions 

(51)  Based on new electricity connections, 14 932 houses were 
completed  in  2016,  almost  thrice  the  number  based  on 
building energy ratings (5 377) (Goodbody, 2017).  

47 

-30-20-100102030% y-o-yNational - all residential propertiesNational excluding Dublin - all residential propertiesDublin - all residential properties-60-40-2002040608019951997199920012003200520072009201120132015Model-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg. 
 
 
 
                                                           
4.5. Sectoral policies 

social  housing  units  by  2021  by  3 000,  bringing 
the  total  target  for  new  social  housing  in  the 
Action  Plan  for  Housing  and  Homelessness  to 
50 000 by the same date (of which 33 500 through 
construction  of  new  stock).  However,  this  takes 
time.  Construction  figures  from  September  2017 
show 3 700 new social housing homes being built 
stages  of 
across  190 
development. 

at  different 

sites, 

for 

for 

available 

An  appropriate  supply  response  requires 
coherent  and  concrete  action,  including  in  the 
infrastructure and planning system. Building on 
previous  actions  (see  table  3.1),  the  2018  Budget 
announced that up to EUR 750 million was being 
made 
commercial 
financing 
in  housing  by  means  of  a  new 
investment 
dedicated 
fund.  The  difficulty  of  accessing 
development  finance  may  in  particular  remain  an 
inhibitor  for  small  companies,  as  there  are  more 
large 
better 
opportunities 
developers. Capital gains tax changes are expected 
to help increase supply. The budget also signalled 
an increase in the vacant site levy. While this could 
encourage  builders  to  use  development  land,  in 
practice  the  increase  will  not  have  an  effect  until 
2019.  While  such  tax  measures  should  address 
speculation,  they  may  not  address  issues  such  as 
commercial unviability, mentioned above, and the 
lack  of  supporting  infrastructure  (such  as  water 
and  transport).  The  latter  is  showing  the  strain  of 
the years of low investment that followed the bust, 
constraining housing supply. 

capitalised, 

The government is introducing initiatives in the 
to 
property  market, 
commercial 
shift 
developers’ 
residential 
towards 
attention 
building.  The  budget  included  an  increase  in  the 
level  of  stamp  duty  on  commercial  property 
transactions  from  2 %  to  6 %.  While  this  is  a 
considerable change which may reduce the volume 
of  commercial  transactions  in  the  next  few  years, 
there  are  doubts  whether  it  would  actually  divert 
developers’  attention  to  the  residential  market.  A 
stamp  duty  refund  scheme  for  land  purchased  for 
the  development  of  housing  was  also  introduced. 
Finally, a new, time-limited tax deduction for pre-
letting  expenses  was  introduced  to  encourage 
owners  of  vacant  residential  property  to  bring  it 
into  the rental market.  Official  vacant homes  data 

Apartments  represented  only  13.8 %  of  new 
buildings (52), despite the need for a more one- and 
two-bedroom  apartments.  The  high  cost  of 
is  sometimes  cited  as  a 
apartment  delivery 
significant  barrier  to  new  apartment  supply.  A 
government 
a 
comparison with other countries, is being done and 
this 
new  apartment  guidelines, 
assessment  and  other  analysis,  are  being  refined 
(see Section 3.2).   

informed  by 

assessment, 

including 

cost 

An  inability  to  meet  housing  demand  could 
have an adverse effect on growth prospects. The 
draft  National  Planning  Framework  (DHPLG, 
2017)  projects  the  need  to  accommodate  550 000 
additional households by 2040. Other estimates of 
housing demand range from 23 000 (53) (Duffy et 
al., 2016)) and 50 000 (Lyons, 2017) annually. No 
matter  what  indicator  is  used,  it  is  clear  that  new 
supply remains below all estimates of the number 
of new housing units required to meet demand. In 
this  regard,  the  National  Competitiveness  Council 
has  stressed  the  need  to  find  solutions  to  increase 
the  availability  of  property.  The  lack  of  housing 
could limit the ability to  maintain and to compete 
for  new  jobs  in  multinationals  and  sustain  growth 
in  foreign  investment.  At  the  same  time,  if  any 
relocation  of  companies  to  Dublin  also  leads  to  a 
relocation  of  employees,  existing  scarcity  of 
housing may be exacerbated. 

The  2018  Budget  contains  a  number  of  extra 
measures  aimed  at  addressing  the  housing 
shortage, including social housing. In September 
2016,  the  net  need  (54) for  social  housing  support 
delivered through the current expenditure (Section 
4.3.2) was estimated at 91 600 households (DPER, 
2017).  Updated  housing  need  assessment  figures 
for  2017  show  a  drop  in  a  nine-month  period  of 
6.1 %  to 85 799 (Housing Agency, 2018). Overall, 
the  housing  needs  of  a  further  80  000  eligible 
households will be met under the five -year Action 
Plan  through  Housing  Assistance  Payments  and 
other supports. Concerning the capital expenditure, 
the  budget  included  a  target  of  building  some 
3 800  new  social  housing  units  in  2018.  An 
additional  EUR  500  million  was  allocated  in  this 
budget to increase the total provision of new-build 

(52)  Based  on  energy  ratings  data.  They  diverge  marginally 
from the figures based on electricity connections data. 

(53)  Rising to 32 000 by 2024.  
(54)  Households  deemed  eligible  but  not  accessing  social 

housing support. 

48 

 
                                                           
4.5. Sectoral policies 

may  be  overestimating  the  number  of  habitable 
vacant homes at the moment (55).    

capacity  constraints  on  public  transport  system 
across Ireland's cities. 

4.5.2.  TRANSPORT AND TELECOMS   

Transport 

in 

the 

levels 

sector 

investment 

investment 

Recent 
transport 
infrastructure  have been  lower  than before  the 
crisis,  linked  to  the  lower  level  of  resources 
available for capital investment. While increased 
demand  for  transport  is  driven  by  economic 
growth, 
remains 
in 
constrained  (Section  4.4.1).    Ireland  has  more 
motorways  per capita than the EU average, but the 
‘Performance  Indicators  in  Local  Authorities’ 
Report  published  by  the  National  Oversight  and 
Audit  Commission  in December 2016  highlighted 
the  need  for  major  work  on  Ireland’s  rural  road 
the 
networks.  The 
Department  of  Transport,  Tourism  and  Sport  will 
total  EUR  7.5  billion  over  the  four-year  period  to 
the  department’s 
2021.  Overall,  most  of 
transport,  with 
expenditure  will  be  on 
landmark  projects  such  as  the  Naas  Bypass 
upgrade/  Sallins  Bypass  (including  Osberstown 
interchange)  project  and  investment  in  significant 
public transport programmes.  

allocation 

capital 

land 

for 

transport 

infrastructure, 

The  weak 
in 
particular  around  urban  centres,  is  hindering 
matters. There has been significant and increasing 
traffic congestion in all urban areas in recent years. 
Dublin  and  Galway  are  particularly  congested, 
with  international  ratings  ranking  Dublin  as  the 
‘slowest’ major city studied (56) (INRIX Research, 
in  urban  centres 
2017). 
highlights  the  need  for  targeted  investment  in 
additional  capacity  where  significant  bottlenecks 
exist.  The  Capital  allocation  over  the  four-year 
period  from  2018  to  2021  allows  for  an  envelope 
of  €2.7  billion  for  public  transport.    This  funding 
should  progress  key  capital  programmes  that 
would  help  address  congestion  and  emerging 

Increasing  demand 

(55)  As  noted  in  the  statement  from  Minister  for  Housing, 
Planning  and  Local  Government  on  Budget  2018 
(http://www.housing.gov.ie/housing/statement-eoghan-
murphy-minister-housing-planning-and-local-government-
budget-2018) 

(56)  At  7.5  k/h  during  all  congested  periods,  with  peak  hour 

speeds at 5.5 k/h. 

Ireland’s  urban  transport  policy  emphasis  has 
been  on  shifting  commuters  from  their  private 
cars  to  other  modes,  including  public  and 
sustainable  transport.  In  2015,  there  were  an 
extra 7.7 million passenger journeys spread across 
bus,  rail  and  light  rail  services,  with  public 
transport  accounting  for  5.8 %  of  all  journeys  in 
2014.  Any  new  infrastructure  is  to  account  for  its 
impact  on  Ireland’s  obligations  under  the  EU 
energy,  climate  and  air  quality  policies.  The  need 
for  further  public  infrastructure  investment  has 
been demonstrated, in particular in public transport 
and cycling infrastructure in the main cities with a 
funding  allocation  of  some  €114m  to  support  this 
objective.  Consideration  must  also  be  given  to 
moving  away  from  diesel-only  fuelled  public 
transport  fleets,  in  view  of  the  obligations  under 
the  EU  Renewable  Energy  Directive  to  introduce 
more renewables into the energy mix for transport 
and this is being considered for urban bus fleets in 
the context of future year funding allocations. 

Telecoms 

Access to  fixed  broadband remains a  challenge 
for  rural  areas  in  particular.  In  2017,  around 
80%  of  rural  households  had  access  to  fixed 
networks offering at least 30 Mbps, which is well 
above  the  EU  average  (47%)  and  represents  a 
substantial  y-o-y  increase.  However,  6  %  of  rural 
households  had  no  access  even  to  basic  fixed 
broadband (offering at least 2 Mbps). Overall, 52% 
of  households  had  access  to  a  fixed  network 
offering at least 100 Mbps. This figure is likely to 
be significantly lower in rural areas. 16% of SMEs 
reported that the speed of their Internet connection 
is  insufficient  for  their  needs.  A  number  of  SME 
stakeholders consider unavailability of connections 
of  at  least  100  Mbps  a  challenge,  hampering 
growth and cross-border sales.   

challenges, 

connectivity 

notwithstanding 

in 
Overcoming 
in  rural  areas,  requires  public 
particular 
intervention, 
private 
investments  from  operators.  The  2015  National 
Broadband Plan Intervention Strategy provides for 
the  delivery  to  all  premises  of  a  minimum 
download of 30 Mbps and a minimum upload of 6 
Mbps,  with  a  mix  of  private  and  public 
intervention. On the other hand, it does not specify 

49 

 
                                                           
4.5. Sectoral policies 

a concrete target for access to networks offering at 
least  100  Mbps.  The  plan  is  eligible  for  EUR  75 
million under the ERDF programme 2014-2020. 

The implementation of the National Broadband 
Plan  is  experiencing  substantial  delays.  It  is 
therefore  important  that  Irish  authorities  complete 
the related procurement process. 

expenditure  in  R&D  grew  from  EUR  836  million 
to  EUR  950  million  over  the  same  period. 
Nevertheless,  the  low  levels  of  investment  will 
make  it  difficult  for  Ireland  to  reach  its  R&D 
intensity  target  of  2.5 %  of  GNP  by  2020  and  if 
unreversed,  this  can  have  long-lasting  negative 
effects. 

of 

quality 

number 

The  strong  public  research  base  and  Ireland’s 
highly  qualified  human  resources  are  key 
drivers  of  the  Irish  innovation  ecosystem.  The 
strength  of  the  Irish  research  base  is  reflected  in 
scientific 
high 
the 
publications (57)  (fifth  in  EU)  and  the  number  of 
new  doctoral  graduates  (seventh  in  EU).  In  2016 
the  government  put  in  place  the  National  Skills 
Strategy  2025  to  help  Ireland  deliver  technology 
talent  and  skills.  Some  Irish  universities  have 
fallen  in  international  rankings.  The  additional 
allocation  of  EUR  36.5  million  planned  in  2017 
may be a signal of reinvestment. The drop in PhD 
enrolments 
in  2017, 
in  2016  was  reversed 
recovering  to  2015  levels  (58)  (Higher  Education 
Authority (HEA) statistics). Moreover, a new PhD 
for  150 
and  Research  Master’s  Programme 
enrolments in disciplines aligned to business needs 
and the Laureate Awards for frontier research have 
been launched. 

Addressing  barriers  to  pension  portability  that 
can restrict researcher mobility is hence of key 
importance  to  ensure  qualified  research  staff. 
To  this  end,  Ireland  has  initiated  to  explore  the 
possibility of higher education institution and other 
research  performing  organisations  participation  in 
the EU RESAVER pension scheme.  

4.5.3.  RESEARCH, DEVELOPMENT AND 

INNOVATION (R&D&I)  

Ireland  is  a  strong  innovator  and  continues  to 
improve its position in international innovation 
rankings.  This  is  evidenced  by  its  position  in  the 
Innovation  Output  Indicator  (3rd)  and  on  the 
European  Innovation  Scoreboard  (10th).  The 
strengths  of  the  Irish  innovation  system  are  the 
quality of human capital, the openness and quality 
of  its  research  system  as  well  as  an  enabling 
business  environment.  Relative  weaknesses  relate 
to  finance,  links  between  academia  and  business 
and inter-company collaboration. 

a 

The 

global 

become 

proportion 

The  country’s  ability  to  sustain  its  robust 
economic  growth  depends  greatly  on  its  vision 
innovation 
to 
Its 
leader (Innovation  2020,  DBEI  2015). 
strengths  stem  from  a  well-developed knowledge-
intensive  services  sector  and  medium-  and  high-
tech  manufacturing. 
of 
employment  in  high-growth  companies  (fourth  in 
the  EU)  and 
in 
innovative  sectors  (first  in  the  EU)  strongly 
outperforms the EU average. Exports are the main 
driver  of  economic  growth  (10th  world’s  leading 
are 
exporter  of 
increasingly  concentrated  in  a  limited  number  of 
sectors  (pharmaceuticals,  medical  devices  and 
software)  and  mainly  produced  by  multinationals 
(Section 4.2.2). 

in  fast-growing  companies 

services).  However, 

they 

Public  expenditure  on  R&D  continues  to  cause 
concern.  Public  R&D  intensity  has  continued  to 
decline from 0.50 % in 2010 to 0.34 % of GDP in 
terms,  public 
2016.  However, 

in  absolute 

(57)  Scientific  publications  within  the  top  10 %  most  cited 

publications worldwide as % of total publications. 

(58)  2015 (6 800), 2016 (6 062), 2017 (6.806). 

50 

 
 
 
 
 
                                                           
4.5. Sectoral policies 

Box 4.5.1: Policy highlights: Technology Partnerships and Technology/Research Centres 

The  European  Commission's  Country  Specific  Recommendations  (CSRs)  for  Ireland  have  called  for 
increased attention by the public sector to the diffusion of technologies among Irish indigenous companies. 
In  particular,  the  2017  CSRs suggested  stimulating  innovation  by  SMEs  with  new  and  more  direct  policy 
mixes.  The  Innovation  2020  Strategy,  adopted  in  December  2015,  has  been  developing  new  policy 
instruments that have succeeded in fostering cooperation between research institutions and domestic firms as 
an effective way of finding out and spreading the use of new technology solutions and innovations. In June 
2017, Innovation 2020 reported that, over the previous twelve months, 45 new actions have been initiated, 
12 actions have been completed and 72 actions were continuing to progress.  

In the context of Innovation 2020, technology partnerships and Technology/Research Centres are a vital part 
of the system of public support for enhancing competitiveness through innovation and commercialization of 
research. The Centres provide firms with a mechanism to access expertise and technology beyond what they 
have  available  in-house.  They  have  managed  to  turn  every  euro  invested  in  the  scheme  into  a  seven  euro 
increase in the turnover of firms. The Centres are co-financed with public and private funds and primarily 
focused  on  research  and  innovation  priority  areas  that  have  been  identified  as  market  opportunities  for 
Ireland.  They  also  provide  a  path  to  commercialization  for  intellectual  property emerging  from  the  public 
research system. 

Ireland  currently  has  a  sophisticated  network  of  such  Centres.  The  Research  Centres,  funded  by  Science 
Foundation  Ireland,  have  a  specific  research  mission  and  competency.  These  are  complemented  by  a 
network  of  enterprise-led  Technology  Centres  located  on  campuses  across  the  Higher  Education  System. 
They act in sync with Incubation Centres, technology transfer offices, and Technology Gateways supported 
by Enterprise Ireland.  

In 2017, five new Research Centres were added to the already existing 12 Research Centres: Confirm (smart 
manufacturing), Beacon (sustainable use of biological resources), FutureNeuro (rare neurological diseases), 
I-Form  (Additive  Manufacturing)  and  Future  Milk  (precision  pasture-based  dairying).  The  Centres  will 
enable  collaborative  partnerships  between  industry  and  academia  supported  by  an  investment  of  EUR  98 
million  by  Science  Foundation  Ireland  matched  by  EUR  54  million  from  125  industry  partners.  A  Meat 
Technology Centre and a Manufacturing Research Technology Centre were also set up in 2017. An Applied 
Internet of Things Cluster and an Engineering, Materials and Design Cluster were also set up to maximize 
the potential of Technology Gateways working in these thematic areas.  

Regular  reassessment  of  the  ongoing  work  allows  for  the  possible  winding  down  of  some  initiatives.  For 
instance, in 2017 a number of Technology Centres were wound down "primarily as their target objectives 
and company base did not continue to match the Technology Centre model and requirements. This allows 
other Centres to scale subject to their funding proposals being of sufficient quality and robustly supported by 
industry." (DJEI 2017). 

Interesting concrete results can be reported from the activity of these Centres. While partnerships encourage 
collaboration  between  industry  and  academia  there  is  an  increasing  emphasis  on  promoting  collaboration 
across  firms  as  well.  One  such  example  was  a  EUR  1.1  million  partnership  award  in  late  2015  between 
Boston  Scientific  (a  US  medical  device firm),  Schivo  (an  indigenous  precision  engineering  company)  and 
Lisnabrin  Engineering  (an  indigenous  tool  manufacturing  company).  The  collaboration  between  these 
companies  and  the  South  Eastern  Applied  Materials  (SEAM)  Technology  Gateway  in  WIT  resulted  in  a 
joint  research  programme  which  aims  to  bring  a  considerable  improvement  o  the  way  manufacturing 
industries operate in Ireland through a new process linked to metal lasering.  

expenditure 

Business  R&D 
to 
increase  and  is  dominated  by  foreign-owned 
firms. It increased from EUR 1.5 billion in 2006 to 
EUR  2.3  billion  in  2016.  Still,  Business  R&D 
intensity  in  Ireland,  at  0.83 %  GDP  in  2016, 

continues 

remained below the EU average of 1.31 %. Despite 
the  increase  in  SMEs  engaging  in  R&D,  business 
R&D  is  dominated  by  multinationals  (73 %  of 
total  business  R&D  expenditure).  Public  support 
for business R&D has increasingly relied on R&D 

51 

 
4.5. Sectoral policies 

Technology  Centre  were  set  up  in  2017.  An 
Applied  Internet  of  Things  Cluster  and  an 
Engineering,  Materials  and  Design  Cluster  were 
also  set up. Five new  research  centres  will  enable 
collaborative  partnerships  between  industry  and 
academia  supported  by  an  investment  of  EUR  98 
million by Science Foundation Ireland matched by 
EUR 54 million from 125 industry partners. 

Graph 4.5.3:  Public support for business R&D as % of GDP, 

2006 and 2014 

(1) Estimated direct public support for business R&D includes 
direct government funding, funding by higher education 
and public sector funding from abroad. Public sector 
funding from abroad is not included for DE and NL.  
(2) LU: 2009; BE, CH: 2012; FR, IT, US, CN: 2013.  
(3) BE, DK, IT, LU, SI, KR: 2007; CH, TR: 2008; CN: 2009; SK: 2010; 
IS: 2011.  
(4) EU was estimated by DG Research and Innovation and 
does not include HR, MT, PL, SE. Data on tax incentives for 
R&D are not available for HR, MT, PL, SE. The following 
countries have no tax incentives for R&D: BG, DE, EE, CY, 
LU.  
(5) Some estimation was involved in the compilation of the 
data. 
Source: European Commission 

and 

accelerate 

There  is  scope  to  increase  industry-academia 
collaboration 
knowledge 
spillovers  from  multinationals  to  local  SMEs. 
The level of business enterprise funding of public 
R&D  is  one  of  the  lowest  in  the  EU  and  the 
amount of public-private scientific co-publications 
per million inhabitants remains relatively low. The 
Technology  Transfer  Strengthening 
Initiative 
Third  Phase  has  been  launched  to  enhance  the 
knowledge  transfer  system.  Alternative  ways  of 
increasing  the  diffusion  of  new  technologies  and 
getting multinationals more involved in R&D with 
local SMEs need to be explored. 

tax incentives, accounting for 81 % of total public 
support  for  business  R&D.  A  2016  evaluation 
(IGEES,  2016)  found  that  the  R&D  tax  credit 
achieves  reasonable  additionality (59).  The  review 
highlighted  that  most  firms  conducting  R&D  are 
small and Irish, but that total expenditure on R&D 
comes  mainly  from  older,  larger  and  non-Irish 
firms.  The  review  found  that  it  was  mainly  older, 
larger  and  non-Irish  firms  who  derived  financial 
benefit from the scheme, although it was typically 
Irish firms who benefited more from the repayable 
credit element. The Knowledge Development Box 
(Certification  of  inventions)  Act  2017  has  come 
into  operation,  enabling  SMEs  to  qualify  for  a 
tax (60).  While 
lower 
corporation 
information  on  its  take-up  or  impact  is  not  yet 
available,  there  are  indications  that  some  of  the 
modalities might be too complex for SMEs to use.  

rate  of 

Evidence  suggests  that  policies  to  incentivise 
innovation  and  investment  in  knowledge-based 
capital (61)  should  be 
tailored 
further 
to 
indigenous 
Irish-owned 
Irish  SMEs.  For 
companies,  the  largest  productivity  gains  are 
driven by investment in R&D and in organisational 
and  branding  capital  (Siedschlag,  2017).  To  gear 
innovation policies towards more direct support for 
local  SMEs,  new  initiatives  are  being  launched. 
The  Enterprise  Ireland  Strategy  2017-2020  (EI, 
2017a)  seeks  to  support  SMEs  by  increasing  its 
R&D investment by 50 % to EUR 1.25 billion by 
2020.  A  review  of  R&D  and  innovation  support 
for companies is being done, to be finalised by the 
end  of  the  year.  Six  small  business  innovation 
research projects were launched in 2017 and a new 
credit  guarantee  scheme  (a  Counter  Guarantee 
Scheme) will be launched shortly. 

A  network  of  technology  and  research  centres 
helps  companies  collaborate  with  the  public 
research  system  and  generates  inter-company 
collaboration, including multinationals. In 2016, 
three gateways were added to the network. A Meat 
Technology Centre and a Manufacturing Research 

(59)  Since  2009,  for  each  euro  in  foregone  revenue,  an 

additional EUR 2.40 is generated in R&D. 

(60)  On  profits  derived  from  inventions  certified  to  be  novel, 
non-obvious and useful and in contrast to larger companies, 
which  cannot  make  a  claim  with  regard  to  non-patented 
inventions. 

(61)  Computerised  information  (software  and  databases),  IP 
assets  (designs,  copyrights,  patents, 
trademarks)  and 
economic  competences  (branding,  organisational  know-
how and employee skills). 

52 

0.000.050.100.150.200.250.300.350.400.45South KoreaUnited StatesEU (4)JapanChinaAustriaBelgiumFranceIrelandHungarySloveniaUnited KingdomCzech RepublicNetherlandsPortugalSpainDenmarkGreeceFinlandLithuaniaEstoniaItalyLatviaGermanyRomaniaLuxembourgBulgariaSlovakiaCyprusIcelandNorwayTurkeySwitzerland%Indirect government support through tax incentives,2014 (2)Direct public support (1) for R&D, 2014 (2)Total financial support, 2006 (3) 
                                                           
 
4.5. Sectoral policies 

a 

aimed 

towards 

roadmap 

Ireland  recently  adopted  a  National  Mitigation 
Plan. It  is the first  plan  to present  a  coherent  and 
integrated 
low-carbon 
economy,  laying  out  a  coherent  framework  to 
tackle persisting challenges in the energy sector. It 
sets  out  broad  objectives  and  wide-ranging  policy 
instruments 
at  decarbonising  power 
generation,  the  built  environment  and  transport 
while  reaching  carbon  neutrality  for  agriculture, 
forestry  and  land  use.  The  plan  will  be  a  living 
document  to  which  mitigation  measures/policies 
will be added iteratively. As it stands, however, it 
offers  few  specific  new  mitigation  measures.  It 
should still be a good basis for preparing Ireland’s 
integrated national energy and climate plan. 

transport  and 

Other  key  initiatives  are  being  implemented, 
that will affect Ireland’s capacity to decarbonise 
its  economy.  The  recently  released  draft  National 
Planning  Framework  has  a  climate  component. 
Adequate spatial planning will be a critical enabler 
of  mitigation  given  the  population  is  so  widely 
dispersed  and  Ireland  only  has  a  small  number  of 
large  urban  areas,  all  of  which  have  serious 
congestion and public transport issues to deal with. 
The  Capital  Investment  Plan  will  also  play  a 
crucial role in decarbonisation as it will determine 
the extent to which additional means are mobilised 
low-energy  housing 
for  public 
(Section  4.5.2  and  below).  How  the  government 
deals  with  the  housing  shortage  may  have  a 
significant  impact  on  energy  efficiency  in  the 
residential  sector  for  many  years  to  come.    Both 
the  consistency with the National Mitigation Plan 
(Section  4.5.1.)  and  the  affordability  of  house 
building  need  to  be  considered.  In  the  energy 
sector (see below), Ireland has put in place a series 
of  policies  to  foster  decarbonisation  in  line  with 
the  White  Paper  on  Energy (DCCAE,  2015). 
However, subsidies to two peat power plants under 
public  service  obligations  will  remain  in  place 
until  2019.  The  planned  capacity  remuneration 
mechanism under the Integrated Single Electricity 
Market  may  still  support  fossil  fuel-based  power 
plants to a certain extent for security of supply. 

The  transition  to  low-carbon  energy  sources 
continues  to  be  challenging.  Fossil  fuel  energy 
represents  over  90 %  of  total  energy  used  (63). 
Replacing it with renewable energy and improving 
energy  efficiency  will  be  crucial  for  making 

(63) SWD (2017)398 final, Energy Union factsheet Ireland, p. 3 

on 

2020 

Innovation 

Innovation  is  high  on  the  agenda  thanks  to  a 
comprehensive approach, rolled out at national 
and  regional  level.  It  is  not  only  addressed  in  a 
Strategy 
dedicated 
(Interdepartmental  Committee 
Science, 
Technology and Innovation, 2015), but as part of a 
comprehensive framework bringing  together other 
government  strategies,  such  as  on  education, 
taxation  and  employment.  The  Innovation  2020 
Second  Progress  Report  2017  (Cross  Government 
Implementation  Group,  2017) 
shows  good 
advancement  in  implementing  actions  and  a  good 
monitoring  and  evaluation  system.  Research 
prioritisation, being reviewed, is almost complete. 

4.5.4.  ENERGY AND CLIMATE ACTION 

Ireland’s  current  climate  change  mitigation 
efforts will not enable it achieve its Europe 2020 
climate  goals  domestically.  Greenhouse  gas 
emissions  declined  between  2001  and  2011,  but 
the  economic  recovery  has  put  emissions  on  a 
renewed 
since  2012,  which 
demonstrates  Ireland’s  challenges  and  limited 
progress 
its 
economy,  mainly  agriculture,  road  transport  and 
the residential sector. 

in  decarbonising  key  parts  of 

rising 

trend 

is  projected  to  greatly  exceed 

Ireland 
its 
emission  allocations  under  the  Effort  Sharing 
Decision  by  2020.  National  projections indicate 
that cumulated emissions (with existing measures) 
over the 2013-2020 compliance period will exceed 
allocations by 13.7 million tons of CO2 equivalent, 
and that emissions in 2020 will be only 3 % below 
2005  levels,  compared  to  a  reduction  target  of 
20 %.  This  means  that  Ireland  will  need  to  buy 
allocations from other Member States in surplus in 
order to comply with the Effort Sharing Decision. 

National  projections  highlight  the  scale  of 
additional  efforts  needed.  Emissions  under  the 
Effort Sharing Decision are likely to increase up to 
2025 (62),  before  stabilising  at  a  level  slightly 
below  2005  emissions.  The  implementation  of 
additional  measures  already identified  would  only 
slow down the rising trend until 2025. 

(62)  Transport emissions are expected to increase the most, but 
the  rising  trend  is  also  expected  to  continue  in  the 
residential  sector,  and  for  a  more  limited  period  in 
agriculture. 

53 

 
                                                           
                                                           
4.5. Sectoral policies 

interconnector,  which  is  undergoing  a  feasibility 
study and, if successful, could allow the Irish grid 
direct access to electricity from France. 

The  Integrated  Single  Electricity  Market  for 
Ireland  and  Northern  Ireland  is  scheduled  to 
enter  into  force  in  May  2018.  It  is  expected  to 
facilitate  the  transition  to  a  low-carbon  energy 
sector in a more competitive market environment.   

Resource efficiency and the circular economy 

the  period  2014-2021 

Ireland  is  in  great  need  of  investments  in  the 
water  sector.  According  to  the  national  utility 
Irish  Water,  EUR  5.5  billion  need  to  be  invested 
over 
to  bring  water 
infrastructure  and  services  up  to  an  ‘acceptable’ 
level. It is estimated that investment of almost €14 
billion  will  be  required  by  Irish  Water  over  the 
period 2018 to the mid-2030s, on a structured and 
phased  basis,  to  meet  its  investment  needs.    'The 
Water  Services  Act  2017,  which  was  signed  into 
law on 17 November 2017, provides for liabilities 
under  the  pre-existing  charging  system  to  be 
extinguished and for domestic water services to be 
funded  from  general  taxation  in  future.  The  Act 
also  provides  for  a  regime  of  charging  for 
excessive usage above a threshold. Irish Water also 
receives  funding  from  charges  to  non-domestic 
customers  and  will  raise  debt,  within  limits  set 
from a government debt management perspective, 
only for non-domestic sector capital expenditure 

Waste  water 
substandard 
treatment  and 
drinking  water  continue  to  give  rise  to  serious 
environmental  and  human  health  concerns.  In 
nearly  one  quarter  (50  out  of  185)  of  Ireland’s 
large  urban  areas,  which  account  for  almost  two 
thirds of national waste water collection, treatment 
does  not  meet  European  quality  standards.  The 
Irish  Environmental  Protection  Agency  calls  for 
significant capital investments to upgrade deficient 
collecting  and  treatment  systems  and  to  improve 
water  quality  (Environmental  Protection  Agency, 
2017).  Capital  expenditure  on  waste  water 
was 
treatment 
EUR 172 million.  This  is  nearly  EUR 100  million 
less than the average spent each year between 2000 
and  2011.  A  substantial  increase  in  investment 
over the coming years would be needed in order to 
protect  and  improve  the  quality  of  water  and 
minimise  public  health  risks  (and  corresponding 
costs). 

infrastructure 

2016 

in 

progress  towards  decarbonisation.  In  view  of  the 
obligations  under  the  EU  Renewable  Energy 
Directive,  it  is  noted  that  diesel-powered  vehicles 
accounted  for  71 %  of  all  new  vehicle  sales  in 
Ireland in 2016. 

and 

systems, 

in  management 
storage 

There  is  a  considerable  need  for  public  and 
private  investment  in  energy  infrastructure, 
including 
smart 
distribution 
(Environmental 
Protection Agency, 2016). In this context, the roll-
out of smart meters, planned to commence in 2019, 
is  expected  to  significantly  contribute  to  the  low-
carbon  economy  and  to  bring  benefits  to  the 
energy system and final consumers. 

It  will  be  difficult  for  Ireland  to  reach  its 
renewable energy targets by 2020. It is staying in 
line  with  the  2013/2014  indicative  trajectory  for 
the  deployment  of  renewable  energy  (its  share  in 
gross final energy consumption) and is currently in 
line  with  the  2015/2016  indicative  trajectory. 
However,  as  the  indicative  trajectory  becomes 
steeper, reaching the 2020 target of 16 % remains 
challenging and may require further measures. 

to  be 

Ireland  has  intensified  its  energy-efficiency 
efforts,  although  reaching  the  targets  remains 
levels  of 
challenging.  Ireland  has  achieved 
primary  and  final  energy  consumption  below  the 
indicative  national  2020  targets.  However,  the 
latest  projections  (DCCAE,  2017)  suggest  that  it 
might  not  reach  its  2020  target  and  efficiency 
improvements  would  need 
intensified 
because of the robust growth of the Irish economy. 
The  2018  budget  has  allocated  €107m  to  energy 
efficiency,  an  increase  of  over  €50m  since  2015, 
to 
allocating  an  additional  EUR 36  million 
expanding  energy  efficiency  programmes  in  the 
residential, commercial and public sectors. Several 
initiatives  have  been  launched  to  promote  energy 
efficiency  renovations  in  homes  with  promising 
results, such as the Warmer Homes Better Energy 
scheme (SEAI, 2017) to combat energy poverty of 
the most vulnerable households. 

to 

its 

geographical 

Due 
location, 
interconnection  is  a  key  challenge  for  Ireland. 
The level of interconnection of installed electricity 
generation capacity was 7.4 % in 2017. There are a 
number  of  ‘projects  of  common  interest’  in  the 
pipeline  involving  Ireland,  which  should  help 
the  Celtic 
improve 

interconnection, 

including 

54 

 
ANNEX A 

Overview table 

Commitments  

Summary assessment (64)   

2017 Country-specific recommendations (CSRs)  

CSR 1: Pursue a substantial fiscal effort in 2018 
in  line  with  the  requirements  of  the  preventive 
arm  of  the  Stability  and  Growth  Pact.  Use  any 
windfall  gains  arising  from  the  strong  economic 
and financial conditions, including proceeds from 
asset  sales,  to  accelerate  the  reduction  of  the 
general  government  debt  ratio.  Limit  the  scope 
and the number of tax expenditures and broaden 
the tax base.  

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

  Pursue  a  substantial  fiscal  effort  in  2018  in 
line  with  the  requirements  of  the  preventive 
arm of the Stability and Growth Pact.  

  The compliance assessment with the Stability and 
Growth Pact will be included in spring when final 
data for 2017 will be available. 

  Use  any  windfall  gains  arising  from  the 
strong  economic  and  financial  conditions, 
including  proceeds  from  asset  sales, 
to 
the  general 
the  reduction  of 
accelerate 
government debt ratio.  

  Some  Progress  The  proceeds  from  the  sale  of 
government's  shares  in  state-owned  banks  have 
been  used  to  reduce  public  debt  and  the  National 
Asset  Management  Agency  recently  redeemed, 
three  years  ahead  of  target,  the  final  EUR  500 
million  of  the  government-guaranteed  debt.  In 
December  2017,  the  Irish  authorities  repaid  the 

(64)  The following categories are used to assess progress in implementing the 2017 country-specific recommendations (CSRs): 

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the  CSR.  This  category 
covers a number of typical situations, to be interpreted on a case-by-case basis taking into account country-specific conditions. 
They include the following: 
 

no  legal,  administrative,  or  budgetary  measures  have  been  announced  in  the  national  reform  programme,  in  any  other 
official  communication  to  the  national  Parliament/relevant  parliamentary  committees  or  the  European  Commission, 
publicly (e.g. in a press statement or on the government's website);  
no non-legislative acts have been presented by the governing or legislative 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 to be taken (unless the CSR explicitly asks for orientations or exploratory actions). 
However, it has not proposed any clearly-specified measure(s) to address the CSR. 

 
 

Limited progress: The Member State has: 
 
 

announced certain measures but these address the CSR only to a limited extent; and/or 
presented legislative acts in the governing or legislative body but these have not been adopted yet and substantial further, 
non-legislative work is needed before the CSR is implemented;  
presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

 

Some progress: The Member State has adopted measures:  
 
 

that partly address the CSR; and/or  
that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures 
have  been  implemented.  For  instance,  a  measure  or  measures  have  been  adopted  by  the  national  Parliament  or  by 
ministerial decision, but no implementing decisions are in place. 

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

them have been implemented. 

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

55 

 
 
                                                           
 
 
 
 
 
 
  Limit  the  scope  and  the  number  of  tax 

expenditures and broaden the tax base.  

A. Overview table 

outstanding IMF loans, together with the bilateral 
loans  from  Denmark  and  Sweden,  early  and  in 
full.  

  Limited  Progress:  Some  of  the  measures  in  the 
Budget  do  not  contribute  to  expanding  the  tax 
base: the increases to tax credits for self-employed 
and  home  carers,  the  creation  of  a  stamp  duty 
refund  scheme  for  residential  land,  the  reduction 
from  seven  to  four  years  of  the  holding  period  to 
qualify  for  the  capital  gains  tax  exemption  on 
certain  property  assets,  the  tapered  extension  of 
mortgage 
remaining 
relief 
recipients, the fiscal incentive for certain types of 
share-based  remunerations,  or  the  decision  to 
extend  the  universal  social  charge  relief  for 
medical  card  holders  for  a  further  two  years. 
Conversely,  the  reduced  cap  of  80%  on  the 
amount of capital allowances for intangible assets 
and  the  introduction  of  a  new  tax  on  sugar-
sweetened  drinks  can  potentially  broaden  the  tax 
base.  

interest 

the 

for 

CSR 2: Better target government expenditure, by 
prioritising public investment  in  transport, water 
services,  and  innovation  in  particular  in  support 
of  SMEs.  Enhance 
infrastructure, 
including  social  housing  and  quality  childcare; 
deliver  an 
integrated  package  of  activation 
policies  to  increase  employment  prospects  of 
low-skilled  people  and  to  address  low  work 
intensity of households.  

social 

  Better  target  government  expenditure,  by 
prioritising  public  investment  in  transport, 
water services, and innovation in particular in 
support of SMEs.  

Ireland has made Some Progress in addressing CSR 2  

  Some  Progress  has  been  made  in  enhancing  the 
quality  of  expenditure  through  a  new  spending 
review.  Public  investment  continues  to  recover 
while addressing key infrastructure bottlenecks. A 
Water Service Act has been adopted that provides 
for the current domestic water charging regime to 
be  discontinued  and  for  this  to  be  replaced  by  a 
regime  where  general  taxes  fund  domestic  water 
services.  Some  progress  has  been  achieved  in  the 
provision of innovation infrastructures to SMEs, in 
particular  as  regards  the  creation  of  Technology 
Centres.  Ireland  has  an  ambitious  infrastructure 
investment plan for education at all levels.  

  Enhance 

social 

infrastructure, 

including    Some  Progress:  The  government  is  adopting  an 
array  of  measures  to  support  housing  supply, 

56 

 
social housing and quality childcare;  

A. Overview table 

(ECEC), 

increasing 

including 
the  provision  of  social 
housing units. Childcare costs remain elevated and 
according to recent OECD figures are the highest 
in  the  EU.  Despite  high  participation  in  early 
childhood  education  and  care 
its 
accessibility,  affordability  and  full-time  provision 
remain  problematic.  The  ECEC  participation  rate 
in  Ireland  was  92.7  %  in  2015  against  the  EU 
average  of  94.8  %.  Attendance  fell  by  5.4  pp 
percentage  points  (pps.)  since  2013,  and  the 
availability and cost of full-time provision are still 
problematic. The quality of ECEC is supported by 
Síolta,  the  national  quality  framework  for  the 
sector,  and  by  Aistear,  a  curriculum  framework 
published by the National Council for Curriculum 
and  Assessment  (NCCA).  In  August  2016,  a 
National  Collaborative  Forum  for  the  sector  was 
created.  This 
engagement  with 
stakeholders  on  issues  of  concern  and  on  policy 
and  delivery.  There  have  been  important  changes 
to the minimum qualifications required for staff in 
the  sector,  and  a  reorganisation  of  the  inspection 
system  for  pre-schools  in  order  to  help  children 
with disabilities fully participate. From December 
2016 all staff working directly with children must 
hold  at  least  a  level  5  qualification  ('major  award 
in  early  childhood  care  and  education').  More 
funding  is  available  to  services  where  the  pre-
school  leader  has  a  pre-school  award  in  ECEC  at 
level  7  on  the  national  qualifications  framework 
and the assistants have achieved a minimum level-
5 award.  

facilitates 

  deliver  an  integrated  package  of  activation 
policies to increase employment prospects of 
low-skilled  people  and  to  address  low  work 
intensity of households.  

  Some Progress: With the Action Plan for Jobless 
Households,  IE  has  taken  important  steps  to 
expand  the  labour  force,  combat  joblessness  and 
ensure  that  the  inactive  households  are  equipped 
with the skills required on the labour market. How 
the plan will be put into effect and implemented is 
still  to  be  seen.  A  more  holistic  approach  to 
support  provision  for  the  inactive  households 
could  be  sought  considering  the  diverse  needs  of 
this group and integration of services across areas 
could be recommended for the whole target group. 
In general the Action Plan is rather weak in terms 
of  defining 
to  be 
designed.  More  flexibility  would  need  to  be 
included  in  the  training  and  education  offers 
provided.  

the  personalised  services 

CSR 3: Encourage a continued and more durable  Ireland  has  made  Some  Progress  in  addressing  CSR 

57 

 
in  non-performing 

reduction 
through 
resolution  strategies  that  involve  write-offs  for 
viable businesses and households, with a special 
emphasis on resolving long-term arrears.  

loans 

A. Overview table 

3:  

  The  reduction  of  NPLs  continues  but  perhaps  not 
as  quickly  as  one  would  have  expected  given  the 
economic  performance  of  IE  in  recent  years.  It  is 
difficult  to  establish  to  what  extend  the  reduction 
in NPLs is the result of policy measures or just the 
consequence  of  the  upturn  in  the  business  cycle. 
The pace of NPL reduction has slowed somewhat 
as the most difficult cases are proving sticky. The 
nature of impaired loans restructuring is such that 
it requires time to show whether arrangements put 
in  place  are  truly  sustainable  and  resilient  to 
changes  in  the  interest  rate  environment.  Several 
policy  measures  have  been  introduced  to  support 
the engagement of debtors in distress and increase 
the  number  of  personal  insolvency  arrangements, 
but the take-up remains overall limited.  

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: Between 
69 and 71 %.  

The  employment  rate  (Eurostat  definition,  age  group 
20-64)  rose  to  70.3 %  in  2016  compared  with  an 
average of 63.7 % in 2011-2012. 

R&D target set in the NRP: 2.5 % of GNP  

Public  R&D  intensity  has  continued  to  decline  from 
0.50 %  in  2010  to  0.34 %  of  GDP.  However,  in 
absolute terms, public expenditure in R&D grew from 
EUR  836  million  to  EUR  950  million  over  the  same 
period.  Business  R&D  expenditure  increased  from 
EUR  1.5  billion  in  2006  to  EUR  2.3  billion  in  2016. 
Yet, business R&D intensity, at 0.83 % GDP in 2016, 
remained  below  the  EU  average  of  1.31 %.  Overall, 
the  relatively  low  levels  of  investment  and  with  an 
overall R&D intensity of 1.18% of GPD (in 2016) will 
make it difficult for Ireland to reach its R&D intensity 
target of 2.5 % of GNP by 2020.  

target: 
Greenhouse  gas  emissions,  national 
Reduction of greenhouse gas emissions in sectors 
that  are  not  covered  by  the  Emission  Trading 
System by 20 % in 2020 compared to 2005 levels 

that 

indicate 

cumulated 
 National  projections 
emissions (on the basis of existing measures) over the 
2013-2020  compliance  period will  exceed allocations 
by  13.7  million  tons  of  CO2  equivalent  and  that 
emissions in 2020 will be only 3 % below 2005 levels, 
almost  17  percentage  points  short  of  the  reduction 
target.  This  means  that  Ireland  will  need  to  buy 
allocations  from  other  Member  States  in  surplus  in 

58 

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

Energy  efficiency,  2020  energy  consumption 
targets:  

13.9  million  tons  of  oil  equivalent  expressed  in 
primary  energy  consumption  (11.7  million  tons 
of oil equivalent in final energy consumption). 

Early school leaving (ESL) target: 8 %.  

A. Overview table 

order to comply with the Effort Sharing Decision. 

 The share of renewable energy in 2016 is estimated to 
have  reached  9.49  %.  Ireland  has  achieved  its  2015-
2016  indicative  interim  target  as  set  out  in  the 
Renewable Energy Directive. However, Ireland might 
need to step up its efforts to enable the achievement of 
the 2017-2018 11.5 % indicative interim target and the 
binding 2020 –target of 16·%.  

Ireland  increased  its  primary  energy  consumption  by 
4.6 % from 13.96 Mtoe in 2015 to 14.6 Mtoe in 2016. 
Final  energy  consumption  also  increased  by  3.5% 
from  11.21  Mtoe  in  2015  to  11.6  Mtoe  in  2016. 
Ireland  has  to  increase  its  efforts  to  reverse  the 
increase of its primary energy consumption in order to 
achieve  its  primary  energy  target  for  2020  (13.9 
Mtoe).  Ireland  should  also  endeavour  to  keep  its 
current final energy consumption level below its final 
energy target for 2020 (11.7 Mtoe). 

On  early  school  leaving  Ireland  is  continuously 
improving  its  performance,  but  disparities  remain  at 
local level. The share of early leavers fell to 6.3 % in 
2016, well below the Europe 2020 national target of 8 
%  and  the  EU  average  of  10.7  %.  Ireland  has  made 
important  progress,  effectively  halving  the  rate  since 
2009.  No  major  gap  is  visible  between  native-  and 
foreign-born  students.  There is,  however,  a persistent 
gap between girls (4.6 %) and boys (7.8 %). The 2017 
National  Reform  Programme  highlights  the  renewed 
‘Delivering equality of opportunity in schools’ (DEIS) 
initiative  (DES,  2017a)  in  disadvantaged  areas  (see 
box  1  below).  It  also  points  to  the  need  to  improve 
retention 
the  most  socioeconomically 
disadvantaged  schools  (Irish  Government,  2017), 
which  continue  to  lag  considerably  in  'educational 
outcomes' (Smyth et al., 2015). The proportion of 15- 
to  24-year-olds  not  in  employment,  education  or 
training  is  13.0  %,  slightly  above  the  EU  average  of 
11.5 % in 2016.  

rates 

in 

Tertiary education target: 60 %.  

Ireland  ranks  near  the  top  of  the  EU  on  tertiary 
attainment  and  has  an  ambitious  national  target  for 
2020.  Ireland  ranks  fourth  in  the  EU  in  2016  on 
tertiary attainment rates. The proportion of 30- to 34-
year-olds with  higher  education was 52.9 %  in 2016, 
well above the EU average of 39.1 % (see Figure 3). 
The  national  target  for  2020  is  60  %,  which  is  quite 
ambitious.  There  is  a  clear  gender  gap,  with  women 

59 

 
A. Overview table 

(at  58.5  %)  outperforming  men  (at  46.6  %). 
Interestingly,  migrant 
students  have  a  higher 
attainment  rate  (58.4  %  in  2016)  than  native-born 
students  (50.5  %).  The  employability  of  tertiary 
graduates is also improving. In 2016 the employment 
rate of recent graduates increased by 3.3 pp. from the 
previous year to reach 86.7 %, against the 82.8 % EU 
average.  Irish  students  are  very  mobile  in  pursuing 
their  studies,  with  a  rate  of  8.4  %  for  ISCED  5-8 
students,  up  from  6.2  %  in  2013.  This  is  especially 
true  at  masters  (16.9  %  in  2015)  and  doctoral  level 
(22.1 % in 2015).  

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 (the rate was 8.7 % 
in  2015)  and  requires  additional  action.  Similarly, 
while the proportion of those in combined poverty fell 
from 37.4% in 2014 to 33.7% in 2015, there are now 
1.6  million  in  combined  poverty  in  Ireland,  which  is 
150,000  higher  than  the  2008  baseline  figure.  This 
means  Ireland  must  now  lift  350,000  people  out  of 
combined  poverty  to  meet  this  target,  a  significant 
challenge. 

To  reduce  the  number  experiencing  consistent 
poverty  to  4 %  by  2016  (interim  target)  and  to 
2 % or less by 2020, from the 2008 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). 

60 

 
 
ANNEX B 

Macroeconomic Imbalance Procedure Scoreboard  

Table B.1: 

The MIP scoreboard for Ireland (AMR 2018) 

Flags:b:Break in series. p:Provisional.           
(1) This table provides data as published under the Alert Mechanism Report 2018, which reports data as of 24 Oct 2017. 
Please note that figures reported in this table may therefore differ from more recent data elsewhere in this document.  
(2) 2015 PSD, PSCF: significant increases due to re-domiciling of large multinational corporations and movement of large parts 
of their balance sheets.  
(3) 2016 PSD, PSCF: the decline for IE relative to 2015 predominantly reflects restructuring and re-domiciling activities of large 
multinational companies.      
Source: European Commission 2017, Statistical Annex to the Alert Mechanism Report 2018, SWD(2017) 661. 

61 

Thresholds201120122013201420152016Current account balance, % of GDP 3 year average-4%/6%-3.3 -2.3 -1.0 0.4 4.9 5.5 Net international investment position% of GDP-35%-139.2 -137.4 -131.6 -161.0 -195.1 -176.2 Real effective exchange rate - 42 trading partners, HICP deflator3 year % change±5% (EA) ±11% (Non-EA)-9.6 -12.2 -3.8 -3.6 -6.3 -6.6 Export market share - % of world exports5 year % change-6%-10.1 -15.9 -7.8 -12.1 41.0 59.8 Nominal unit labour cost index (2010=100)3 year % change9% (EA) 12% (Non-EA)-15.4b-11.8 -1.9 -3.7 -19.5 -20.5 House price index (2015=100), deflated 1 year % change6%-17.8p-14.8p-0.5p15.1p11.0p6.6pPrivate sector credit flow, consolidated% of GDP14%16.3 -0.6 -1.4 2.5 -3.1 -19.0 Private sector debt, consolidated% of GDP133%272.7 279.1 267.1 279.4 306.5 278.1 General government gross debt% of GDP60%110.3 119.6 119.4 104.5 76.9 72.8 Unemployment rate3 year average10%13.5 14.4 14.2 13.0 11.3 9.5 Total financial sector liabilities, non-consolidated1 year % change16.5%-2.2 -1.8 0.3 19.5 9.7 2.5 Activity rate - % of total population aged 15-643 year change in pp-0.2 pp-2.9 -1.4b0.4 0.6 0.8 0.7 Long-term unemployment rate - % of active population aged 15-743 year change in pp0.5 pp6.9 5.5 1.0 -2.0 -3.7 -3.6 Youth unemployment rate - % of active population aged 15-243 year change in pp2 pp15.8 6.4 -0.8 -5.2 -9.5 -9.6 External imbalances and competitivenessInternal imbalancesEmployment indicators 
 
 
 
 
 
ANNEX C 

Standard tables 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2017. Includes not only banks but all monetary financial institutions excluding central banks 
(2) Latest data Q2 2017. 
(3) As per ECB definition of gross non-performing debt instruments 
(4) 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). 

62 

201220132014201520162017Total assets of the banking sector (% of GDP)(1)666.4564.0555.0414.8390.3362.3Share of assets of the five largest banks (% of total assets)46.447.847.645.944.3-Foreign ownership of banking system (% of total assets)(2)64.865.148.348.448.347.8Financial soundness indicators:2)              - non-performing loans (% of total loans)(3)16.618.416.311.710.39.3              - capital adequacy ratio (%)19.220.522.625.325.025.3              - return on equity (%)(4)-14.6-13.28.56.86.33.2Bank loans to the private sector (year-on-year % change)(1)-2.6-6.8-10.0-6.4-3.50.0Lending for house purchase (year-on-year % change)(1)6.6-1.7-3.9-1.1-4.24.0Loan to deposit ratio(1)128.7113.699.484.378.579.7Central Bank liquidity as % of liabilities--4.12.41.71.7Private debt (% of GDP)279.1267.1279.4306.5278.1-Gross external debt (% of GDP)(2) - public71.369.873.554.548.748.8    - private651.3583.0698.7703.6636.1576.3Long-term interest rate spread versus Bund (basis points)*467.7222.0120.468.764.650.6Credit default swap spreads for sovereign securities (5-year)*406.0120.453.537.045.727.9 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States 
performance. The indicators "participants in active labour market policies per 100 persons wanting to work" and 
"compensation of employees per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible 
alternatives will be discussed in the relevant Committees. 
(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2018.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2017 for the employment rate and gender employment gap. 
Source: Eurostat  

63 

201220132014201520162017 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)9.78.46.96.96.3:Gender employment gap (pps)8.710.611.812.512.312.4Income inequality, measured as quintile share ratio (S80/S20)4.84.74.94.54.4:At-risk-of-poverty or social exclusion rate1 (AROPE)30.329.927.726.024.2:Young people neither in employment nor in education and training (% of population aged 15-24)18.716.115.214.313.0:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)63.765.567.068.770.372.0Unemployment rate2 (15-74 years)15.513.811.99.98.46.7Gross disposable income of households in real terms per capita3 (Index 2008=100) ::91.493.995.8:Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction458.059.055.855.052.2:Children aged less than 3 years in formal childcare31.029.027.430.628.6:Self-reported unmet need for medical care3.43.33.72.82.6:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):::44.044.048.0 
 
 
 
 
 
 
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for the 
distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All employees 
working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.       
(5) Average of first three quarters of 2017, unless for the youth unemployment rate (annual figure). 
Source: Eurostat, OECD 

64 

Labour market indicators201220132014201520162017 5Activity rate (15-64)69.269.869.870.070.5:Employment in current job by durationFrom 0 to 11 months12.012.513.313.714.3:From 12 to 23 months7.27.78.08.29.4:From 24 to 59 months16.414.714.314.015.2:60 months or over62.562.961.861.057.3:Employment growth* (% change from previous year)-0.62.51.72.52.82.6Employment rate of women(% of female population aged 20-64)59.460.361.262.664.265.9Employment rate of men (% of male population aged 20-64)68.170.973.075.176.578.3Employment rate of older workers* (% of population aged 55-64)49.351.353.055.657.258.6Part-time employment* (% of total employment, aged 15-64)24.124.223.622.822.620.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)10.110.09.38.78.28.3Transition rate from temporary to permanent employment(3-year average)38.739.538.839.4::Long-term unemployment rate1 (% of labour force)9.28.06.75.44.33.2Youth unemployment rate (% active population aged 15-24)30.826.723.420.216.814.7Gender gap in part-time employment21.421.420.921.120.420.4Gender pay gap2 (in undadjusted form)12.212.913.9:::Education and training indicators201220132014201520162017Adult participation in learning(% of people aged 25-64 participating in education and  training)7.47.66.96.56.4:Underachievement in education316.9::15.0::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)51.152.652.252.352.9:Variation in performance explained by students' socio-economic status414.6::12.7:: 
 
 
 
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

*  Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) 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. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(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) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard.Source: Eurostat, OECD 

65 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7.47.16.65.0::Disability1.21.21.20.9::Old age and survivors7.37.16.65.0::Family/children3.02.82.51.9::Unemployment3.33.12.61.9::Housing0.70.70.60.5::Social exclusion n.e.c.0.30.20.20.1::Total23.122.220.315.2::of which: means-tested benefits7.16.86.24.6::General government expenditure by function (% of GDP, COFOG)Social protection14.313.712.69.6::Health8.27.97.55.7::Education5.35.04.83.7::Out-of-pocket expenditure on healthcare (% of total health expenditure):15.015.415.2::Children at risk of poverty or social exclusion (% of people aged 0-17)*33.534.430.428.827.3:At-risk-of-poverty  rate1 (% of total population)16.615.716.416.316.6:In-work at-risk-of-poverty rate (% of persons employed)5.65.05.44.84.8:Severe material deprivation rate2  (% of total population)9.89.98.47.56.5:Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan0.00.40.00.80.0:Tenant, rent at market price1.22.31.60.63.1:Proportion of people living in low work intensity households4 (% of people aged 0-59)23.423.921.019.218.2:Poverty thresholds, expressed in national currency at constant prices*1139911253113731219312597:Healthy life years (at the age of 65)Females12.212.112.312.0::Males10.910.911.411.4::Aggregate replacement ratio for pensions5 (at the age of 65)0.40.40.40.40.4:Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::46.255.560.764.7GINI coefficient before taxes and transfers*57.058.257.555.1::GINI coefficient after taxes and transfers*29.930.030.829.8:: 
 
 
 
 
 
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

(1) The methodologies, including the assumptions, for this indicator are shown in detail here: 
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 codified 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 don't know.       
(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 here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
(6) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       
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)."       

66 

Performance Indicators2010201120122013201420152016Labour productivity (real, per person employed, year-on-year % change)Labour productivity in Industry11.3227.340.45-6.346.2756.55-0.37Labour productivity in Construction0.02-18.213.776.45-6.53-4.675.59Labour productivity in Market Services6.065.74-2.440.546.247.934.01Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in Industry-9.73-11.63-0.087.06-4.50-54.122.94ULC in Construction-4.93-3.69-4.37-3.637.265.321.05ULC in Market Services-8.030.993.95-0.77-3.71-4.81-0.06Business Environment2010201120122013201420152016Time needed to enforce contracts(1) (days)515.0650.0650.0650.0650.0650.0650.0Time needed to start a business(1) (days)13.013.010.010.06.06.05.0Outcome of applications by SMEs for bank loans(2)0.951.491.240.791.230.730.26Research and innovation2010201120122013201420152016R&D intensity1.591.551.561.561.501.201.18General government expenditure on education as % of GDP5.005.605.305.004.803.70naPersons with tertiary education and/or employed in science and technology as % of total employment47505151515251Population having completed tertiary education(3)33333536363738Young people with upper secondary level education(4)86878789939394Trade balance of high technology products as % of GDP4.515.475.372.551.423.11naProduct and service markets and competition200320082013OECD product market regulation (PMR)(5), overall1.581.351.45OECD PMR5, retail0.871.531.53OECD PMR5, professional services1.601.251.25OECD PMR5, network industries(6)3.322.492.21 
 
 
 
 
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 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 % of total value added for the economy 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % 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 GHG 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 2010 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 covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels 
* European Commission and European Environment AgencySource: European Commission and European Environment 
Agency (Share of GHG emissions covered by ETS); European Commission (Environmental taxes over labour taxes and GDP); 
Eurostat (all other indicators) 

67 

Green growth performance201120122013201420152016MacroeconomicEnergy intensity kgoe / €0.080.080.080.070.060.06Carbon intensity kg / €0.330.340.330.300.25-Resource intensity (reciprocal of resource productivity)kg / €0.570.520.570.510.400.42Waste intensity kg / €-0.07-0.08--Energy balance of trade % GDP-3.3-3.0-3.2-2.7-1.5-1.1Weighting of energy in HICP%10.5312.7011.6711.1510.628.84Difference between energy price change and inflation %8.37.93.01.0-4.9-4.9Real unit of energy cost% of value added6.46.77.27.1--Ratio of environmental taxes to labour taxesratio0.190.180.190.190.19-Environmental taxes% GDP2.52.42.52.41.91.8Sectoral Industry energy intensity kgoe / € 0.050.050.050.050.030.03Real unit energy cost for manufacturing industry excl. refining% of value added6.66.88.18.5--Share of energy-intensive industries in the economy% GDP------Electricity prices for medium-sized industrial users€ / kWh0.120.140.140.140.140.13Gas prices for medium-sized industrial users€ / kWh0.040.040.040.040.040.03Public R&D for energy % GDP0.000.000.000.000.000.00Public R&D for environmental protection% GDP0.010.010.000.000.000.01Municipal waste recycling rate%36.136.6----Share of GHG emissions covered by ETS*%27.729.426.827.427.928.5Transport energy intensitykgoe / €0.720.680.710.750.750.79Transport carbon intensitykg / €1.841.781.831.871.93-Security of energy supplyEnergy import dependency%90.085.089.185.388.669.1Aggregated supplier concentration indexHHI14.519.915.313.913.4-Diversification of energy mixHHI0.360.340.350.340.350.36 
 
 
 
REFERENCES 

Acheson J., Deli, Y. T., Lambert, D., Morgenroth, E. L. W. (2017), ‘Income Tax Revenue Elasticities in 
Ireland:  An  Analytical  Approach’,  Economic  and  Social  Research  Institute,  Research  Series,  No  59, 
March 2017. 

Arpaia,  A.  and  Kiss,  A.  (2015),  ‘Benchmarks  for  the  assessment  of  wage  developments’,  European 
Commission,  Directorate-General  for  Employment,  Social  Affairs  and  Inclusion,  Analytical  web  note 
2/2015. 

Carroll,  J.  and  McCann,  F.  (2017),  ‘Observables  and  residuals:  exploring  cross-border  differences  in 
SME borrowing costs’, CBI, 2017.   

Carroll, J. and McCann, F. (2017b), ‘SME collateral: risky borrowers or risky behaviour?’, CBI, 2017. 

Central  Bank  of  Ireland  (CBI)  (2017),  ‘Residential  Mortgage  Arrears  and  Repossessions  Statistics 
(Q2 2017)’. 
(https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/credit-and-
banking-statistics/mortgage-arrears/residential-mortgage-arrears-and-repossessions-statistics-june-
2017.pdf?sfvrsn=7) 

(2017a), 

CBI 
(https://www.centralbank.ie/docs/default-source/consumer-hub-library/tracker-issues/update-on-tracker-
examination.pdf?sfvrsn=5 ) 

tracker  mortgages,  October 

examination 

‘Update 

on 

of 

2017’ 

CBI  (2017b),  ‘Irish  Responses 
(https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/credit-and-banking-
statistics/bank-lending-survey/comment-on-results-october-2017.pdf?sfvrsn=4). 

the  October  2017  Bank  Lending  Survey,  October  2017’ 

to 

CBI  (2017c),  ‘Household  credit  market  report  H1  2017  (https://www.centralbank.ie/news-media/press-
releases/household-credit-market-report-for-h1-2017-released ) 

CBI  (2017d),  ‘Household  credit  market  report  H2  2017  (https://www.centralbank.ie/docs/default-
source/publications/household-credit-market-report/household-credit-market-report-
2017h2.pdf?sfvrsn=4)   

(2017e), 

CBI 
(https://www.centralbank.ie/statistics/data-and-analysis/credit-and-banking-statistics/business-credit-and-
deposits) 

Deposits: 

Business 

‘Trends 

Credit 

and 

Q3, 

in 

2017’ 

(2017f), 

CBI 
source/publications/sme-market-reports/sme-market-report-2017h1.pdf?sfvrsn=6) 

‘SME  Market 

Report  H1 

2017’.(https://www.centralbank.ie/docs/default-

Coffey, S. (2017), ‘Review of Ireland’s corporation tax code presented to the Minister for Finance and 
(http://www.finance.gov.ie/wp-
Public  Expenditure  and  Reform  by  Mr  Seamus  Coffey’ 
content/uploads/2017/09/170912-Review-of-Irelands-Corporation-Tax-Code.pdf) 

Central Statistics Office (CSO) (2016), ‘Census 2016 Profile 5 - Homeless Persons in Ireland’ 

(http://www.cso.ie/en/csolatestnews/presspages/2017/census2016profile5-homelesspersonsinireland/) 

(2016a), 

CSO 
the 
(http://www.cso.ie/en/media/csoie/methods/balanceofinternationalpayments/RedomiciledPLCs.pdf) 

Irish  Balance  of  Payments,  October  2016’. 

‘Redomiciled  PLCs 

in 

CSO  (2017),  ‘Environmental  subsidies  and  similar  transfers  2015,  online  publication  of  recent  data 
(http://www.cso.ie/en/releasesandpublications/er/esst/environmentalsubsidiesandsimilartransfers2015/) 

68 

 
 
 
References 

Annual 

Results 

2016’ 

-  

CSO 
http://www.cso.ie/en/releasesandpublications/er/nie/niear2016/. 

‘National 

(2017a) 

Income 

and 

Expenditure 

(2017b) 

_at 
CSO 
http://www.cso.ie/en/releasesandpublications/ep/p-nbsi/nationalbalancesheetforireland2015/,  December 
2017. 

‘National 

Balance 

Ireland 

2015’ 

Sheet 

for 

- 

CSO 
http://www.cso.ie/en/releasesandpublications/in/geid/explaininggoodsexportsandimports2012-2016/ 

‘Explaining 

(2017c), 

Exports 

Imports 

Goods 

and 

2012-2016’.  

(2017d) 

CSO 
(http://pdf.cso.ie/www/pdf/20170922124340_Quarterly_National_Household_Survey_Quarter_2_2017_f
ull.pdf) 

Household 

‘Quarterly 

National 

Quarter 

Survey, 

Second 

2017’ 

Cross Government Implementation Group (2017)  ‘Innovation 2020 Second Progress Report. July 2017’ 
(https://dbei.gov.ie/en/Publications/Publication-files/Innovation-2020-Second-Progress-Report.pdf) 

Department  of  Business,  Enterprise  and  Innovation  (DBEI)  (2017)  ‘Brexit  —  the  view  of  Irish  SMEs, 
January  2017’  (https://dbei.gov.ie/en/Publications/Brexit-the-view-of-Irish-SMEs.html)  Department  of 
Communications, Climate Action & Environment (2015) ‘White Paper on Energy: Ireland’s Transition 
to  a  Low  Carbon  Energy  Future  2015-2030’.  (  https://www.dccae.gov.ie/en-ie/energy/topics/Energy-
Initiatives/energy-policy-framework/white-paper/Pages/White-Paper-on-Energy-Policy-in-Ireland-.aspx) 

Department  of  Communications,  Climate  Action  &  Environment  (2017)  ‘National  Energy  Efficiency 
Action Plan for Ireland #4 2017-2020’, ( http://www.dccae.gov.ie/documents/NEEAP%204.pdf (accessed 
September 2017). 

Department  of  Finance  (2017),  ‘Tax  Strategy  Group  —  TSG  17/08:  Energy  and  environmental  taxes’, 
Dublin  (http://www.finance.gov.ie/wp-content/uploads/2017/07/TSG-17-08-Environmental-Taxes-Paper-
GK.pdf)  

Department of Finance (2017a), ‘Credit Demand Survey October 2016-March 2017’, June 2017. 

Department  of  Finance  (2017b),  ‘Update  on  Ireland’s  international  tax  strategy  and  consultation  on 
Coffey 
2017 
(http://www.budget.gov.ie/Budgets/2018/Documents/Update_International_Tax_Strategy_Consultation.p
df 

review’, 

October 

Department of Finance (2017c), ‘UK and EU Exit: Trade Exposures of Sectors of the Irish Economy in a 
European Context’, September 2017. 

Department of Finance (2017d), ‘Budget 2018: Economic and Fiscal Outlook’, October 2017. 

Department of Finance (2017e), ‘Budget 2018: Expenditure Allocation’, October 2017. 

Department  of  Finance,  (2017f),  ‘Budget  2018:  Part  II  —  Expenditure  Allocations  2018-20’,  October 
2017. 

Department  of  Housing  Planning  and  Local  Government  (2017),  ‘Ireland  2040.  Our  Plan.  National 
Planning Framework’ (http://npf.ie/draft-of-ireland-2040/)   

69 

 
 
 
References 

Department  of  Jobs,  Enterprise  and  Innovation  (DJEI)  (2016).  ‘Economic  and  Enterprise  Impacts  from 
Public  Investment  in  R&D  in  Ireland,  October  2016’.  (https://dbei.gov.ie/en/Publications/Publication-
files/Economic-Enterprise-Impacts-Public-Investment-RD-Ireland.pdf) 

Department  of  Jobs,  Enterprise  and  Innovation  (DJEI)  (2017).  ‘Innovation  2020  -  Second  Progress 
report, July 2017’. (https://dbei.gov.ie/en/Publications/Innovation-2020-Progress-Reports.html) 

Department of Public Expenditure DPER (2017), ‘Analysis of current expenditure on housing supports’ 
(http://www.per.gov.ie/wp-content/uploads/Current-Expenditure-on-Housing-Supports.pdf)   

Department of Public Expenditure (DPER) (2017a), ‘Review of the Capital Investment Plan 2016-2017, 
Building on Recovery, Progress Report & Update on Public Investment Priorities’, August 2017 

Di Ubaldo M., Lawless M. and Siedschlag I. (forthcoming). ‘Productivity Spillovers from Multinational 
Activity  to  Indigenous  Firms  in  Ireland.  Economic  and  Social  Research  Institute  Working  Paper 
forthcoming’. 

Digital Economy Society Index (2017) (https://ec.europa.eu/digital-single-market/en/desi)  

Duffy, D., Foley, D., McInerney, N. and McQuinn, K. (2016), ‘Demographic Change, Long-Run Housing 
Demand and the Related Challenges for the Irish Banking Sector’. The Economic and Social Research 
Institute (ESRI) (https://www.esri.ie/pubs/CB201617.pdf) 

ECB/EC Survey on the Access to Finance of Enterprises (SAFE)’. 

Economic  and  Social  Research  Institute  (ESRI)  (2017),  ‘Quarterly  Economic  Commentary,  Autumn 
2017’. 

Ecorys  (2017),  ‘Administrative  formalities  and  costs  involved  in  accessing  markets  cross-border  for 
provisions 
2017’. 
(https://publications.europa.eu/en/publication-detail/-/publication/5c8a6c62-44e3-11e7-aea8-
01aa75ed71a1) 

services,  May 

accountancy, 

architecture 

engineering 

and 

of 

European Banking Authority, ‘Risk Dashboard, H1 2017’. 

European Commission (2016), ‘2016 European Semester: Country Report — Ireland’. 

European Commission (2017a),  ‘Country Report Ireland 2017’, Commission Staff Working Document, 
22 February 2017. 

European  Commission 
market/en/digital-scoreboard) 

(2017b), 

‘Digital  Scoreboard  2017’ 

(https://ec.europa.eu/digital-single-

European Commission (2017c), ‘EU Monitor of Macroeconomic Imbalances, 2017’. 

European 
(http://ec.europa.eu/DocsRoom/documents/24829)   

Commission 

(2017d), 

‘European 

Innovation 

Scoreboard 

2017’ 

European 
(https://rio.jrc.ec.europa.eu/en/stats/innovation-output-indicator)  

Commission 

(2017e), 

‘Innovation 

Output 

Indicator’ 

European  Commission  (2017f),  ‘Labour  market  and  wage  developments  in  Europe  2017,  Directorate-
General for Employment, Social Affairs and Inclusion’. 

70 

 
 
References 

European  Commission  (2018a)  (Directorate-General  for  Economic  and  Financial  Affairs)  –  Economic 
Policy Committee (Ageing Working Group), ‘2018 Ageing Report: Economic and Budgetary Projections 
for the EU Member States (2016-2070)’ (forthcoming) 

European Commission (2018b), ‘Debt Sustainability Monitor 2017’  

European  Commission  (2018c),  ‘Post-Programme  Surveillance  Report,  Ireland,  Winter  2018, 
Institutional  Paper  XX/2018’.European  Commission  and  the  European  Central  Bank  (2017)  ‘SAFE’ 
(https://www.ecb.europa.eu/stats/ecb_surveys/safe/html/index.en.html) 

European  Environment  Agency  (2016),  ‘Report  No 17/2016:  Environmental  taxation  and  EU 
environmental 
the  European  Union,  Luxembourg 
(https://www.eea.europa.eu/publications/environmental-taxation-and-eu-environmental-policies) 

Publications  Office 

policies’, 

of 

European Environment Agency (2017), ‘Urban waste water treatment in 2016’, Johnstown Castle Estate, 
County 
Ireland 
Wexford, 
(http://www.epa.ie/pubs/reports/water/wastewater/Urban%20waste%20water%20report%20for%202016 
%20Final%20Version.pdf) 

European  Investment  Bank  (2016),  ‘EIB  Group  Survey  on  Investment  and  Investment  Finance  2016. 
Country Overview: Ireland’.(http://www.eib.org/attachments/efs/eibis_2016_ireland_en.pdf) 

European Investment Bank (2017), ‘EIB Investment Survey 2017 — Ireland overview, November 2017’ 
(http://www.eib.org/infocentre/publications/all/econ-eibis-2017-ireland.htm) 

Higher Education Authority Statistics (http://hea.ie/statistics/)   

Houses  of  the  Oireachtas  (2017),  ‘Committee  on  the  Future  of  Healthcare:  Sláintecare  Report’, 
(https://www.oireachtas.ie/parliament/media/committees/futureofhealthcare/Oireachtas-Committee-on-
the-Future-of-Healthcare-Slaintecare-Report-300517.pdf)  

Housing 
(http://rebuildingireland.ie/install/wp-content/uploads/2018/01/SHA-Summary-2017-v5.pdf)  

Summary 

Housing 

Agency 

(2018), 

Social 

Assessments 

of 

2017 

IBF/PwC (2017), ‘IBF/PwC Mortgage Market Profile, Banking & Payments Federation of Ireland’. 

Irish 
(http://www.fiscalcouncil.ie/pre-budget-statements/pre-budget-2018-statement/) 

‘Pre-Budget 

Advisory 

Council 

(IFAC) 

(2017), 

Fiscal 

2018 

Statement’ 

IHS (2018), ‘Aggressive Tax Planning indicators study, forthcoming in Taxation Papers’. 

INRIX Research (2017), ‘INRIX Global Traffic Scorecard’ (http://inrix.com/scorecard)  

Interdepartmental Committee on Science, Technology and Innovation (2015) ‘Innovation 2020, Ireland's 
strategy for research and development, science and technology’ 

International Monetary Fund (IMF) (2017), ‘Ireland: 2017 Article IV Consultation—Press Release; and 
Staff Report, June 2017’.  

Irish Fiscal Advisory Council (IFAC) (2017), ‘Fiscal Assessment Report, November 2017’. 

Irish  National  Organisation 
(https://www.inou.ie/newsandupdates/newsletter/2017/10/05/)  

the  Unemployed 

of 

(2017), 

‘E-Bulletin  October 

2017’ 

71 

 
 
References 

Irish SME Association (2017), ‘Budget 2018 Scorecard. Press release’, October 2017. 

Irish Tax Institute (2017). ‘IVCA Venture Pulse 2017: Funds raised by Irish SMEs (IVCA)’, Irish Venture 
Capital Association, 2017. 

Irish Tax Institute (2017a). ‘A future tax strategy to grow Irish indigenous exports’. 

Jenkinson, F., O’Callaghan, D., Reidy, P., Kane, F. and Prior, S. (2017), ‘Strategic Public Infrastructures 
Capacity  and  Demand  Analysis’.  Capital  Section  and  DPER  IGEES  (Irish  Government  Economic  and 
Evaluation Service) Unit, Department of Public Expenditure and Reform, August 2017. 

Jordan, D., Fákó P. (2017), ‘RIO Country Report 2017: Ireland’. 

Kinghan,  C.,  Lyons,  P.,  McCarthy,  Y.  and  O’Toole,  C.  (2017),  ‘Macroprudential  Measures  and  Irish 
Mortgage Lending: An Overview of Lending in 2016’, CBI, 2016. 

Lane, P. R. and Milesi-Ferretti, G.M. (2017), ‘International Financial Integration in the Aftermath of the 
Global Financial Crisis, IMF Working Paper WP/17/115’, May 2017. 

Lawless, M. and. Morgenroth, E. L. W. (2017), ‘Ireland’s international trade and transport connections’, 
Economic and Social Research Institute, Working Paper No 573, October. 

Levinsohn,  J.  and  Petrin,  A.  (2003),  ‘Estimating  production  functions  using  inputs  to  control  for 
unobservables’, Review of Economic Studies, Vol.70, No 2, pp. 317-341. 

Lyons, 
(2017), 
(http://www.ronanlyons.com/category/blog/propertymarket/)   

‘How 

R. 

to 

Build 

Enough 

Homes’ 

McCann, F. (2017), ‘Borrower-lender engagement during the Irish mortgage arrears crisis’, CBI, 2017. 

McCann, F. (2017b), ‘Mortgage modification in Ireland: a recent history’, CBI, 2017. 

McIndoe-Calder, T. (2017), ‘Debt giveth and debt taketh away: mortgage debt burdens in Ireland’, CBI, 
2017. 

Morgenroth,  E.  L.  W.  (2009),  ‘Irish  Public  Capital  Spending  in  a  Recession,  Economic  and  Social 
Research Institute’, Working Paper No 298, May 2009. 

National Competitiveness Council (2016), ‘Ireland’s Competitiveness Challenge’, December 2016. 

National Competitiveness Council (2017a), ‘Costs of Doing Business in Ireland’, July 2017. 

National Competitiveness Council (2017b), ‘Ireland’s Competitiveness Scorecard’, July 2017. 

National Competitiveness Council (2017c), ‘Ireland’s Competitiveness Challenge 2017’, December 2017. 

OECD (2015)  – ‘Education at a glance, 2015’, November 2015. 

OECD 
(2016a), 
9789264266490-en.htm) 

‘PISA  2015  Results’ 

(http://www.oecd.org/education/pisa-2015-results-volume-i-

OECD,  (2016b),  ‘PISA  Low-Performing  Students’  (http://www.oecd.org/edu/low-performing-students-
9789264250246-en.htm) 

72 

 
 
References 

OECD (2016c), ‘Education at a Glance’ ( http://www.oecd.org/edu/education-at-a-glance-19991487.htm) 

OECD  (2017a),  ‘Governance  at  a  Glance’  (https://www.oecd.org/gov/government-at-a-glance-2017-
executive-summary.pdf) 

OECD (2017b), ‘FDI in Ireland’, Working Group on International Investment Statistics, October 2017. 

OECD (2017c), ‘Entrepreneurship at a Glance’, Paris, October 2017. 

OECD (2017d), ‘Ireland — Trade and Investment Statistical Note. International Trade, Foreign Direct 
Investment and Global Value Chains’, Paris. 

OECD/European Observatory on Health Systems and Policies (2017), ‘Ireland: Country Health Profile 
2017, State of Health in the EU’, OECD Publishing, Paris/European Observatory on Health Systems and 
Policies, Brussels (http://dx.doi.org/10.1787/9789264283435-en) 

PwC & IHS (2017), ‘Effectiveness of tax incentives for venture capital and business angels. Final report’. 
Study commissioned by the European Commission. 

Tenancies 

Residential 
(https://onestopshop.rtb.ie/images/uploads/Comms%20and%20Research/RTB_Rent_Index_2017_Q3_Fi
nal.pdf) 

Quarter 

(2017) 

Index. 

Board 

‘Rent 

3 

2017’   

Schwab,  K.  ed.  (2017),  ‘The  Global  Competitiveness  Report  2017-2018’.  World  Economic  Forum, 
Geneva. 

SHARES 
(http://ec.europa.eu/eurostat/web/energy/data/shares) 

Eurostat, 

2016 

published 

provisional 

results. 

Siedschlag,  I.,  Di  Ubaldo,  M.  and  Tong  Koeclin,  M.  (2017),  ‘Comparative  Performance  of  Indigenous 
and Multinational Firms Operating in Ireland’, ESRI, 8 December 2017. 

Siedschlag, I., Lawless, M. and Di Ubaldo, M. (2017)  ‘The impact of business investment in knowledge 
based capital on productivity growth, a review of international and Irish evidence’. 

SOLAS 
(http://www.skillsireland.ie/Publications/2016/National%20Skills%20Bulletin%202016.html)  

‘National 

Bulletin 

(2016), 

Skills 

2016’ 

Sustainable  Energy  Authority 
(http://www.seai.ie/Grants/Warmer_Homes_Scheme/About_the_BEWH.html- accessed May 2017). 

‘Better  Energy  Warmer  Homes 

Ireland, 

of 

Scheme’ 

Tax  Strategy  Group  (2017),  ‘The  Tax  and  Fiscal  Treatment  of  Rental  Accommodation  Providers’ 
(http://www.finance.gov.ie/wp-content/uploads/2017/07/TSG-17-03-Tax-and-Fiscal-Treatment-of-
Landlords-JC.pdf) 

The Courts Service (2016), ‘Courts Service Annual Report 2016’ (p. 71) 

The  World 
(http://www.doingbusiness.org/) 

Bank 

(2017), 

‘Doing 

Business.  Measuring 

Business 

Regulations’ 

Watson,  D.,  et  al., 
(http://www.esri.ie/pubs/RS56.pdf) 

(2017), 

'A  Social  Portrait  of  Travellers 

in 

Ireland',  by 

the  ESRI 

73