COMMISSION STAFF WORKING DOCUMENT Country Report Ireland 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Ireland, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 506 final  COMMISSION STAFF WORKING DOCUMENT Country Report Ireland 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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(2020) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

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

4.  Reform priorities 

4.1.  Public finances and taxation 
4.2.  Financial sector 
4.3.  Labour market, education and social policies 

4.4.   Competitiveness, reforms and investment 
4.5.  Environmental sustainability 

Annex A: Overview table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Ireland 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Table 1.1: 
Table 2.1: 
Table 3.1: 
Table 3.2: 

Table 3.3: 
Table 4.2.1: 
Table C.1: 
Table C.2: 
Table C.3: 

Key economic and financial indicators - Ireland 

Annual assessment of the 2019 CSRs (1) 

Macroeconomic effects of loan-to-value ratio reduction 

Macroeconomic effects of loan-to-value ratio reduction combined with a 10% vacant 

site levy 

MIP Scoreboard 

Financial soundness indicators, all domestic and foreign banks in Ireland 

Financial market indicators 

Headline Social Scoreboard indicators 

Labour market and education indicators 

1 

4 

8 

15 

19 

26 

26 
32 
38 
49 
61 

68 

76 

77 

83 

84 

89 

14 
17 
22 

23 
24 
32 
77 
78 
79 

 
 
 
Table C.4: 
Table C.5: 
Table C.6: 

Social inclusion and health indicators 

Product market performance and policy indicators 

Green growth 

LIST OF GRAPHS 

Graph 1.1:  Modified domestic demand and contributions 

Graph 1.2:  Gross value added and contributions 

Graph 1.3: 

Core domestic investment and contributions 

Graph 1.4: 

Change in employment by sector 

Graph 2.1: 

Ireland – Current implementation level of 2014-19 CSRs 

Graph 3.1:  Overvaluation gap in housing 

Graph 3.2: 

Housing prices developments 

Graph 4.1.1:  General government debt development 

Graph 4.1.2: 

Total outgoing royalty payments from EU Member States and share going to offshore 

financial centers**, average values 2013-2017 

Graph 4.2.1:  Residential mortgage arrears in the banking sector 

Graph 4.2.2:  Private indebtedness 

Graph 4.2.3:  Breakdown of NFC debt by location of counterparty, 2018 

Graph 4.2.4:  Comparison of new business loan interest rates (< €1 million) 

Graph 4.2.5:  Credit rejections/refusals 

Graph 4.3.1:  Unemployment by duration 

Graph 4.3.2:  Net childcare costs for a low-income family, by component 

Graph 4.3.3:  Employment rate, by educational attainment 

Graph 4.3.4:  Share of platform workers across 16 EU Member States, year 

Graph 4.3.5:  Main social indicators 

Graph 4.3.6:  At risk-of-poverty rate gap, by age groups 

Graph 4.4.1:  Average labour productivity growth, 2010-2017 

Graph 4.4.2:  Labour productivity index of main sectors 

Graph 4.4.3:  Labour productivity and GVA, 2017 

Graph 4.4.4: 

Intellectual Property Investments v Total Investments 

Graph 4.4.5:  Source of investment finance, 2017 

Graph 4.4.6:  Sectoral investment rates 

Graph 4.4.7:  GVA by sector 

Graph 4.4.8:  Proportion of firms that are finance constrained 

Graph 4.4.9:  Labour productivity, EU28, NL NUTS-2 regions 

Graph 4.4.10:  GVA per worker index by NUTS3 region 

Graph 4.4.11:  Disposable income per person 

Graph 4.4.12:  Ease of doing business, by dimension - 2020 

Graph 4.5.1:  Projections in non-ETS sectors 

Graph 4.5.2: Greenhouse gas emissions per capita, 2017 vs. 1990 

2 

80 
81 
82 

8 

8 

9 

10 

15 

20 

22 

26 

30 

33 

35 

36 

37 

37 

38 

40 

41 

41 

44 

45 

49 

49 

49 

53 

53 

53 

54 

54 

57 

58 

58 

59 

62 

66 

 
 
 
 
LIST OF BOXES 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth and 

competitiveness in Ireland 

Box 3.1: Drivers of house and rental prices 

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

Box 4.3.2: Social housing policy and provision in Ireland 

Box 4.4.1: Investment challenges and reforms in Ireland 

Box 4.5.1: Transition to a climate-neutral and circular economy 

18 
22 
39 
47 
55 
66 

3 

 
 
 
 
EXECUTIVE SUMMARY 

Ireland  has  enjoyed  robust  economic  growth 
over  the  past  years,  also  helped  by  significant 
progress in reforms, but a number of challenges 
remain (1).  Since  2014, 
Ireland  has  made 
remarkable  progress  in  strengthening  its  financial 
sector  and  improving  employability.  Completing 
reforms in other areas will help underpin Ireland’s 
robust  economic  growth.  Closing  employment-
related  skill  gaps  and  encouraging  key  social, 
environmental  and  productive  investment  could 
provide 
the  foundations  for  sustainable  and 
inclusive growth. Reducing public and private debt 
to 
would 
external  shocks.  Broadening  the  tax  base  and 
reducing  the  reliance  on  volatile  corporate  taxes 
would  buttress  the  long-term  sustainability  of 
public finances.  

the  economy´s  resilience 

increase 

Ireland is experiencing strong economic growth. 
In 2018, real GDP grew by 8.2%, a very high rate 
for  an  advanced  economy  but  to  a  significant 
extent  boosted  by  the  activities  of  multinational 
companies  operating 
Ireland.  Meanwhile, 
in 
domestic  activity  also  remained  robust,  driven  by 
in 
private 
construction.  

consumption 

investment 

and 

is 

environment.  GDP 

Real  GDP  growth 
is  slowing,  affected  by 
uncertainties  linked  to  the  UK’s  withdrawal 
from  the  EU,  and  a  worsening  of  the  global 
trade 
nevertheless 
estimated  to  have  grown  strongly  in  2019  (5.6%) 
and is expected to grow above 3% this year and the 
next.  Ireland’s  outlook  depends  heavily  on  the 
future relationship between the EU and UK, while 
risks  stemming  from  potential  changes  to  the 
international 
taxation  environment  have  not 
abated. Consumer price inflation remains modest.  

Public  finances  have  been  improving  but  risks 
to  their  sustainability  remain.  The  government 
balance has turned to a surplus and is expected to 
further improve. Risks to government finances are 
tilted 
reflecting 
the  downside,  mainly 
uncertainty  as  regards  the  economic  outlook,  the 

to 

(1)  This  report  assesses  Ireland’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy  published  on  17 December 2019. 
this 
document, Commission  sets out a new strategy  on how to 
address  not  only  the  short-term  economic  challenges  but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

In 

4 

sustainability  of  the  current  level  of  corporate  tax 
receipts,  the  ongoing  review  of  the  international 
corporate  tax  system,  and  over-spending  within 
some sectors, particularly health. 

Given  the  major  economic  challenges  ahead, 
(especially  digitisation  and  climate  transition), 
it  is  crucial  for  workers  to  acquire  the  right 
skills.  Job  creation  has  continued  to  progress 
strongly  in  most  sectors.  The  employment  rate 
reached  its  pre-crisis  peak  and  the  unemployment 
rate  fell  below  5%  in  2019,  its  lowest  level  in  a 
decade.  Against  this  background,  shortages  of 
skilled-labour  have  become  more  pressing, 
especially in fast growing sectors.  

Providing  workers  with  the  skills  required, 
including  digital  and  those  for  a  smooth  and 
just  transition  to  a  climate  neutral  economy, 
would require  investing  more in education and 
training. Ireland  has also  scope to address labour 
shortages  by  further  facilitating  the  access  of 
women  and  vulnerable  groups  to  the  labour 
market,  which  although 
remain 
relatively low.  

improving, 

There  remain  significant  investment  needs  in 
various  areas.  The  transition  to  a  climate-neutral 
and  clean  economy  would  require  substantial 
private  and  public  investment  in  skills,  clean 
energy,  water  and  in  decarbonising  sectors  with 
high  emissions.  More  investment  in  R&D,  digital 
infrastructure and skills would address the lagging 
productivity of domestic firms and would increase 
the  resilience  of  the  economy  to  external  shocks. 
Substantial  investment  is  also  required  to  address 
rising  homelessness  and  improving  access  to 
employment for women and disadvantage groups.  

Overall,  Ireland  has  made  some  progress  (2)  in 
addressing 
country-specific 
2019 
the 
recommendations.  

There  has  been  substantial  progress  in  the 
following areas: 

 

Increasing  access  to  affordable  and  quality 
childcare. 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in Annex A. 

is  presented 

in 

 
                                                           
                                                           
There  has  been  some  progress  in  the  following 
areas: 

  Providing  personalised 

integration 
support and facilitating upskilling, in particular 
for  vulnerable  groups  and  people  living  in 
households with low work intensity. 

active 

  Focusing  investment  policy  on  the  low  carbon 
and  energy  transition  and  the  reduction  of 
greenhouse  gas  emissions.  Investing  in  water 
management,  sustainable 
transport,  digital 
infrastructure, affordable and social housing. 

 

 

Implementing measures, including those in the 
Future Jobs strategy, to diversify  the economy 
and improve the productivity of Irish firms  — 
small  and  medium  firms  in  particular  —  by 
using  more  direct  funding 
to 
stimulate research and innovation. 

instruments 

Improving 
reducing 
entrepreneurship. 

the  business  environment  by 
to 

regulatory 

barriers 

There has been  limited  progress in the  following 
areas: 

  Limiting  tax  expenditure  and  broadening  the 

tax base.  

  Addressing features of the tax system that may 
facilitate  aggressive  tax  planning,  where  the 
effectiveness of the measures taken remains to 
be seen.   

  Addressing the expected increase in age-related 
expenditure,  where  the  full  implementation  of 
some  measures  remains  endangered  by  issues 
such as recurrent overspending in healthcare. 

indicators  of 

the  Social  Scoreboard 
The 
supporting the European Pillar of Social Rights 
point  to  a  relatively  good  performance,  but 
challenges  remain.  While  employment  continues 
to grow strongly, some population groups have yet 
to  reap  the  benefits  of  the  economic  upturn. 
Households’  real  disposable  income  per  head 
continues to grow, but remains slightly below pre-
crisis levels.  A still relative low percentage  of the 
population  has  basic  digital  skills,  which  might 
hinder  their  active  participation  in  a  society 

Executive summary 

increasingly reliant on digital tools. While the Irish 
tax and benefit system continues to be effective in 
reducing  inequalities,  a  high  share  of  jobless 
households,  especially  with  children,  still  face 
challenges.  Although  increasing,  the  employment 
rate for people with disabilities remains below the 
EU average. The rising number of homeless people 
as a result of rent increases and insufficient social 
and affordable housing is still a concern. 

Regarding  progress  towards  its  national  targets 
under the Europe 2020 strategy, Ireland has met or 
is  very  close  to  its  targets  for  employment,  early 
school  leaving,  and  the  reduction  of  poverty  and 
social  exclusion.  However,  there  is  scope  for 
improvement  in  the  areas  of  R&D  investment, 
reducing  greenhouse  emissions,  increasing  the 
share of renewables, energy efficiency and poverty 
reduction. 

Ireland made significant progress in addressing the 
United  Nation’s  sustainable  development  goals 
(SDG) (3) related to ‘no poverty’ and ‘decent work 
and  economic  growth’  but  faces  challenges  in 
climate action (SDG13). In the five years to 2018, 
Ireland  surpassed  the  EU  average  level  in  almost 
all dimensions related to SDG1 (‘No poverty’) and 
SDG8 (‘Decent work and economic growth’).  

findings  of 

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

in-depth 

the 

  Government debt remains high, which limits 
the room for responding to economic shocks. 
The  public  debt-to-GDP  ratio  fell  to  63.5%  in 
2018  on  the  back  of  strong  GDP  growth.  But 
other  indicators  suggest  that  the  public  debt 
burden 
remains  high  by  historical  and 
international standards. 

  Private  sector debt  remains high in relation 
to GDP, but has declined in both household 
and corporate sectors. Private debt was 223% 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Ireland during the past five years, based on Eurostat’s EU 
SDG indicator set 

5 

 
                                                           
Executive summary 

rental  sector  are  still  growing  fast,  due  to 
insufficient, though increasing, housing supply.  

  Macro-prudential  mortgage  measures 
(designed  to  mitigate  risks  to  the  financial 
system as a whole) are helping to strengthen 
the resilience of both households and banks. 
Combined  with  measures  supporting  housing 
supply,  they  might  also  improve  affordability 
for  buyers  and  tenants,  which  remains  a 
challenge. 

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

  Uncertainty  over  the  sustainability  of  the 
current  high  level  of  corporate  tax  revenue 
is  a  risk  to  public  finances.  Receipts  from 
corporation  tax  remain  concentrated  among  a 
small  number  of  companies.  Furthermore,  its 
share  of total tax revenue  has been increasing. 
Continued reliance on this potentially transient 
revenue 
current 
expenditure remains a concern. 

funding  permanent 

for 

  Evidence  suggests  that  Ireland’s  tax  rules 
tax  planning 
are  used 
for  aggressive 
the 
purposes.  Specifically,  rules  such  as 
limited  application  of  withholding  taxes  are 
cause for concern. In addition to implementing 
European and internationally agreed initiatives, 
Ireland  has  taken  some  unilateral  measures, 
including the extension of transfer pricing rules 
to  non-trading  transactions  and  to  small  and 
medium-sized firms.  

its 

anti-money 

  Ireland  has  taken  a  number  of  steps  to 
strengthen 
laundering 
framework.  But  challenges  remain  given  the 
Irish  economy’s  exposure  to  foreign  direct 
investment  and  the  presence  of  complex  legal 
structures.  A  register  of  beneficial  ownership 
was  set  up  in  2019,  which  records  who  is 
benefiting  from  owning  assets  held  in  other 
parties’  names.  If  secrecy  is  to  be  genuinely 
limited, it is vital that this register functions as 
intended.  Professionals  providing  services  to 
companies  and  trusts  show  an  incomplete 
understanding  of  their  risk  exposure  to  money 
laundering.  This  could  be 
remedied  by 
reviewing  the  national  risk  assessment  of  the 

of  GDP  in  2018,  largely  due  to  debt  held  by 
non-financial  corporations  (182%  of  GDP), 
which  includes  intra-company  liabilities  of 
multinationals  (who  have  a  strong  presence  in 
Ireland).  Household  debt  appears  high  when 
compared  to  disposable  income.  Moreover, 
long-term mortgage arrears remain a persistent 
challenge  for  some  households,  despite  a 
number  of  existing  schemes  to  help  resolve 
them. 

further 

following 

  Banks’ asset quality has improved in recent 
sales  and 
quarters 
securitisations of bad loans (non-performing 
loan)  portfolios.  The  ratio  of  bad  loans  as  a 
share  of  all  banks’  loans  declined  to  4.2%  in 
the second quarter of 2019, down from 8.5% a 
year earlier, reflecting sales by all  major retail 
banks.  The  majority  (72%)  of  remaining  bad 
loans relate to mortgages. 

  Ireland’s  net 

international 

investment 
position remains highly negative (its external 
liabilities are higher than its external assets). 
This  has  changed  little  in  recent  years,  though 
the  domestic  component  has  shrunk  and  is  set 
to shrink further on the back of current account 
surpluses.  

  This  negative  position  is  largely  due  to  the 
liabilities  of  multinational  corporations 
registered  in  Ireland  and  the  International 
Financial Services Centre. But the associated 
risks  are  smaller  than  taken  at  face  value 
because  links  with  the  domestic  economy  are 
restricted.  

  The  risks  are  also  lessened  by  the  long 
maturity  and  low  interest  rates  on  loans 
disbursed  by  official  creditors  during  the 
economic  adjustment  programme  following 
the  2008  financial  crisis,  which  comprise  the 
substantial  share  of  the  general  government’s 
external liabilities. Nevertheless, the full extent 
of the risk is difficult to gauge.  

  House  price  growth  has 

slowed  but 
affordability  remains  a  concern.  The  fall  in 
house  prices  at  the  top  end  of  the  market  has 
brought annual residential price inflation down 
to  levels  not  seen  since  2013.  Prices  in  the 

6 

 
by 

a  more 

organisations  and  arrangements  in  this  field, 
and 
risk-based 
supervision.  Such  supervision  would  require 
statistics to be collected on professionals in this 
sector. 

effective, 

  Challenges  remain  to  the  long-term  fiscal 
sustainability  of  the  healthcare,  long-term 
care and the pension systems. Expenditure on 
healthcare and long-term care is relatively high 
by  EU  standards.  Difficulties 
in  budget 
management  managing  healthcare  have  led  to 
the 
recurrent 
implementation  of  the  ambitious  Sláintecare 
reform. The reform of the state pension system 
currently  being  implemented  aims  to  improve 
its long-term sustainability.   

overspending, 

endangering 

in 

firms,  concentrated 

  Increasing  the  productivity  of  domestic 
firms  may  help  make  the  economy  less 
vulnerable to sector-specific shocks. The high 
productivity  of  the  Irish  economy  is  based  on 
the  performance  of  a  small  number  of 
multinational 
few 
sectors, which invest large amounts in research 
and  development.  As  a  result,  Ireland’s  export 
share  in  global  trade  keeps  increasing.  In 
contrast,  investments  by  domestic  firms  is 
much lower. This holds back their productivity 
growth  and  widens  the  dichotomy  between 
them  and  foreign-owned  firms.  Domestic 
sourcing  by  foreign  companies,  which  could 
lead to knowledge and skills spillover, remains 
limited.  The  high  cost  of  credit,  commercial 
properties and legal and insurance services also 
impair the competitiveness of domestic firms.  

in 

the 

The Climate Action Plan represents a much-
needed  breakthrough  and  a  stepping  stone 
in  the  transition  to  a  climate  neutral  and 
circular  economy.  Ireland  has  lagged  behind 
so  far  in  tackling  climate  change.  Greenhouse 
emissions 
transport,  building  and 
agriculture  sectors  are  high  and  on  a  rising 
trend.  There  is  scope  for  improving  energy 
efficiency,  renewables  provision  and  material 
recycling.  The  Climate  Action  Plan  2019 
constitutes  an  important  step  to  address  these 
challenges,  though  its  success  will  depend  on 
the  implementation  of  public  measures  that 
could  trigger  additional  private  investments. 
Recent reforms encouraging the repair of water 
leaks and rational  water  usage, combined  with 

Executive summary 

investment  in  water  and  wastewater  facilities, 
could  contribute 
to  a  more  efficient  and 
sustainable use of water resources. 

includes  a 

  The  EU  Just  Transition  Mechanism  will 
contribute  to  a  fair  transition  towards 
climate 
neutrality.  The  Commission’s 
proposal  under  the  next  multi-annual  financial 
framework for the period 2021-2027 for a ‘Just 
Transition  Mechanism’ 
‘Just 
Transition  Fund’,  a  dedicated  scheme  under 
InvestEU, and a new public sector loan facility 
with  the  EIB.  It  is  designed  to  ensure  that  the 
transition towards EU climate neutrality is fair 
by helping the most affected regions in Ireland 
address the accompanying social and economic 
consequences. Key priorities for support by the 
Just Transition Fund, set up as part of the Just 
Transition Mechanism, are identified in Annex 
D,  building  on  the  analysis  of  the  transition 
challenges outlined in this report. 

  Regional  disparities  are  among  the  highest 
in  the  EU  and  increasing.  Economic  growth 
follows  a  distinct  geographic  pattern  with 
particularly  dynamic  developments  around 
Cork  and  Dublin,  the 
location  of  highly 
competitive  multinational  companies.  In  terms 
of gross value added per capita, the difference 
between  the  richest  and  the  poorest  region  in 
Ireland  has  doubled  between  2000  and  2016. 
While  Dublin  had  a  per  capita  regional  gross 
value  added  of  248%  of  the  EU  average  in 
2016,  the  poorest  region  bordering  Northern 
Ireland stood only at 66%. Productivity growth, 
attractive 
business 
environments  and  disposable  income  follow  a 
similar pattern of geographic distribution.  

sustainable 

and 

7 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth  

Economic activity remains strong, although it is 
slowing. GDP grew by 6.6% year-on-year (y-o-y) 
in  the  first  half  of  2019,  well  above  the  eurozone 
average.  Real  GDP  is  expected  to  have  grown  by 
5.7%4  in  2019  and  to  expand  further  by  3.6%  in 
2020  and  3.2%  in  2021  (European  Commission, 
2019).  These  headline  figures  remain  inflated  by 
the activities of multinational companies operating 
in Ireland. 

investment 

consumption  and 

Domestic  economic  activity  has  been  driven  by 
private 
in 
construction.  Modified  domestic  demand,  a 
measure  of  domestic  activity  that  strips  out  some 
of  the  effects  of  multinationals,  grew  by  2.3% 
y-o-y  in  the  first  half  of  2019  (Graph  1.1),  after 
growing by 4.7% in 2018. It is expected to expand 
above  3%  on  average  between  2019  and  2021. 
increasing 
Private  consumption,  sustained  by 
disposable 
rising 
employment, and investment in housing have been 
the  main  drivers  of  domestic  demand.  Household 
savings,  meanwhile, remain  high, likely reflecting 
caution on the part of consumers. 

strongly 

income 

amid 

Graph 1.1:  Modified domestic demand and contributions 

Source: CSO 

The value added in the domestic sector provides 
further  evidence  of  robust  underlying  activity. 
Gross  value  added  (GVA)  in  the  sectors  not 
dominated  by  multinationals  grew  by  3.9%  in 
2018, 
contributing 
in 
after 
substantially 
total  GVA  (Graph  1.2). 
Amongst  these  sectors,  legal,  accounting,  and 

4.8% 
the 

2017, 

to 

(4)  The  figures    in  square  brackets  will  be  updated  at  a  later 
stage, following the publication of the winter forecast. 

8 

engineering  activities  grew  the  most  (17.7%)  in 
2018, followed by the construction sector (11.0%). 

is 

likely 

Ireland 

final  negotiations, 

The  economic  outlook  remains  clouded  by 
heightened  uncertainty.  External  risks  mainly 
relate  to  the  UK’s  withdrawal  from  the  EU, 
changes  in  the  international  taxation  environment 
and the  slowdown  in  global trade. The UK is one 
of the main trading partners for Ireland and acts as 
a land bridge to the continent. Thus, depending on 
the 
to 
experience disruption of its supply chains and a hit 
on final demand after the UK’s exit. This negative 
impact  might  be  amplified  by  a  fall  in  Irish 
consumer and business confidence, job losses and 
sterling depreciation. In addition, a large degree of 
unpredictability, 
the  activities  of 
multinationals, could drive headline growth in any 
direction. At the same time, the tight labour market 
to  an 
and  diminishing  spare  capacity  point 
economy  operating  at  or  above  its  potential. 
Against  this  background,  signs  of  overheating 
could  become  more  apparent  if  adverse  external 
shocks do not materialise. 

linked 

to 

Graph 1.2:  Gross value added and contributions 

Source: CSO 

Investment 

Investment in Ireland continues to be driven by 
volatile  investment  by  foreign  multinational 
corporations.  In  the  first  half  of  2019,  headline 
investment increased by 112% y-o-y, because of a 
surge  in  intellectual  property  investment  in  the 
second  quarter  of  2019.  This  surge  was  matched 
by  a  rise  in  intellectual  property  imports.  These 

-6-4-202468Q1-2011Q3-2011Q1-2012Q3-2012Q1-2013Q3-2013Q1-2014Q3-2014Q1-2015Q3-2015Q1-2016Q3-2016Q1-2017Q3-2017Q1-2018Q3-2018Q1-2019Q3-2019Intangible Assets excl. net R&D importsMachinery and Equipment excl. aircraft for leasingTotal constructionPublic consumptionPrivate consumptionModified Domestic Demand, y-o-y%pps.-10-5051015202530200120022003200420052006200720082009201020112012201320142015201620172018Sectors with substantive MNE activityDomestic sectorsGVA total (y-o-y%)pps. 
   
                                                           
   
the 
activities 

two  impacts  are  largely  offsetting  and  therefore 
have  a  broadly  neutral  impact  on  GDP.  Modified 
volatile 
excludes 
investment,  which 
of 
the 
to 
related 
components 
multinationals  (such  as  aircraft  and  intangible 
assets)  and  better  reflects  domestic  investment, 
decreased by  -4.1% y-o-y in the first half of 2019 
(Graph  1.3).  Investment  in  construction  increased 
by  3.6%  y-o-y  in  the  first  half  of  2019  and  is 
expected to remain strong as housing supply is still 
catching  up  with  demand  and  is  supported  by 
various  government  measures.  By  contrast, 
investment  in  machinery  and  equipment  has  been 
weak 
reflecting 
heightened external uncertainty.  

recent  quarters, 

likely 

in 

Graph 1.3:  Core domestic investment and contributions 

(1) Statistics on machinery and equipment without aircraft 
for Q2-2019 have been omitted by the CSO due to 
confidentiality 
Source: CSO 

Public investment continues to increase. Capital 
spending  has  been  on  an  upward  path  since  2014 
after significant cuts in the aftermath of the crisis. 
Ireland’s 2020 Budget estimates an annual increase 
in  public  capital  investment  above  10%  y-o-y  in 
2020, at 4.4% of modified GNI (GNI*)(5). Capital 
expenditure  is  expected  to  increase  at  an  average 

(5)  Modified  Gross  National  Income  (GNI*)  reflects  more 
accurately  the  income  standards  of  Irish  residents  than 
GDP.  It  differs  from  actual  GNI  in  that  it  excludes,  inter 
alia,  the  depreciation  of  foreign-owned,  but  Irish-resident, 
capital  assets  (notably  intellectual  property  and  assets 
associated  with  aircraft  for  leasing)  and  the  undistributed 
profits of firms that have re-domiciled to Ireland. For more 
details  on  the  computation  of  GNI*,  see  CSO,  National 
Income 
2018 
https://www.cso.ie/en/releasesandpublications/ep/p-
nie/nie2018/mgni/  

Expenditure 

and 

1. Economic situation and outlook 

annual rate of 5.8% until 2024, and a ratio of 4.3% 
of  GNI*  to  be  maintained  in  the  medium  term. 
Investment so far has centred on key areas such as 
infrastructure,  particularly  in  housing,  transport, 
education and health.   

Regional disparities  

in 

Ireland 

Regional  disparities 
remain 
significant  and  are  increasing.  The  difference 
between  the  richest  and  the  poorest  NUTS3 (6) 
area  in  Ireland  in  terms  of  GVA  per  capita  has 
doubled  between  2000  and  2016.  Productivity 
(GVA  per  worker) 
the  Southern  region 
in 
corresponds to 240% of the EU average, while the 
Northern and Western region stands at 98% of the 
EU  average.  The  share  of  employment  in  high-
technology  sectors  is  twice  as  high  in  the  Eastern 
and  Midland,  as  in  the  Northern  and  Western 
region (see sections 4.4.1., 4.4.4. and 4.4.6.).  

Differences in regional competitiveness are also 
sizeable. With the location of globally competitive 
multinational companies around Dublin and Cork, 
these  areas  offer  increasingly  favourable  business 
and  innovation  environments  while  areas  in  the 
Northern  and  Western  region    -  predominantly 
rural and remote - increasingly lag behind. Eastern 
and Midland region, hosting Dublin, performs well 
in the Regional Competitiveness Index (89th place 
in  the  EU),  providing  particularly  favourable 
conditions  in  terms  of  technological  readiness, 
higher  education  and  lifelong  learning  and  health. 
The  Northern  and  Western  region  ranks  only 
177th,  due 
for 
to  below-average 
infrastructure, market size and efficiency. 

results 

Inflation 

inflation 

Wage pressures have not yet passed through to 
inflation.  Consumer  price 
remains 
subdued,  with  the  harmonised  index  of  consumer 
prices  rising  by  0.9%  on  average  in  2019.  Core 
inflation  remains  contained  by  low  price  pressure 
from  non-energy  industrial  goods,  which  reflects 
both  low  import  prices  due  to  the  appreciation  of 

(6)  NUTS (Nomenclature of  Territorial Units for Statistics)  is 
a  geocode  standard  for  referencing  the  subdivisions  of 
countries  for  statistical  purposes.  There  are  three  NUTS2 
regions  (Northern  and  Western,  Southern  and Eastern  and 
Midland) and eight NUTS3 areas in Ireland (Border, West, 
Mid-West,  South-East,  South-West,  Dublin, Mid-East  and 
Midlands).  

9 

-10-505101520253035Q1-2013Q2-2013Q3-2013Q4-2013Q1-2014Q2-2014Q3-2014Q4-2014Q1-2015Q2-2015Q3-2015Q4-2015Q1-2016Q2-2016Q3-2016Q4-2016Q1-2017Q2-2017Q3-2017Q4-2017Q1-2018Q2-2018Q3-2018Q4-2018Q1-2019Q2-2019Q3-2019Machinery and equipment without aircraftTransfer CostsOther Building and ConstructionImprovementsDwellingsCore Domestic Investment (y-o-y%)pps.   
                                                           
                                                           
the euro real exchange rate towards sterling and a 
downward  bias  related  to  quality  adjustments 
methods  (Keating  et  al.,  2018).  Services  prices 
continue  to  be  bolstered  by  rents  and  catering 
services  and  are  expected  to  remain  the  main 
driver  of  inflation,  in  line  with  robust  domestic 
demand.  

House price developments  

While  residential  price  inflation  has  slowed 
down to levels not seen since 2013, prices at the 
bottom-end  of  the  market  are  still  increasing 
briskly.  Annual  residential  price  inflation  was 
1.4% in November 2019, down from a 13.3% peak 
in April 2018. The decline was driven by the top-
end  of  the  market  (see  Box  3.2)  Despite  its  rapid 
growth in recent years, overall house prices do not 
seem  overvalued  (see  Section  3.1).  However, 
affordability remains a concern. 

Housing  rental  inflation  is  still  high.  Rents  for 
new  or  renewed  tenancies  increased  by  6.6%  in 
Dublin  and  9.2%  outside  Dublin  in  the  third 
quarter  of  2019.  This  represents  a  change  in 
growth  of  respectively  -3  pps  and  +2.3  pps 
compared  with  the  same  period  last  year.  The 
evolution  of  rental  inflation  seems  to  reflect 
changes  in  the  stock  of  houses  available  for  rent 
with supply in Dublin increasing by 10% to 1,500 
units  in  the  year  to  August  while  availability  was 
falling nationwide. (see Box 3.3.1) 

Labour market 

The  labour  market  continues  to  improve.  The 
economic  expansion  has  spurred  job  creation 
across  most  sectors  (Graph  1.3).  In  2018,  the 
overall  employment  rate  (20-64)  reached  74.1%, 
and  the  unemployment  rate  continued  to  decline 
steadily 
lowest  rate  since  2007 
the 
(seasonally adjusted). 

to  5%, 

1. Economic situation and outlook 

Graph 1.4:  Change in employment by sector 

Source: Eurostat 

There is scope for increasing the labour supply 
through  greater  labour  force  participation  and 
workforce attachment, in particular for women. 
Ireland’s  activity  rate  (15-64)  hovers  around  72% 
since  2013,  below  the  EU  average  (73.7%  in 
2018). The female activity rate was 67.1% in 2018, 
11.7 pps  below  that  of  men,  and  the  gender 
employment  gap  (20-64)  stood  at  12.2 pps.  This 
indicates that women are still at a disadvantage to 
men  in  the  jobs  market.  Evidence  from  the 
International Labour Organisation (2017) suggests 
that  closing  the  gender  activity  rate  gap  by  25% 
would  boost  GDP  per  capita  by  2%  (a  total  GDP 
increase  of  some  € 6.5  billion  in  current  prices  in 
2018). In 2019, the government launched measures 
to  tackle  the  specific  challenges  in  the  childcare 
labour 
system 
participation  -  these  require  close  monitoring. 
Similarly,  gains  from  the  economic  upturn  have 
not trickled down to all population groups, such as 
the  low  skilled  or  those  with  disabilities  (see 
section 4.3.1). 

foster  greater 

female 

and 

as 

Skilled-labour  shortages  are  becoming  more 
pressing.  While  the  aggregate  job  vacancy  rate 
remains stable (1% in the second quarter of 2019), 
it is trending upwards in some fast-growing sectors 
and  those  dominated  by  multinational  companies, 
communication 
such 
technologies, 
and  professional, 
scientific  and  technical  activities  (see  section 
4.3.1).  With  a  large  majority  of  jobs  requiring 
strong  digital  skills,  the  relatively  low  level  of 
basic digital skills in the workforce is a barrier for 
greater uptake of innovation. 

construction, 

information 

and 

10 

-200-150-100-500501001502007Q12007Q32008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q32019Q12019Q3thsAgricultureIndustryConstructionTradable servicesNon-tradable servicesPublic sectorTotal   
1. Economic situation and outlook 

tax  and  social  transfers  in  Ireland  have  strong 
reducing  effects,  disposable 
poverty 
income 
inequality  (0.296) 
the  EU  average 
is  below 
(0.308). (9) 

Competitiveness  

Irish 

the  euro  continued 

economy  has  maintained 

its 
The 
competitiveness.  In  2018, 
the  real  effective 
exchange rate based on unit labour costs remained 
broadly  unchanged  with  respect  to  2017.  Sterling 
depreciation  vis-à-vis 
to 
negatively affect competitiveness in 2018, but was 
offset  by  weak  consumer  price  inflation  and  the 
reduction in unit labour costs. The underlying trade 
balance also shows that the country has maintained 
its  external  competitiveness.  However,  wage 
pressures in a tightening labour market may affect 
competitiveness  over 
term.  The 
activities  of  multinationals  continue  to  inflate 
significant 
overall  productivity 
productivity 
low-productivity 
domestic  firms  and  high-productivity  foreign 
companies (see Section 4.4.1.).  

figures  with 
between 

the  medium 

gaps 

External position 

Headline  current  account 
figures  remain 
volatile,  and  net  external  liabilities  largely 
unchanged. (10)  The  headline  current  account 
surplus increased dramatically, from 0.5% of GDP 
in 2017 to 10.6% in 2018, driven by the activities 
of  multinationals.  This  volatility  highlights  the 
importance  of  alternative  indicators  that  better 
the  resources  generated  by  domestic 
capture 
residents.  For 
the  modified  current 
account (11) increased only moderately from 2.3% 
of GDP in 2017 to 4.0% in 2018. Ireland’s external 
position  remains  difficult  to  grasp  by  standard 
value  metrics.  The  high  level  of  net  external 
liabilities  is  largely  due  to  the  operations  of  some 
intragroup 
multinationals, 
liabilities,  and  the  negative  net  position  of  the 
International  Financial  Services  Centre  (IFSC),  to 
limited 
which  domestic 

sectors  have  only 

including 

instance, 

their 

(no  inequality)  and  1  (maximum  inequality).  Source: 
OECD Income Distribution Database. 

(9)  Source:  EU-SILC  database.  Data  on  income  refers  to  the 
previous year for all Member States except IE and UK. 
(10)  The net external liabilities (NIIP) is defined as the stock of 
a country’s external assets minus its external liabilities.   
(11)  The current account, which to a large degree strips out the 

effects of multinational corporations. 

Wages  have  become  more  aligned  with  labour 
market  conditions,  with  further  acceleration 
over  the  past  year.  Nominal  wage  growth  has 
been contained since 2014 (1.5% on average from 
2014 to 2017), and often lower than what could be 
expected  from 
in 
particular  from  productivity  growth  (7.9%  on 
average  in  the  period).  However,  the  rate  of 
increase  of  nominal  compensation  per  employee 
accelerated to 2.1% in 2018, and it is set to reach 
3.2%  in  2019  and  3.5%  in  2020,  closing  the  gap 
with  the  predicted  growth  based  on  economic 
fundamentals. (7) 

labour  market  conditions, 

The  labour  market  tightening  points  to  an 
economy  operating  at  or  above  its  potential. 
Strong  employment  growth  and  decreasing  rates 
for both part-time employment (-9.3% year on year 
in 
long-term 
first  half  of  2019)  and 
unemployment,  suggest  increasing  constraints  on 
the  labour  supply.  As  the  domestic  labour  market 
is  close  or  at  full  employment,  high  net  inward 
migration helps alleviate these constraints.  

the 

Social developments  

Housing  scarcity  remains  a  pressing  issue, 
including  rising  homelessness  due  to  shortages 
of social housing. In November 2019, over 10,000 
people were counted as homeless, including 3,752 
children. 

The share of people at risk of poverty or social 
exclusion  is  decreasing,  but  challenges  remain 
for  some  groups.  The  share  of  people  at-risk  of 
poverty  or  social  exclusion  has  been  declining 
since  2012,  closing  the  gap  with  the  EU  average. 
However, it remains particularly high for children, 
largely  due  to  impact  of  joblessness  at  household 
level (see Section 4.3.3).  

Income inequality after social transfers is below 
the  EU  average,  but  challenges  remain.  The 
income  of  the  richest  20%  of  the  population 
relative to the poorest 20% increased from 4.23 in 
2017  to  4.63  in  2018,  but  remain  below  the  EU 
average (5.17). Market income inequality is among 
the highest in the EU (0.543 in 2016). (8) However, 

(7)  Benchmark for wage growth predicted based on changes in 
labour  productivity,  prices  and  unemployment.  European 
Commission (2015). 

(8)  Measured by the GINI coefficient for income before taxes 
and transfers. For incomes, the coefficient is bounded by 0 

11 

                                                           
                                                                                   
1. Economic situation and outlook 

over-spending  within 

and 
particularly health. 

some 

sectors, 

economic 

shocks.  The 

Ireland  is  still  running  high  levels  of  public 
debt,  which  limits  its  room  to  respond  to 
negative 
general 
government  debt  ratio  further  declined  in  2018  to 
63.6% of GDP, on the back of strong GDP growth.  
It  is  projected  to  fall  further  to  around  54%  in 
2020,  contingent  on  continued  robust  growth  and 
positive  primary  balances.  The  absolute  level  of 
debt  increased  during  2018  by  around  €5 billion, 
despite a modest general government surplus. It is 
projected  to  remain  at  the  current  level  over  the 
medium  term  (Department  of  Finance,  2019a).  A 
range  of  alternative  metrics  show  that  Ireland’s 
stock of public debt remains high by international 
and  historical  standards  (Section  3).  In  2019,  the 
government  plans  to  direct  estimated  receipts  of 
€0.7 billion  from  the  return  of  funds  deployed  for 
the  resolution  of  the  financial  crisis  towards 
reducing  debt.  Over  2020-2021,  additional 
€4.0 billion from the winding down of the National 
Asset  Management  Agency  are  expected  to  be 
used  for  debt  reduction.  While  debt  sustainability 
has  improved,  long-term  fiscal  sustainability  risks 
related  to  the  cost  of  ageing  remain,  including  in 
healthcare,  pensions  and  long-term  care  (Section 
4.1.1). 

Climate  

Ireland  has  not  been  able  so  far  to  decouple 
fully  greenhouse  gas  emissions  and  economic 
growth. While real GDP growth has outpaced the 
increase in gross inland energy consumption since 
the start of the recovery, rising output continues to 
translate  into  higher  energy  demand  in  transport, 
industry  and  housing  (13).  While  the  share  of 
renewable  sources  in  electricity  generation  has 
increased  to  about  33%  in  2018,  the  reliance  on 
fossil  fuels  remains  high,  which  has  led  to  rising 
CO2  emissions  in  the  past  few  years.  In  turn, 
energy  efficiency  gains  have  been  rather  limited. 
in  agriculture  has  also 
Continued  growth 
to  rising  emissions  of  non-CO2 
contributed 
greenhouse  gases.  Sustained  real  GDP  growth  in 

(13)  Real GDP increased by 65% between 2013 and 2018 while 
gross inland energy consumption rose by 9.1% in the same 
period. However, a substantial part of the GDP increase in 
2015-2018  was  due  to  multinational  companies  operating 
in Ireland without substantial real activity affecting energy 
consumption.  

exposure. However, although the external position 
of  the  domestic  institutional  sectors  (such  as  the 
Central  bank,  commercial  banks  and  general 
government)  has  improved  in  recent  years,  the 
stock of external liabilities remains elevated, even 
when  adjusting  for  the  activity  of  multinationals 
and the IFSC (see Section 3).  

Financial sector  

sheet 

repair 

Overall,  Irish  banks  are  well  capitalised  and 
liquid, but their profitability is under increasing 
pressure  as  the  external  outlook  remains 
challenging.  Balance 
is  well 
underway,  particularly  reflecting  sales  of  non-
performing loans (NPLs). At the end of the second 
quarter of 2019, NPLs accounted for 4.2% of gross 
loans  by  the  banking  sector,  down  from  8.5%  a 
year  earlier.  A  significant  proportion  of  the  NPL 
stock  continues  to  be  comprised  of  residential 
mortgages,  a  large  proportion  of  which  is  in  deep 
arrears.  

strengthen 

The  central  bank  of  Ireland  continues  to  make 
active use of its macro-prudential policy toolkit 
to 
A 
financial 
countercyclical  capital  buffer  at  a  rate  of  1%  has 
been  put  in  place  in  July  2019.  The  mortgage 
measures  were  maintained  in  view  of  increasing 
the  resilience  of  both  the  banking  and  household 
sectors to adverse shocks. 

stability. 

Public finances  

The  government  balance  is  in  surplus  and 
further 
improving,  but  risks  remain.  The 
general  government  balance  is  expected  to  have 
improved  in  2019.  Including  measures  announced 
in  the  2020  Draft  Budget  Plan,  the  surplus  is 
expected to further increase to 0.3% in 2020, based 
on  Commission  2019  Autumn  forecast  (European 
Commission,  2019l)(12).  Ireland’s  fiscal  position 
continues  to  be  supported  by  strong  corporate  tax 
revenue  and  low  interest  rates  (see  Section  4.1).  
Risks  to  the  fiscal  outlook  remain  skewed  to  the 
downside, mainly reflecting uncertainty as regards 
the  economic  outlook,  the  sustainability  of  the 
current  level  of  some  sources  of  government 
revenue  (notably  corporate  tax),  the  ongoing 
review  of  the  international  corporate  tax  system 

(12)  The estimates do not take into account the latest Exchequer 

out-turn for 2019. 

12 

                                                           
                                                           
1. Economic situation and outlook 

the  near  term  and  a  rising  population  mean  that 
reducing  greenhouse  gas  emissions  in  absolute 
terms  will  be  a  significant  challenge  and  that 
decoupling  could  only  be  achieved  via  sustained 
and additional policy efforts.  

United  Nations’  Sustainable  Development 
Goals 

economic  growth’  but 

Ireland made significant progress in addressing 
the  United  Nation’s  sustainable  development 
goals (SDG) related to ‘no poverty’ and ‘decent 
faces 
work  and 
challenges  in  climate-related  goals.  In  the  five 
years  to  2018,  Ireland  surpassed  the  EU  average 
level in almost all dimensions related to the SDG1 
—  No  poverty  and  SDG8  —  Decent  work  and 
economic  growth.  Ireland  also  performed  above 
the  EU  average  in  SDG4—  Quality  education. 
Performance 
in  addressing  SDG5—  Gender 
equality  was  good  on  education  but  below  EU 
average  for  leadership  positions  and  in  most 
employment  dimensions.  Additional  effort  is  still 
required  in  addressing  climate-related  sustainable 
development  goals  (SDG13),  in  particular  in 
reducing greenhouse gas emissions and increasing 
energy  efficiency  and  the  share  of  renewable 
energy 
Ireland 
(see  Section  4.5.1).  While 
performed  well  in  SDG11  —  Sustainable  Cities 
and  Communities,  housing  affordability  is  still  a 
concern.  Ireland  performed  well  in  the  water 
quality  dimension  of  SDG6  —  Clean  Water  and 
Sanitation.  However,  the  share  of  population 
connected 
least  secondary  wastewater 
treatment  was  among  the  lowest  in  Europe  (see 
Section 4.5.3) 

to  at 

13 

1. Economic situation and outlook 

Table 1.1: 

Key economic and financial 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 tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation  
(4)  Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings 

Source:  Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise) 

14 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)5.7-1.59.38.18.25.73.63.2Potential growth (y-o-y)4.4-0.38.18.68.95.04.33.9Private consumption (y-o-y)6.0-1.42.83.13.4...Public consumption (y-o-y)4.4-2.02.13.54.4...Gross fixed capital formation (y-o-y)8.3-6.327.2-6.7-21.1...Exports of goods and services (y-o-y)6.71.814.49.210.4...Imports of goods and services (y-o-y) 8.2-0.516.21.1-2.9...Contribution to GDP growth:Domestic demand (y-o-y)5.6-2.77.7-0.9-5.0...Inventories (y-o-y)0.00.00.50.4-1.6...Net exports (y-o-y)-0.32.01.010.015.4...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)1.3-1.81.62.52.42.11.41.0Capital accumulation (y-o-y)2.20.85.00.80.01.21.31.3Total factor productivity (y-o-y)0.90.71.45.36.51.71.71.6Output gap1.7-2.81.52.01.32.01.20.5Unemployment rate4.813.011.06.75.85.04.84.8GDP deflator (y-o-y)2.1-0.92.11.10.80.81.51.5Harmonised index of consumer prices (HICP, y-o-y)2.50.60.10.30.70.91.01.3Nominal compensation per employee (y-o-y)5.10.31.12.52.13.53.73.8Labour productivity (real, person employed, y-o-y)1.31.75.95.04.8...Unit labour costs (ULC, whole economy, y-o-y)3.8-1.3-4.5-2.3-2.60.41.82.0Real unit labour costs (y-o-y)1.7-0.5-6.5-3.4-3.4-0.40.40.4Real effective exchange rate (ULC, y-o-y)3.4-3.4-6.1-1.8-2.3-4.1-1.00.2Real effective exchange rate (HICP, y-o-y)1.4-2.3-1.30.21.3-2.7-1.5-0.5Net savings rate of households (net saving as percentage of net disposable income)0.26.84.26.6....Private credit flow, consolidated (% of GDP)30.77.1-4.20.2-7.8...Private sector debt, consolidated (% of GDP)177.1260.6283.8250.5223.2...of which household debt, consolidated (% of GDP)85.7107.570.746.841.7...of which non-financial corporate debt, consolidated (% of GDP)91.4153.1213.1203.7181.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)..14.18.14.6...Corporations, net lending (+) or net borrowing (-) (% of GDP)2.38.22.0-0.9-6.0-14.8-13.2-11.9Corporations, gross operating surplus (% of GDP)34.434.647.053.554.554.254.354.3Households, net lending (+) or net borrowing (-) (% of GDP)-9.01.61.72.00.40.1-0.4-0.8Deflated house price index (y-o-y)8.3-13.311.09.78.3...Residential investment (% of GDP)12.33.91.72.12.4...Current account balance (% of GDP), balance of payments-3.9-3.40.70.510.60.81.31.7Trade balance (% of GDP), balance of payments10.415.020.322.1....Terms of trade of goods and services (y-o-y)-1.1-0.70.5-1.4-1.3-1.1-0.5-0.4Capital account balance (% of GDP)0.20.1-1.5-8.7-16.4...Net international investment position (% of GDP)-31.4-120.3-167.1-167.2-165.0...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)1.3-224.9-288.4-264.5-251.7...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)951.01384.71458.51294.91237.7...Export performance vs. advanced countries (% change over 5 years)9.9-1.820.466.673.8...Export market share, goods and services (y-o-y)-2.8-4.014.01.65.610.01.00.5Net FDI flows (% of GDP)11.2-4.0-7.9-16.47.5...General government balance (% of GDP)1.5-14.8-3.1-0.30.10.20.30.6Structural budget balance (% of GDP)..-3.8-1.4-0.6-0.8-0.30.3General government gross debt (% of GDP)25.584.293.767.863.659.053.952.6Tax-to-GDP ratio (%) (3)31.829.226.823.222.922.922.922.8Tax rate for a single person earning the average wage (%) (4)22.123.526.325.325.6...Tax rate for a single person earning 50% of the average wage (%) (4)7.18.312.211.411.8...forecast 
 
  
 
        
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

the 

implementing 

Progress 
recommendations 
addressed  to  Ireland  since  2014  is  substantial. 
Looking  at  the  multiannual  assessment  of  the 
Country-Specific 
implementation 
Recommendations  (CSRs)  since  these  were  first 
adopted,  at  least  ‘some  progress’  was  noted  for 
87%  of  all  the  CSRs  addressed  to  Ireland  and 
‘limited’  or  ‘no  progress’  for  13%  of  these  CSRs 
(Graph  2.1).  Policies  supporting  the  financial  and 
employment  sector  have  been  among  the  most 
successful. 

Graph 2.1: 

Ireland – Current implementation level of 2014-
19 CSRs 

to 

tackle 

free  preschool  programme 

A number of labour market reforms addressing 
country  specific  recommendations  have  been 
implemented  since  2014.  Ireland  has  taken  steps 
to make quality childcare more affordable with the 
universal 
‘Early 
Childhood Care and Education’ and the Affordable 
Childcare  Scheme.  Recent  reform  efforts  have 
the  problem  of  weak  work 
tried 
incentives for low-income groups. Ireland has also 
revised its activation  framework,  with a  particular 
focus on improving the progression to employment 
of  vulnerable,  inactive  individuals.  The  launching 
of the Social Inclusion and Community Activation 
Programme (2018 – 2022) will provide funding to 
tackle poverty and social exclusion. Measures have 
been taken to increase basic and advanced levels of 
digital skills, but further efforts are needed. Policy 
measures  to  increase  the  supply  of  social  housing 
are in place but their effectiveness is still limited. 

in 
Progress  has  been  made  since  2014 
implementing 
country-specific 
the 
recommendations  for  the  financial  sector.  The 
steady  pace  of  reduction  in  non-performing  loans 
by  banks  has  been  maintained,  helped  by  a 
combination  of  portfolio  sales  and  restructuring 
activities. The supervisor is closely monitoring the 
banks’  non-performing  loan  reduction  strategies 
and  restructuring  practices.  Long-term  mortgage 
arrears  have  proven  to  be  the  most  difficult  to 
restructure, but they have also fallen, although at a 
slower  pace  than  the  overall  stock  of  non-
performing  loans.  Several  policy  measures  have 
been introduced to support debtors in distress and 
increase 
insolvency 
arrangements,  but  take-up  of  these  measures  is 
only  slowly  gaining  traction.  The  credit  register 
has been fully operational since 2019. 

the  number  of  personal 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact 
(2) 2011 annual assessment: Different CSR assessment 
categories 
(3) The multiannual CSR assessment looks at the 
implementation until 2020 Country Report since the CSRs 
were first adopted. 
Source: European Commission 

country 

implementation  of 

The 
specific 
recommendations since 2014 has contributed to 
the  improvement  in  the  fiscal  position.  Since 
2014, the public finances have been stabilised to a 
significant extent and public capital investment has 
been  revamped.  Efforts  to  limit  tax  expenditures 
and  broaden  the  tax  base  have  been  mixed. 
Measures to address the expected increase  in age-
related expenditure are underway but risks to their 
full  implementation  still  remain.  Aside  from  the 
transposition  of  EU  Directives,  Ireland  has  taken 
some  additional reforms to address aggressive  tax 
planning, however their effectiveness in addressing 
the issue remains to be seen. 

Ireland  has  made  some 
2019 
the 
addressing 
recommendations (see table 2.1). 

(14)  progress 

in 
country-specific 

Ireland  has  made 
addressing 
recommendation  on 

the 

limited  progress 

in 
country-specific 
issues.  Recent 

2019 

fiscal 

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

15 

No Progress2%Limited Progress11%Some Progress46%Substantial Progress32%Full Implementation9% 
  
                                                           
2. Progress with country-specific recommendations 

from  a  Member  State, 

On  request 
the 
Commission  can  provide  tailor-made  expertise 
via the Structural Reform Support Programme 
implement  growth-
to  help  design  and 
enhancing reforms. Since 2018, such support has 
been  provided  to  Ireland  for  15  projects,  most  of 
which  started  in  2019.  Work  has  begun,  for 
example,  on  supporting  a  public  sector  energy 
efficiency  investment  programme,  developing  a 
new  automatic  enrolment 
retirement  savings 
system, 
improving  management  development 
standards  for  small  and  medium-sized  firms, 
assessing the performance of the health system and 
setting  up  a  supervisory  framework  for  complex 
investment firms. 

measures  are  not  meaningfully  contributing  to 
broadening  the  tax  base  and  some  increase  the 
scope for tax expenditure. Ireland has not yet fully 
implemented the envisaged measures to accelerate 
the  reduction  of  public  debt  or  address  the 
expected  increase  in  age-related  expenditure.  The 
effectiveness of the  measures taken to address the 
issue  of  aggressive  tax  planning  remains  to  be 
seen.  This  means  that  limited  progress  has  been 
made  on  country  specific  recommendation  1, 
which reflects euro area recommendation 2.  

and 

further 

integration 

investment 

in  households  with 

Some progress has been made in addressing the 
2019  country-specific  recommendation  aiming 
to  address  skills  and  social  challenges.  Some 
progress has been  made in providing personalised 
facilitating 
support 
active 
upskilling,  in  particular  for  vulnerable  groups  and 
low  work 
people 
living 
intensity.  However, 
in 
education  and  training  would  be  still  needed  to 
provide workers with the skills required, including 
digital and those for a smooth and just transition to 
a  climate  neutral  economy.  Substantial  progress 
has  been  made  in  increasing  access  to  affordable 
and  quality  childcare.  Programmes 
recently 
launched  in  this  area  require  appropriate  funding 
and  monitoring 
effective 
implementation  Hence  the  overall  assessment  of 
country  specific  recommendation  2 
is  ‘some 
progress’. 

ensure 

their 

to 

the 

and 

economy 

infrastructure 

Ireland  has  made  some  progress  in  addressing 
the  2019  country-specific  recommendation  on 
investment and productivity. Some progress has 
been  made  in  facilitating  investment  related  to 
climate  change,  energy 
transition,  sustainable 
and 
transport,  water,  digital 
affordable and social housing. Measures aiming to 
diversify 
the 
productivity of Irish firms have also recorded some 
progress.  While  the  bulk  of  public  support  for 
research  and  innovation  is  still  provided  through 
the  Research  and  Development  tax  credit,  rather 
than direct  support,  the 2020 Budget targets  more 
specifically  micro  and  small  companies.  Some 
progress  has  been  made  to  improve  the  business 
environment  by  reducing  regulatory  barriers  to 
entrepreneurship.  As  a  result,  some  progress  has 
been made on country-specific recommendation 3, 
which reflects euro area recommendations 1 and 2.   

improve 

16 

 
2. Progress with country-specific recommendations 

Table 2.1: 

Annual assessment of the 2019 CSRs (1) 

(*) This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact.  
(1) The assessment of CSR 3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. 
The regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been 
adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 
Source: European Commission 

17 

  Ireland Overall assessment of progress with 2019 CSRs:  Some progress CSR 1: Achieve the medium-term budgetary objective in 2020. Use windfall gains to accelerate the reduction of the general government debt ratio. Limit the scope and number of tax expenditures, and broaden the tax base. Continue to address features of the tax system that may facilitate aggressive tax planning, and focus in particular on outbound payments. Address the expected increase in age-related expenditure by making the healthcare system more cost-effective and by fully implementing pension reform plans.  (MIP relevant) Limited progress*   Limited progress in reducing the debt-to-GDP ratio.   Limited progress in limiting tax expenditure and broadening the tax base.  Limited progress in addressing features of the tax system that may facilitate aggressive tax planning.  Limited progress in addressing the expected increase in age-related expenditure. CSR 2: Provide personalised active integration support and facilitate upskilling, in particular for vulnerable groups and people living in households with low work intensity. Increase access to affordable and quality childcare. Some progress   Some progress in providing personalised active integration support and facilitating upskilling, in particular for vulnerable groups and people living in households with low work intensity.  Substantial progress in increasing access to affordable and quality childcare. CSR 3: Focus investment-related economic policy on low carbon and energy transition, the reduction of greenhouse gas emissions, sustainable transport, water, digital infrastructure and affordable and social housing, taking into account regional disparities. Implement measures, including those in the Future Jobs strategy, to diversify the economy and improve the productivity of Irish firms – small and medium enterprises in particular - by using more direct funding instruments to stimulate research and innovation and by reducing regulatory barriers to entrepreneurship. Some progress   Some progress focused on facilitating investments related to climate change, energy transition, sustainable transport, water, digital infrastructure, affordable and social housing.  Some progress in implementing measures aiming to diversify the economy and improve the productivity of Irish firms.   Some progress in improving the business environment by reducing regulatory barriers to entrepreneurship.   
  
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth 
and competitiveness in Ireland 

Ireland  is  benefiting  from  EU  support.  The  financial  allocation  from  EU  cohesion  policy  programmes  (

1

)  for  Ireland 

amounts  to  €1.97  billion  in  the  current  Multiannual  Financial  Framework  2014-2020,  equivalent  to  around  0.1%  of  the 
GDP annually. As of the end of 2019, some €2.2 billion (more than around 97 % of the total amount planned) was allocated 
)  showing  a  level  of  project 
to  specific  projects,  while  and  €783  million  was  spent  by  the  selected  projects  (

2

implementation in line with the EU average.  

EU Cohesion policy funding contributes to addressing structural challenges in Ireland. The cohesion policy funds for 
Ireland have allocated EU funding of €282 million for smart growth, €125 million for sustainable growth and sustainable 
) additional €58 million have 
transport and €603 million for inclusive growth. In 2019 following a performance review (

3

been made available within performing priorities.  

EU  cohesion  policy  is  contributing  to  major  transformations  of  the  Irish  economy  by  promoting  growth  and 
employment  via  investments,  among  others,  in  research,  technological  development  and  innovation,  competitiveness  of 
enterprises, sustainable transport, employment and labour mobility. Since 2014, over 55,000 enterprises have been granted 
support,  including  over  1,800  start-ups,  generating  over  5,600  new  jobs.  European  Structural  Investment  (ESI)  Funds 
contributed to research and innovation in Ireland, supporting over 1,000 researchers and 350 companies cooperating with 
research institutes. More than 12,000 households are receiving support to improve the energy performance of their homes, 
leading  to  a  reduction  of  greenhouse  gas  emissions  by  more  than  57,000  tons  of  CO2eq.  Under  the  Rural  Development 
Programme 23 European innovation partnerships (EIP) have been financed and 93,000 beneficiaries have received training. 
Furthermore, rural development funding supported farming that promoted biodiversity, reduced greenhouse gas emissions, 
and improved the quality of water, air and soil on 1.5 million hectares.  

The European Social Fund has significantly contributed to increasing employment and social inclusion in Ireland. It 
focuses on the activation of the unemployed, improving social and labour market inclusion, enhancing education attainment 
and tackling youth unemployment. Since 2014, over 160 operations have supported nearly 112,000 unemployed persons, 
28,000 persons with disabilities and 1 200 homeless persons. In total over 330,000 participants have been registered and 
benefitted from upskilling so far. 

Agricultural and fisheries funds and other EU programmes also contribute to addressing the investment needs in 
Ireland. The European Agricultural Fund for Rural Development (EARDF) makes available in total 3.92 billion EUR, and 
the  European  Maritime  and  Fisheries  Fund  (EMFF)  in  total  €239  million  (including  the  national  co-funding  for  both). 
Ireland benefits also from other EU programmes, such as the Connecting Europe Facility, which allocated EU funding of 
€107  million  to  specific  projects  on strategic transport networks,  or  Horizon  2020,  which  allocated  EU  funding  of  €812 
million (including €202 million for 299 small and medium enterprises).  

EU funds already invest substantial amounts on actions in line with the Sustainable Development Goals (SDGs). In 
Ireland,  European  Structural  and  Investment  Funds  support  10  out  the  17  SDGs  and  up  to  99%  of  the  expenditure  is 
contributing to those.  

(1)  European  Regional  Development  Fund,  European  Social  Fund,  Youth  Employment  Initiative.  Amounts  include 

national co-funding. 

(2)  https://cohesiondata.ec.europa.eu/countries/IE  
(3)  The performance review is regulated by Article 22 of the Regulation (EU) No 1303/2013, whereby 5-7 % of overall 
resources  allocated  are  released  to  performing  priority  axes  of  the  operational  programmes,  the  amount  includes 
national co-financing. 

18 

 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

of 

imbalances. 

in-depth  review 

The  2019  Alert  Mechanism  Report  concluded 
should  be 
that  a  new 
undertaken for Ireland to assess the persistence 
or  unwinding 
(European 
Commission, 2019f) In February 2019, Ireland was 
identified  as  having  macroeconomic  imbalances 
(European  Commission,  2019g).  The  imbalances 
identified  relate  in  particular  to  large  stocks  of 
public and private debt and net external liabilities. 
High  stock  of  non-performing  loans  and  rapidly 
rising  house  prices  also  warrant  close  monitoring. 
This  chapter  summarises  the  findings  of  the 
analyses  in  the  context  of  the  Macroeconomic 
Imbalance  Procedure  (MIP)  In-depth  Review  that 
is contained in various sections in this report.  

1.1. 

IMBALANCES AND THEIR GRAVITY 

The  public  debt-to-GDP  ratio  has  been 
declining  but  the  stock  of  debt  remains  high. 
Public  debt  as  a  share  of  GDP  fell  to  63.6%  in 
2018, from 67.8% in 2017. The improvement was 
entirely  due  to  strong  GDP  growth,  whereas  the 
stock  of  debt  increased  by  around  €5 billion  over 
the same period. At 104.4% of GNI* in 2018, the 
debt  burden  is  de  facto  among  the  highest  in  the 
EU. Financial market perceptions of sovereign risk 
remain  favourable,  as  reflected  in  low  sovereign 
bond  yields  and  credit  default  swap  spreads 
(Section 4.4.1).  

Still  high,  private  debt  relative  to  GDP  is 
declining on the back of active deleveraging by 
both firms and households. In 2018, private debt 
amounted  to  223.2%  of  GDP  and  so  was  well 
above  the  EU  average  (137.5%)  and  the  MIP 
threshold  (133%).  It  has  declined  for  a  third 
consecutive  year  from  its  2015  peak  (305.1%  of 
GDP),  reflecting  a  combination  of  particularly 
strong  GDP  growth  and  deleveraging  by  both 
households 
the 
assessment of the risks associated  with these  high 
debt levels needs to take account of how the heavy 
presence  of  multinational  companies  in  Ireland 
affects  both  corporate  debt  and  GDP.  Some  two 
thirds  of  corporate  debt  was  concentrated  in 
firms,  while  domestically-
foreign-controlled 
controlled  firms’  debt  stock  was  equivalent  to 
61.7%  of  GDP  or  101.3%  of  modified  gross 

businesses.  However, 

and 

national income in 2018. About 40% of the latter is 
held  by  redomiciled  firms,  who  have  very  few 
linkages  to  the  domestic  economy.  Also,  only 
about  one  fifth  of  the  debt  of  non-financial 
corporations  was  held  by  Irish  counterparties.  So 
overall,  the  links  between  the  corporates  that 
account  for  the  high  debt  and  the  Irish  financial 
system  is  weaker  than  headline  figures  would 
suggest.  Households 
been 
deleveraging since 2009. While household debt in 
proportion  to  GDP  (41.7%)  is  below  the  EU 
average (60.8%), it nonetheless appears substantial 
when compared to modified gross national income 
(68.4%). 

actively 

have 

is 

to 

international 

largely  due 

international 

The  net 
investment  position 
remains highly negative, even when taking into 
account  the  distorting  impact  of  multinational 
companies  operating  in  Ireland.  The  highly 
negative  net 
investment  position 
(NIIP) of  -166% of GDP in the second quarter of 
2019 
the  activities  of 
multinational companies and the large net position 
of  a  financial  offshore  centre  with 
limited 
connections  to  the  domestic  economy.  Although 
the  net  external  positions  of  some  domestic 
the  general 
institutional 
government,  commercial  banks  and  the  central 
bank  have  improved  over  the  last  two  years,  the 
NIIP remains negative even when adjusting for the 
impact  of  multinational  companies.  Commission 
estimates  of  Ireland’s  domestic  net  international 
investment, net of multinational firms and offshore 
activity,  suggest  a  much  lower  external  liability 
position, although still elevated compared to other 
Member  States  and  exceeding  MIP  thresholds 
(European Commission, 2019c). 

sectors 

such 

as 

The  current  account  balance  remains  highly 
volatile and heavily influenced by the activity of 
some  large  multinationals.  The  current  account 
swung  from  a  broadly  balanced  position  in  2017 
(0.5% of GDP) to a large surplus in 2018 (10.6% 
account 
of  GDP).  The  modified 
balance (15),  which  better 
reflects  domestic 

current 

(15)  The  modified  current  balance  (CA*),  developed  by  the 
Irish  Central  Statistics  Office  (CSO),  is  adjusted  for  the 
distortions: 
main 
intellectual  property  imports,  imports  of  aircraft  related  to 
leasing,  the  depreciation  of  capital  assets  owned  by  Irish 
resident  foreign-owned  firms  and  the  repatriated  global 

globalisation-related 

following 

19 

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

to  use  the  proceeds  from  the  return  of  funds  set 
aside for resolving the financial crisis (notably the 
winding down of the National  Asset Management 
Agency) to further reduce debt.  

The  continuous  decline 
in  household  debt  
masks  some structural challenges, such as  high 
mortgage  arrears.  Long-term  mortgage  arrears 
remain a major issue for many households, despite 
the  existence  of  a  number  of  schemes  that  help 
resolve  those  arrears.  These  deep  arrears  are 
particularly  persistent  and  use  of  some  of  those 
schemes  has  been  low.  On  the  other  hand,  the 
mortgage  measures  put  in  place  by  the  Central 
Bank of Ireland are helping limit the share of risky 
mortgages  and  safeguard  the  resilience  of  both 
households  and  banks.  The  completion  of  the 
central credit register in mid-2019 will ensure safer 
lending  and  a  better  monitoring  of  financial 
stability risks. 

to 

these  corporations 

Ireland’s  highly  negative  NIIP  has  changed 
little,  but  its  domestic  component  is  set  to 
reduce  further.  The  NIIP  relative 
to  GDP 
fluctuated  around  the  same  level  in  recent  years, 
shifting from -167% at end-2017 to -165% at end-
2018  and  -166%  in  Q2 2019.  While  its  domestic 
component  is  projected  to  contract  further  on  the 
back  of  continued  current  account  surpluses,  the 
evolution  of  volatile  corporate  external  liabilities 
(in particular of multinational corporations and the 
International  Financial  Services  Centre),  which 
comprise  the  largest  share,  is  hard  to predict. The 
links  of 
the  domestic 
economy  are  limited,  which  in  turn  limits  the 
domestic  exposure.  The  general  government  also 
accounts for a substantial part of the negative NIIP 
but  its  share  has  diminished  over  time  and  is 
expected 
risks 
associated  with  general  government’s  external 
liabilities are lessened by the fact that part of them 
are loans disbursed by official creditors during the 
economic  adjustment  programme.  These  loans 
have  long  maturity  and  low  interest  rates,  thus 
posing  little  risk  in  the  short  and  medium  term. 
Ireland has recently repaid some of these  loans  in 
full,  notably  bilateral 
to  Scandinavian 
lenders.  The  net  external  position  of  the  central 
bank  is  marginally  positive  and  has  gradually 
improved over recent years. 

shrinking.  The 

to  continue 

loans 

economic activity, suggests that the Irish economy 
appears 
external 
have  maintained 
competitiveness. 

its 

to 

While  annual  house  price 
inflation  has 
moderated, affordability is still a concern. From 
13.3% in  April 2018, annual  house price  inflation 
has moderated to 1.1% in September 2019, a level 
well below the 6% prudential threshold of the MIP 
scoreboard.  Increasing  housing  supply,  coupled 
with more binding macro-prudential rules, seem to 
have  supported  this  sharp  slowdown  (see  Box 
3.1.1).  Although  overall  prices  do  not  seem 
overvalued,  affordability  is  still  a  concern:  the 
price-to-income  ratio,  although  slightly  declining 
in  the  first  half  of  2019,  is  still  above  its 
fundamental value (see Graph 3.1).  

Graph 3.1:  Overvaluation gap in housing 

(1) Overvaluation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps. Long-term values are computed over 1995-2016. 
Source: European Commission calculations 

1.2. 

EVOLUTION, PROSPECTS AND POLICY 
RESPONSE 

Ireland’s public debt-to-GDP ratio is projected 
to continue declining. It is expected to have fallen 
to  59.0%  of  GDP  in  2019  and  to  fall  further  to 
53.9%  in  2020.  This  is  contingent  on  continued 
robust  economic  growth  and  positive  primary 
balances.  However,  the  stock  of  debt  is  estimated 
to 
the 
medium-term (Section 1). The government intends 

remain  around 

its  current 

level 

in 

income  of  companies  that  moved  their  headquarters  to 
Ireland. 

The  current  account  is  positive,  although  very 
volatile due to the presence of multinationals. It 

20 

-40-30-20-10010203040506019992000200120022003200420052006200720082009201020112012201320142015201620172018% deviation of current priceModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gap    
                                                                                   
3. Summary of the main findings from the MIP in-depth review 

inflationary  pressures  in  the  housing  sector.  (see 
Table 3.3) 

1.3.  OVERALL ASSESSMENT 

continue 

Macroeconomic 
to 
imbalances 
unwind,  but  vulnerabilities  related  to  the  high 
stocks  of  public,  private  and  external  debt 
remain.  The  stock  of  public  debt  remains  high, 
which  limits  the  capacity  to  respond  to  negative 
economic  shocks.  The  reduction  of  banks’  non-
performing loans has continued in 2019, supported 
by  sales  and  targeted  policies.  Despite  the  active 
deleveraging, the  high level of private  sector debt 
suggests  continued  sustainability  risks,  notably  in 
the household sector. The high level of net external 
liabilities,  to  which  domestic  sectors  have  only 
limited exposure, has hardly changed. By contrast, 
the  net  external  position  of  some  domestic 
institutional sectors has improved over the last two 
years.  Overall,  risks  to  the  domestic  economy 
continue  to  abate  somewhat.  House  price  growth 
has  moderated  and  is  now  below  the  scoreboard 
threshold. 

has changed from 0.5% of GDP in 2017 to 10.6% 
in  2018  and  is  expected  to  fall  back  to  0.8%  in 
2019.  Stripping  out 
the 
multinationals,  the  current  account  is  more  stable 
and  increasingly  positive.  The  modified  current 
account surplus rose from 2.3% of GDP in 2017 to 
4.0% in 2018.   

the  activities  of 

with 

3.3). 

Combined 

Policies  implemented  in  recent  years  seem  to 
have  been  effective  in  curbing  house  price 
growth,  but  some  challenges  remain.  The 
government  has  implemented  various  measures  to 
support housing supply, which have contributed to 
increasing  annual  housing  completions  by  almost 
40%  in  the  two  years  to  September  2019  (see 
Table 
effective 
macroprudential  tools,  this  seems  to  have  helped 
curb house price inflation. However, there is a risk 
that  any  slowdown  in  housing  completions  could 
reignite  inflationary  pressures  in  the  house  and 
rental  sector.  Housing  affordability  is  a  problem 
for  many  households  and  inflation  in  the  rental 
sector is persistently  high (see  Section 1). Further 
addressing capacity constraints in the construction 
sector  and  solving  administrative  deficiencies  in 
the vacant site levy might ultimately help improve 
housing  affordability  in  the  medium-term.  (see 
Box  3.1).  Better 
the  Help-to-Buy 
targeting 
incentive  to  lower-income  first  time  buyers  might 
reducing 
increase 

effectiveness  while 

its 

21 

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

Box 3.1: Drivers of house and rental prices 

House  price  growth  has  moderated  sharply,  despite  persistent  housing  shortages.  Annual 
housing  completions  in  September  2019  (20,249  units)  were  still  16%  below  the  lower  demand 
estimates.  While  year-on-year  growth  in  annual  completions  (19%)  was  still  high,  it  moderated 
significantly compared with the same period in 2018 (33%). House price inflation also fell sharply 
from 13.3% in April 2018 to 1.4% in November 2019, which has improved affordability for house 
buyers. The slowdown was driven by the decline in house prices at the high end of the market (see 
Graph 3.2.A), where macroprudential rules (1) have become more binding (2). 

Graph 3.2: Housing prices developments 

Source: CSO, daft and European Commission calculations 

Designed to ensure financial stability, macroprudential rules may also have contributed to 
the  slowdown  in  overall  house  price  growth.  Simulations  with  the  European  Commission’s 
QUEST model, calibrated for Ireland, (3) show that setting a 10% tightening of the loan-to-value 
(LTV) ratio on mortgages granted to credit-constrained households (CCH) could help curb land 
and house price inflation. Not taking into account potential second round effects from increased 
financial stability, such as lower mortgage rates, the simulations suggest that stricter LTV limits 
could also reduce aggregate housing investment and thus the housing stock (see Table 3.1). These 
results are consistent with findings of other reports (Duffy et al., 2016). 

Increasing housing construction might help ease inflation in the rental sector. Contrary to the 
trend  of  deceleration  in  overall  house  prices  (see  above),  rental  price  inflation  for  new  and 
renewed tenancies is still high (8.2% in the third quarter of 2019)  and seems to be largely driven 
by the number of properties available for rent. A supply of 12,000 units per quarter, i.e. four times 
the supply reported in the first quarter of 2019, would be consistent with constant rental prices (see 
Graph  3.2.B).  If  the  downward  trend  in  house  completion  growth  persisted,  it  might  lead  to  an 
increase in rental inflation. 

Table 3.1:  Macroeconomic effects of loan-to-value ratio reduction 

22 

-11%-6%-1%4%0. €0.1 €0.2 €0.3 €0.4 €0.5 €0.6 €0.7 €Price Inflation (y-o-y change)Average price (Mill EUR) A: Regional residential property average price vs price inflation, Nov 2019-20%-15%-10%-5%0%5%10%15%0500010000150002000025000Price Index (y-o-y change)Number of properties available for rentB: Stock of properties available for rent and annual rent inflation (quarterly data)Y1Y2Y3Y4Y5House price-0.5-0.6-0.6-0.6-0.5Housing investment-2.3-2.2-1.9-1.7-1.6Housing stock0-0.1-0.2-0.3-0.3Land price-1.1-0.9-0.8-0.8-0.9 
   
 
 
 
  
3. Summary of the main findings from the MIP in-depth review 

(1)  Table compares a baseline scenario with no measures to an alternative scenario with a 10% tightening of the LTV.  
The LTV applies only to credit-constrained households, who represent 50% of total households. This is an 
approximation to reality: 1) the LTV for first time buyers  is 90% but for second and subsequent buyers is higher (80%) 
and 2) banks are allowed to grant part of the mortgages (20% for second and subsequent buyers  and 5% for first 
time buyers above these limits.   

(2) Results are expressed in %. A negative value does not mean that the variable in question will decrease in absolute 
terms, but rather that it will be lower in the scenario with the structural measure than in the baseline scenario.  

Source: European Commission 

The  combination  of  macroprudential  rules  with  policies  boosting  land  availability  could 
curb  both  house  and  rental  price  inflation.  QUEST  simulations  of  jointly  applying  a  10% 
tightening of the LTV ratio and a vacant site levy of 10% show that the levy could lead to higher 
land  availability  and  lower  land  prices,  thereby  reducing  the  costs  of  housing  supply  and  thus 
compensating for the potentially contractionary effects of stricter macroprudential measures (see 
Table 3.2). 

Table 3.2:  Macroeconomic effects of loan-to-value ratio reduction combined with a 10% vacant site levy 

(1) See also the Notes under Table 3.1 to interpret this table.  

(2) Given that the value of the LTV is an approximation of reality, the size of the vacant site levy required to neutralise 
the effect of macroprudential policies in housing stock might be more or less than 10%. 

Source: European Commission 

The  vacant  site  levy,  due  in  Ireland  since  January  2019,  might  require  some  refinement  to 
increase its effectiveness. Sites registered as vacant in 2018, were subject to a 3% levy on their 
market value in January 2019, unless works had been activated in the interim. This levy is set to 
increase to 7% as of January 2020. In April 2019, 360 vacant sites were registered, 162 of them in 
Dublin. A number of local authorities reported difficulties in interpreting the law and identifying 
vacant  sites,  which  might  have  left  out  of  the  register  vacant  sites  with  potential  for  housing 
development.  Around  10%  of  the  sites  identified  have  already  come  off  the  register  and  started 
construction, which might indicate that the levy has the potential to incentivise housing supply, as 
suggested by the results of our QUEST model.  

(1)  Macroprudential measures were introduced in Ireland in 2015 and consist of loan-to-value (LTV) and loan-to-income 
(LTI) ceilings. The end goal of macroprudential policies is to ensure financial stability. This box does not assess how 
effective these policies have been in meeting this objective. 

(2)  Central Bank of Ireland (2018) Review of Residential Mortgage Lending Requirements. Mortgage Measures 2018. 
(3)  QUEST  is  the  global  macroeconomic  model  DG  ECFIN  uses  for  macroeconomic  policy  analysis  and  research  The 
version used in this paper comprises tradable goods, non-tradable goods and housing sectors. Detailed information on 
at: 
applications 
the 
http://ec.europa.eu/economy_finance/research/macroeconomic_models_en.htm. 

available 

QUEST 

model 

and 

are 

its 

23 

Y1Y2Y3Y4Y5House price-2.9-2.7-2.1-1.6-1.1Housing investment-1.20.10.50.30Housing stock000-0.10Land price-10-8-6.1-4.3-3.1 
 
 
 
 
  
 
 
 
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table 3.3: 

MIP Scoreboard 

(Continued on the next page) 

24 

  Severity of the challenge Change and prospects Policy response  Imbalances (unsustainable trends, vulnerabilities and associated risks) Private debt  Private sector consolidated debt stood at 223.2 % of GDP in 2018, down from 250.5 % in 2017. It was still among the highest in the EU, mainly due to high liabilities of multinational companies located in Ireland. The combined debt of households and non-financial companies with an Irish parent, which is a better metric for comparison, stood at 103.4 % of GDP or 169.7 % of modified gross national income (GNI* 1) and is thus still relatively elevated.   Corporate debt (181.5 % of GDP at the end of 2018) is strongly influenced by the activities of multinationals. Debt of domestically-controlled firms stood at 61.7 % of GDP (or 101 % of GNI*) Household debt fell to 41.7 % of GDP in 2018. While declining, household debt relative to gross disposable income was still among the highest in the EU (123.2 % of disposable income at the end of 2018, albeit down from 211 % in 2009). Mortgage arrears however remain an important challenge for many borrowers.                         The steady decline in household debt relative to GDP observed since 2008, continued to decrease in 2018, supported by active deleveraging and GDP growth. The economic recovery facilitated debt repayment and supported the recovery in collateral value. Macro-prudential borrowing limits and behavioural changes (increasing share of mortgages with fixed interest rates) limit risks of a reversal of this trend. Deleveraging in the corporate sector was concentrated in the SME segment. Despite the decline in borrowing costs, SMEs continued to reduce their debts and used retained earnings to fund spending and investment.  A number of schemes are in place to support households in mortgage arrears. This includes the Abhaile scheme, which provides independent expert financial and legal advice, and the Mortgage-to-Rent scheme, which allows defaulted borrower to remain in their home as tenants subject to certain conditions.  The Central Bank of Ireland has finalised its examination of practices regarding Tracker mortgages, which has resulted in the compensation of affected borrowers. Moreover, macro-prudential measures are in place (mortgage measures and a countercyclical capital buffer), which will incentivise more prudent economy-wide lending standards and thereby strengthen the resilience of both lenders and borrowers. Public debt  Gross general government debt remained high at 63.6% of GDP in 2018. A range of alternative metrics, including the interest-to-revenue ratio, shows that Ireland’s stock of public debt remains high by international and historical standards. At 104.3 % of GNI* in 2018, the debt burden is de facto among the highest in the EU. Gross general government debt fell by 4.2 percentage points in 2018, on the back of strong nominal GDP growth. It is expected to have fallen below 60% of GDP in 2019. While the general government position registered a small surplus in 2018, the pace of fiscal consolidation has been less positive in recent years, following several in-year expenditure increases. The general government balance is expected to have increased in 2019 and is projected to further improve in 2020. The structural balance is expected to have decrease to around -0.8 % of GDP in 2019 from -0.6 % in 2018, and it is projected to further decline to -0.3 % in 2020. Based on the Commission 2019 autumn forecast, Ireland is expected to be compliant with the recommended structural adjustment towards the medium-term objective in 2019 and meet its medium-term budgetary objective in 2020.  Risks to the fiscal outlook remain skewed to the downside, mainly reflecting uncertainty as regards the economic outlook, the sustainability of the current level of some sources of government revenue, notably corporate tax, the ongoing review of the global tax system and over spending within some sectors, particularly in health.   In 2019, the National Treasury Management Agency (NTMA) purchased a further EUR 3 billion of floating rate notes linked to the Irish Bank Resolution Corporation from the Central Bank of Ireland and subsequently cancelled them. The outstanding balance remains at around EUR 8.5 billion from an initial EUR 25.0 billion in 2013. In 2019, the government plans to direct estimated receipts of EUR 0.7 billion (0.2% of GDP) from the return of funds from the resolution of the financial crisis towards reducing debt. Over 2020-2021, additional EUR 4.0 billion from the winding down of the National Asset Management Agency are expected to be used for debt reduction.   The rainy day fund could contribute to prudent management of public finances. The Minister for Finance announced in December 2019 a new target for the debt-to-GNI* ratio of 60% (around 37% of GDP based on 2018 values), including an interim target of 85% by 2025. Financial sector challenges  The non-performing loan (NPL) ratio continued its steady downward trend, falling to 5.5 % at end-2018, down from 9.9 % at end-2017. There are nonetheless significant differences in asset quality among banks, and aggregate provisioning levels appear low relative to the EU average, rendering banks more vulnerable to adverse shocks. The stock of long-term arrears in the financial system remains significant, suggesting a number of obstacles to their resolution. The number of repossessions remains low, while there has been some increase in the number of insolvency procedures initiated (although from a low base). The sale of non-performing loans has contributed to the cleaning of banks’ balance sheets, bringing the NPL ratio down to 4.2% in the second quarter of 2019. Additional non-performing loans transactions concluded or announced after that date, in a context of high investor appetite, will lower) even further.  Bank profitability has weakened and potential spillovers related to the decision of the UK to leave the EU make the outlook uncertain. However, banks remain well capitalised, with an average common equity tier 1 (CET1) ratio of 22.9 % at the end of 2018 and liquid.   The central credit register has become fully operational in 2019. The Central Bank of Ireland (CBI) has maintained its set of activated macro-prudential measures (mortgage measures and the countercyclical capital buffer), which strengthen the resilience of the financial system and borrowers. The CBI’s finalisation of the tracker mortgage examination, should contribute to improve trust in bank conduct.                                                            1 Modified gross national income is published by the Irish Central Statistics Office and excludes from the standard gross national income the globalisation effects that are disproportionally impacting the measurement of the size of the Irish economy.  
 
  
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

Source: European Commission 

25 

External sustainability   Ireland had a negative net international investment position (NIIP) of 165% of GDP at the end of 2018. This is linked to the very sizeable on-shoring of intellectual property assets to Ireland, arising from the tax optimisation strategies of a small number of multinational enterprises. On top, the net position of the International Financial Services Centre’s (IFSC) was negative at 47.6% of GDP. The riskier instruments of the NIIP belong largely to multinationals and IFSC sector, to which domestic sector has little exposure. The incurrence of these liabilities hence have only limited implications for the external sustainability of the domestic economy. The NIIP without non-defaultable instruments (NENDI) is negative, but were the IFSC sector excluded, the NENDI would turn positive. Net equity position is positive. The underlying, domestically relevant, NIIP remains hard to gauge. COM estimates indicate an underlying NIIP (NIIP*) to be between -80% to -110% of GNI*.  The NIIP changed little in recent years and quarters, as the bulk of it is associated with the MNE activities.  The external position of the domestic sectors, such as the Central bank, commercial banks and general government, has improved in recent years.  The current account increased from 0.5% of GDP in 2017 to 10.6% in 2018, mainly reflecting the activity of MNEs. The modified current account1 balance developed by the CSO to capture the resources generated by domestic residents, is smaller, less volatile, but consistently positive. It increased from 2.3% to 4% of GDP between 2017 and 2018 (and from 3.7% to 6.5% of GNI*). The maturity profile of external debt is generally favourable, in particular for external liabilities vis-a-vis official creditors. Approximately 40 % of medium/long-term external debt will mature from 2026 onwards.  Property market  Residential property prices increased by 10.2 % in 2018. However, the annual figure masks a significant within-the-year slowdown in house price increases (from 13.4% y-o-y in April 2018 down to 6.3% in December 2018) which has continued in 2019, leading to a y-o-y inflation of 1.1% in September 2019.  While rent inflation has slightly moderated in 2019, rental price levels are still high.  At this stage, average national housing prices do not look overvalued according to standard measures, but some indicators, such as the price-to-income (affordability) index have been above their long-term average since 2017.  If not addressed, constraints limiting the supply of housing could contribute to imbalances building up.  The steep increase in construction coupled with more binding macroprudential rules, seem to have contributed to the slowdown in house price inflation.  Despite improvements, housing supply still falls short of demand. Moreover, in a context of high uncertainty and less dynamic house prices, the growth in construction permits might be losing momentum. This may fuel again property and rent prices. In recent years, the government has actively intervened to address housing supply constraints. The impact of these measures is positive but requires continued monitoring. The recently approved legislative reforms to regulate the short term letting sector in areas of high housing demand may reduce the use of residential homes for short-term tourism and in turn increase the rental stock. The impact of recent reforms to protect tenants and provide greater housing security should be monitored to ensure that they fulfil their goals of having a positive social impact without discouraging landlords to rent their houses. The vacant site levy seems to have been effective in supporting land development but legal provisions may need some refinement to increase its effectiveness. (see Box 3.3.1) The 2020 Budget  has announced the extension of the Help-to-Buy (HTB) scheme to 2021. This scheme provides first time buyers (FTBs) a refund of 5% of the property value under certain conditions. A recent evaluation showed that 26% of applicants bought their new home with a deposit of between 20 and 30%, which might indicate that the HTB incentive was unnecesary. Better targeting this scheme to lower-income FTBs might  increase its effectiveness while reducing the risks of creating inflationary pressures. Conclusions from IDR analysis  While both NPLs and indebtedness have declined over time, large stocks of public, private and external debt still make Ireland vulnerable to adverse shocks.  Although Ireland’s highly negative NIIP is distorted by the impact of MNE activities and a large financial offshore centre, vulnerabilities on this front persist. Likewise, high NFC debt is to a large extent due to significant inter-company loans of MNEs. Nonetheless, adjusting for footloose companies and their debt results in a still-elevated NFC debt position relative to GNI*. Household debt also decreased but, while low in share of GDP, it remains high in relation to household income. As a result, private debt remains elevated. The public debt to GDP ratio remains on a downward trajectory, but the debt level remains high as a proportion of GNI*. Substantial NPL reduction supports the strengthening of the banking sector. House price growth was dynamic in 2018, although it has moderated significantly since April 2018. At this stage, there are no consistent signs of overvaluation, but housing affordability is a concern.   Comprehensive policy measures have been taken in recent years to address the vulnerabilities highlighted above. These include measures to reduce the amount of non-performing loans. Some windfall revenue is planned to be used to reduce government debt. The government has repeatedly intervened to tackle the undersupply of housing, while macro-prudential policies have been tightened to ensure the resilience of households and banks. However, as a small and very open economy, Ireland remains highly sensitive to external shocks. Any adverse economic shock, such as a disorderly withdrawal of the UK from the EU, could be amplified by remaining legacy stock imbalances.                                                             1The modified current balance (CA*) is the current account balance adjusted for the depreciation of capital assets sometimes held outside Ireland and owned by Irish resident foreign owned firms, e.g. intellectual property (IP) and leased aircraft, alongside the repatriated global income of companies that moved their headquarters to Ireland (e.g. redomiciled firms). CA* excludes the depreciation of foreign-owned domestic capital (such as net imports of IP and imports of research and development (R&D) services). The depreciation on the foreign-owned capital is borne by foreign investors; consequently, it does not affect CA*, which is intended to capture the resources generated by domestic residents. The retained earnings of firms that are predominantly owned by foreign portfolio investors are not taken into account by CA* either. Since the choice between paying a dividend versus retaining earnings only affects timing of the pay-out to the ultimate foreign owners, CA* is not affected by this decision.  
 
  
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  FISCAL POLICY* (GOVERNMENT 

BALANCE AND DEBT DEVELOPMENTS) 

Public  finances  continue  to 
improve.  The 
headline government position turned from a deficit 
of 0.3% in 2017 to a small surplus of 0.1% of GDP 
in  2018.  The  general  government  balance  is 
expected  to  have  increased  in  2019  to  0.2%  of 
GDP,  based  on  the  Commission  2019  autumn 
forecast,  and  is  estimated  to  further  improve  in 
2020.(16)    A  continued  fall  in  the  interest  burden 
has  contributed  to  the  deficit  reduction.  The 
development  in  the  non-interest  budget  balance 
since 2015 has been weaker, as pointed out by the 
Irish  Fiscal  Advisory  Council 
(Irish  Fiscal 
Advisory Council, 2019b). 

receipts  performed 

The  improvement  in  Ireland’s  fiscal  position  is 
partly driven by corporate tax revenue. In 2019, 
tax 
strongly,  exceeding 
expectations  by  2.4%.  This  was  almost  entirely 
due  to  receipts  from  corporate  taxes,  which  were 
14.9%  above  expectations  at  the  end  of  2019. 
Expenditure  was  ahead  of  Exchequer  target  by 
1.2%, largely driven by the health sector, as it was 
the  case  in  recent  years.  Overall,  an  Exchequer 
surplus of €647 million was recorded at the end of 
December  2019,  compared  with  a  surplus  of 
€99 million in the same period last year.  

Uncertainty  over  the  sustainability  of  the 
current high level of corporate tax receipts puts 
public  finances  at  risk.  The  high  level  of 
corporate taxes, volatile and potentially transient in 
nature,  and  the  dependence  on  a  small  number  of 
multinationals  represents  a  risk  to  public  finances 
(see  Section  4.1.3).  A  preliminary  assessment  by 
that 
the  Department  of  Finance 
implementation  of  OECD’s  Base  Erosion  and 
Profit  Shifting  initiative  could  reduce  corporation 
tax  receipts  by  €0.5 billion  per  annum  from 
2022.(17)  The  risks  of  relying  too  much  on 
corporate  tax  receipts  are  even  more  evident  as 
windfalls  from  these  taxes  have  been  used  in 
recent years to cover permanent spending overruns 

indicates 

in various departments, notably in health. This has 
repeatedly  been  criticised  by  the  Irish  Fiscal 
Council (Irish Fiscal Advisory Council, 2019a). 

Graph 4.1.1:  General government debt development 

Source: European Commission 

Public debt remains high, which limits the room 
to  respond  to  negative  economic  shocks.  The 
debt-to-GDP  ratio  has  been  declining  on  the  back 
of strong growth in GDP (Graph 4.1.1). However, 
Irish  GDP  remains  inflated  by  the  activities  of 
multinationals.  Alternative  metrics  highlight  that 
debt  remains  high  in  Ireland.  As  a  proportion  of 
the 
GNI*,  which  more  accurately  captures 
underlying economic activity by eliminating some 
of  the  impact  of  multinationals,  debt  stood  at 
104.3%  in  2018  and  is  expected  to  have  declined 
to  100.2%  in  2019  (Department  of  Finance, 
2019b).  Another  metric  is  the  interest-to-revenue 
ratio,  which  shows  the  burden  of  public  debt  in 
terms of the annual obligations on debt (interest) as 
a proportion of government revenue. This stood at 
6.4% at the end of 2018 compared  with pre-crisis 
levels  of  around  3%.  Still,  the  ratio  had  fallen 
considerably from its peak of 13% in 2013, partly 
due  to  the  substantial  increase  in  corporate  taxes 
since  2015,  combined  with 
interest 
payments in recent years.(18) 

lower 

(16)  Based on end-2019 Exchequer figures, a surplus of 0.4% of 

GDP is likely in 2019. 

(17)  This  is  a  preliminary  assessment  and  subject  to  further 

ongoing work. 

(18)  Other alternative metrics that show that the debt burden in 
Ireland is high in an international and historical context are 
debt-to-revenue  ratio,  debt  as  a  fraction  of  the  national 

26 

050100150200250020406080100120140160180% of GDP (GNI*)Ireland - stock (rhs)Ireland - GDPIreland - GNI*EUEAEUR Billion 
                                                           
    
                                                           
4.1. Public finances and taxation 

2019. Consequently, total interest payments by the 
general government have continued to decrease as 
a share of GDP. Around 70% of the total sovereign 
debt  is  at  fixed  rates,  which  limits  the  risk  from 
interest  rate  shocks  and,  in  turn,  increases  the 
sustainability of public debt. The effective interest 
rates  have  also  declined  over  recent  years  but 
remain above the euro area average (DoF, 2019)  

from 

loans 

represented  official 

The  maturity  profile  of  the  debt  remains 
comfortable.  The  low  interest  rate  environment 
also  appears  to  have  had  an  impact  on  the 
extension  of  the  sovereign  debt  maturity  profile 
(Larkin et al, 2019). At the end of 2019, the stock 
of  public  debt  amounted  to  €206.7  billion,  with  a 
weighted  average  maturity  of  around  10  years. 
Some  25%  of  long-term  marketable  and  official 
debt 
the 
EU-supported  financial  assistance  programme. 
Redemptions of loans from the European Financial 
Stability  Facility  (EFSF)  and  European  Financial 
Stabilisation Mechanism (EFSM) currently extend 
until 2042. For EFSF, there are no maturities until 
2029 and for the EFSM until 2027. The maturity of 
EFSM  loans  can  be  extended  within  the  limit  of 
19.5 years of average original maturity established 
by  the  Council  Decision  on  Union  financial 
assistance to Ireland. €3.9 billion originally due in 
2018  has  already  been  extended  (19).  The  revised 
maturity dates of other individual EFSM loans will 
be  determined  as  they  approach  their  original 
maturity  dates.  This  decision  and  the  ensuing 
operations  entail  financial  benefits  for  Ireland, 
linked to the EU’s favourable funding conditions. 

Debt sustainability analysis 

In  the  short  term,  no  significant  risks  of  fiscal 
stress are projected for Ireland. The value of the 
S0 indicator,(20) the Commission’s early-detection 
indicator  of  fiscal  stress,  is  below  its  critical 
the  fiscal  and  financial 
threshold,  for  both 
competitiveness  sub-indices  (see  Annex  B  and 
European  Commission,  2020a).  Financial  market 
perceptions of sovereign risk remain favourable, as 
is reflected in low sovereign bond yields and credit 
default swap spreads 

(19)  Council Implementing Decision 2011/77/EU. 
(20)  The  short-term  sustainability 

is  an 
early-detection  indicator  of  fiscal  stress  in  the  upcoming 
year,  based  on  25  fiscal  and  financial  competitiveness 
variables  that  have  proven  in  the  past  to  be  leading 
indicators of fiscal stress. 

indicator,  S0, 

Making  public  finances  more  resilient  may 
prove useful, given the heightened risks and the 
currently  favourable  cyclical  position  of  the 
economy.  Risks  to  the  fiscal  outlook  remain 
skewed  to  the  downside,  reflecting  uncertainty  as 
regards economic outlook, the sustainability of the 
current level of corporate tax receipts, the ongoing 
review  of  the  international  corporate  tax  system 
and  over-spending  in  particular  in  the  health 
sector.  In  view  of  these  risks  and  the  favourable 
cyclical  position,  including  buoyant  corporate  tax 
revenue,  the  resilience  of  public  finances  to 
by 
adverse 
strengthening 
fiscal  buffers.  This  could  be 
achieved  by  firming  up  the  rainy  day  fund  and/or 
reducing public, and debt broadening the tax base. 

enhanced 

shocks 

could 

be 

that 

address 

reducing 

to 
include 

The  Department  of  Finance  (DoF)  proposed 
fiscal 
several  measures 
vulnerabilities.  These 
the 
exposure  to  corporate  taxes  by  setting  aside  the 
windfall  receipts  in  the  rainy  day  fund  and 
broadening  the  tax  base  (Department  of  Finance, 
2019c).  Also,  it  proposed  defining  a  tailor-made 
excludes 
general  government  balance 
corporate  tax  windfalls,  and  setting  short-  and 
medium-term debt targets as a percentage of GNI*. 
DoF  also  proposed  to  use  alternative  estimates  of 
potential  growth  and  structural  fiscal  balance, 
which  would  better 
the  underlying 
developments  in  the  Irish  economy,  instead  of 
relying  on  GDP  figures  that  are  inflated  and 
are  welcome. 
initiatives 
volatile. 
Furthermore,  in  December  2019  the  Minister  for 
Finance  announced  a  new 
the 
debt-to-GNI*  ratio  of  60%,  including  an  interim 
target of 85% by 2025. He also announced a target 
for  the  budgetary  surplus  of  1%  of  GDP  by  2021 
(1.7%  of  GNI*).  Both  targets  are  contingent  on 
continued economic growth.  

reflect 

These 

target 

for 

Government  financing  has  benefitted  from  the 
low  interest  rate  environment  and  supportive 
bond  market  conditions.  In  conjunction  with 
strong  economic  growth  and  fiscal  performance, 
ECB measures (in particular the non-standard asset 
purchase programmes) have compressed sovereign 
borrowing costs and, in turn,  debt servicing costs. 
The 10-year bond yield for Ireland remains low by 
historical standards at around 0.003% in December 

pay-bill  and  debt  per  capita  (Department  of  Finance, 
2019a). 

27 

                                                                                   
                                                           
4.1. Public finances and taxation 

on healthcare by 0.8% of GDP (see Section 4.3.4. 
for 
the 
a  more  detailed  discussion  on 
cost-effectiveness  of  the  healthcare  and  long-term 
the  Irish  authorities 
care  system).  In  2018 
published  the  ‘Roadmap  for  Pension  Reform 
2018-23’ with the aim of improving the long-term 
sustainability of the state pension system. It builds 
on  the  2014  reform  that  brought  the  state  pension 
eligibility age to 68 by 2028. The  implementation 
of the Roadmap is ongoing but has incurred some 
delays.  The  Roadmap  targeted  implementation  of 
the  total  contributions  approach  from  the  third 
quarter of 2020, subject to the necessary legislation 
being  enacted  and  supporting  structures  being  in 
place 

4.1.2.  FISCAL FRAMEWORK, SPENDING REVIEWS 

AND GREEN BUDGETING  

spending 

overruns  highlight 
Consecutive 
challenges  in  controlling  public  expenditure.  In 
recent  years,  there  has  been  a  tendency  for 
spending to accelerate towards the end of the year, 
contributing  to  limited  compliance  with  EU  fiscal 
rules.  The  2020  Budget  prudently  already 
incorporates  some  expected  overruns  in  2019,  in 
particular related to healthcare expenditure. It also 
includes additional funds for the Christmas bonus. 
Furthermore,  the  Irish  Fiscal  Advisory  Council 
highlighted  that  some  other  areas  are  facing 
expenditure 
local 
government  and  housing  bodies(23).  Enhancing 
current  expenditure  planning  and  control,  and 
ensuring  its  growth  is  sustainable  remains  highly 
important  for  increasing  the  resilience  of  public 
finances. 

slippages, 

including 

the 

A broad public spending review could improve 
budget  execution. In 2017, Ireland has embarked 
on  a  comprehensive  three-year  spending  review 
process,  designed  to  assess  the  efficiency  and 
effectiveness of government spending. In total, 80 
analytical  papers  have  been  produced  so  far.  In 
2019,  key  themes  were  those  related  to  the 
expenditure 
developing  multi-year 
analysis and aligning the spending review with the 
public  spending  code.  Yet,  the  extent  to  which 

sectoral 

(23)  The  Irish  Fiscal  Advisory  Council  further  points  out  that 
even though these areas are outside the government’s direct 
control, they still impact the economy and should therefore 
be  included  in  the  budget  planning  (Irish  Fiscal  Advisory 
Council, 2019b). 

threshold  over 

Debt  sustainability  risks  are  anticipated  in  the 
medium term. In principle, Ireland also faces low 
fiscal  sustainability  risks  in  the  medium  term,  as 
measured  by  both  the  debt  sustainability  analysis 
and  the  S1  indicator(21).  This  reflects  a  relatively 
strong  initial  budgetary  position  and  a  debt  ratio 
already  below  60%  of  GDP  in  2019  (Annex  B). 
However, when debt metrics are measured relative 
to  gross  national  income  (GNI)  (which  can  be 
considered  as  a  more  accurate  measure  of 
repayment  capacity  for  Ireland),  most  of  the 
distribution  of  the  debt  burden  lies  close  to  the 
the  projection  period 
60% 
(European  Commission,  2020a).  The  Irish  GNI  is 
also inflated by the activities  of  multinationals, as 
is the case  for the GDP, though to a lesser extent. 
Therefore,  the  analysis  based  on  the  GNI  still 
underestimates  vulnerabilities  in  the  Irish  context. 
Analysis by the Irish Department of Finance which 
uses  the  GNI*  as  a  metric,  points  to  high  risks  in 
the  medium  term  (DoF,  2019a).  Furthermore, 
combined  adverse  shocks  to  real  GDP  growth  — 
of  a  magnitude  reflecting  Ireland’s  historical 
variability  of  output  —  would  increase  the  public 
debt to GDP ratio by 17.7 pps by 2030 compared 
to  the  baseline  scenario.(22)  The  Central  Bank  of 
Ireland  estimates  that  in  the  event  of  a  significant 
loss  of  corporation 
taxes,  combined  with  a 
slowdown  in  the  international  economy,  the  debt-
to-GDP ratio could increase by between 10 and 20 
pps. above central projections, by 2025 (Conefrey. 
et al., 2019). 

in  the 

long  term.  The 

Debt  sustainability  risks  are  anticipated  as 
medium 
long-term 
sustainability  gap  indicator,  S2,  indicates  that  a 
structural primary effort of 2.9% of GDP would be 
needed to stabilise  the debt-to-GDP ratio over the 
long  term.  This  reflects  the  projected  budgetary 
impact of an ageing population, which, in the long 
term,  more  than  offsets  the  favourable  initial 
budgetary  position.  Spending  on  pensions  and 
long-term care both contribute by 1.6% of GDP to 
the  long-term  sustainability  gap,  and  expenditure 

(21)  The  medium-term  sustainability  indicator  S1  shows  the 
additional adjustment required, in terms of improvement in 
the  government  structural primary  balance  over  five  years 
to  reach  a  60%  public  debt-to-GDP  ratio  by  2034, 
including  financing  for  future  additional  expenditure 
arising from population ageing. 

(22)  Details  on  the  scenarios  can  be  found  in  European 
Commission  (2019),  Fiscal  Sustainability  Report  2018. 
Calculations  based  on  the  European  Commission  2019 
autumn forecast. 

28 

                                                           
                                                           
4.1. Public finances and taxation 

these  spending  reviews  could  improve  budget 
planning  and  administration  or  major  investment 
projects remains unclear. In 2020, the Department 
to 
of  Public  Expenditure  and  Reform  plans 
examine  the  degree  to  which  the  process  has 
achieved its objectives and ways to improve it.    

Scenario. The reform of the code and the adoption 
of  carbon  prices  in  line  with  the  binding  targets 
and estimated marginal abatement costs could help 
to  align  public  investment  decisions  in  all  sectors 
with  climate  policy  objectives,  regardless  of 
whether they are directly related to climate or not. 

a 

low 

transition 

Ireland is one of the few countries in the EU to 
have  started  green  budgeting  practices.  Ireland 
introduced a green budgeting exercise for the 2019 
budget, which implied identifying and ‘tagging’ all 
climate-related  expenditure.  The  authorities  draw 
on the definition developed for the Irish sovereign 
green bonds: ‘any expenditure which promotes, in 
whole or in part and whether directly or indirectly, 
Ireland’s 
carbon, 
to 
climate-resilient  and  environmentally  sustainable 
economy’.  For  the  first  year  of  the  exercise,  the 
authorities  adopted  a  conservative  approach  and 
included  only  those  expenditures  that  directly 
contributed to greenhouse gas emissions reduction, 
including  funding  for  energy  efficiency  (Cremins 
and  Kevany,  2018).  The  2019  Revised  Estimates 
Report details the climate expenditure, grouped by 
departments and specific programmes (Department 
of Public Expenditure and Reform, 2018a). Linked 
to  the  green  budgeting,  in  May  2019,  the  Central 
Statistical  Office 
of 
environmentally harmful subsidies for the 2012-16 
period,  distinguishing  between  direct  support  and 
tax  expenditure.  These  estimates  point  to  about 
in  potentially 
€4 billion 
in  2016, 
environmentally  damaging  subsidies 
down  from €4.2 billion in 2015 (Central Statistics 
Office, 2019a; Central Statistics Office, 2019b). 

(1.5%  of  GDP) 

published 

estimates 

impacts 

to  better 

integrate  climate 

The shadow cost of carbon is better reflected in 
cost-benefit analyses of public investments. The 
Public  Spending  Code  was  reformed  in  2019  in 
order 
in 
investment  decisions.  A  shadow  price  of  carbon 
has  been  set  on  an  annual  basis  for  emissions 
originating  from  Emission  Trading  System  (ETS) 
and  non-ETS  sectors,  with  prices  rising  from 
€32/tonne  in  2020  to  €100/tonne  in  2030  and 
€265/tonne  in  2050  in  the  latter  (Department  of 
Public  Expenditure  and  Reform,  2019b).  These 
values  represent  Ireland’s  estimated  marginal 
abatement  cost  at  the  level  required  to  reach  the 
emissions 
binding  mitigation 
originating  from ETS sectors, the shadow price  is 
based  on  market  projections  of  the  price  of  ETS 
allowances  and  the  values  of  the  EU  Reference 

targets.  For 

4.1.3.  TAXATION  

is 

tax  revenue 

increasing.  Corporate 

from 
Reliance  on  corporate 
multinationals 
tax 
receipts remain heavily concentrated,  with  the top 
10  multinationals  operating  in  Ireland  accounting 
for around 45% of total corporate tax revenue and 
8.5% of the total tax revenue in 2018. The share of 
corporate tax receipts in total tax revenue reached 
17.2% in 2018, the highest  level since 2003. This 
is  an  increase  by  7.2 pps.  since  2014,  before  the 
2015  spike  in  GDP  growth.  Reliance  on  these 
revenues,  which  are  volatile  and  potentially 
transient in nature poses risks to the sustainability 
of public finances (Section 4.1.1).  

Recent  revenue  measures  are  not  meaningfully 
contributing  to  broadening  the  tax  base.  The 
main revenue raising measures in the 2020 Budget 
included  increases  in  the  carbon  tax  and  stamp 
duty  on  non-residential  property,  as  well  as 
specific 
anti-tax-avoidance  measures.  Other 
measures  go  in  the  opposite  direction.  These 
include 
tax  credits,  an 
in  certain 
extension  of  the  Help-to-Buy  scheme  and  the 
capital 
the 
tax. 
revaluation  of  the  local  property  tax  was  deferred 
by  one  year,  to  November  2020.  The  favourable 
cyclical  position  of  the  economy  provides  an 
opportunity to broaden the tax base and to choose 
a tax mix that is more conducive to growth. 

Furthermore, 

acquisition 

increases 

The  economic  evidence  suggests  that  Ireland’s 
tax rules are used by companies that engage in 
aggressive tax planning(24). Eurostat data suggest 
that  outgoing  royalty  payments  from  Ireland  in 
2018 were high, representing 22% of its GDP and 
that  45%  of  these  were  paid  to  offshore  financial 

(24)  For  an  overview  of  the  high  level  of  incoming  and 
outgoing  dividend  and  royalty  payments,  as  well  as  of 
inward  and  outward  foreign  direct  investment  positions, 
see European Commission, 2020(b) 

29 

                                                           
centres  (OFC)(25),  as  illustrated  in  the  graph 
below. For net dividend payments, the share going 
to OFCs was 71% in 2017(26). The current limited 
application  of  withholding  tax  on  royalty  and 
dividend  payments  going  out  of  Ireland  –  which 
may  lead to those payments  being taxed at a very 
low  rate  or  escaping  tax  altogether  if  they  are 
channelled  to  a  low  or  no  tax  jurisdiction  –  has 
been  flagged  as  a  key  element  facilitating 
aggressive  tax  planning  through  Ireland.  The 
possibility 
for 
intangible  assets  against  100%  of  the  income 
arising from the use of those intangibles purchased 
or  developed  between  2015  and  October  2017  is 
still  effective,  as  explained  in  the  2019  country 
report.  

to  offset  capital  allowances 

Ireland is acting to curb aggressive tax planning 
through  the  implementation  of  European  and 
internationally  agreed  initiatives,  as  well  as 
unilateral  measures.  The  Irish  government  has 
introduced  legislative  measures  implementing  the 
second  Anti-Tax  Avoidance  Directive  (ATAD  2), 
which  should  neutralise  certain  hybrid  mismatch 
arrangements that would otherwise result in double 
non-taxation,(27)  and  the  sixth  amendment  of  the 
Directive on Administrative Cooperation (DAC 6), 
which  provides  for  new  transparency  rules  for 
intermediaries  involved  in  tax  planning.  Ireland 
has also ratified the OECD Multilateral Instrument 
(MLI)  to  prevent  base  erosion  and  profit  shifting, 
which entered into force on 1 May 2019. However, 
like  most  countries,  Ireland  entered  a  number  of 
reservations  to  the  MLI  and  the  application  of  its 
provisions will depend on the choices made by the 
relevant  treaty  partners.  Ireland  has  also  made 
changes 
to  its  transfer-pricing  rules,  to  take 
account of the 2017 OECD guidelines and extend 
their scope, as recommended in the Coffey Review 
(Department of Finance, 2017). In particular, it has 
extended  transfer-pricing  rules  to  cover  non-
trading transactions. It has also legislated to extend 
transfer-pricing  rules  to  SMEs  (with  reduced 
documentation 
a 
requirements), 
Ministerial  commencement  order.  In  addition, 

subject 

to 

services, 

(25)  Commission 

2019, 
based 
bop_its6_det. and nama_10_gdp. OFC is an aggregate used 
by Eurostat. 
(26)  Commission 
bop_fdi6_inc 

on  Eurostat, 

on  Eurostat 

services 

based 

2019, 

(27)  Hybrid  mismatch  arrangements  exploit  differences  in  the 
tax  treatment  of  an  entity  or  instrument  under  the  laws  of 
two  or  more  tax  jurisdictions  to  achieve  double  non-
taxation. 

4.1. Public finances and taxation 

planning 

aggressive 

Ireland  has  made  changes  to  the 
legislation 
governing  Irish  real  estate  funds  (IREFs),  to 
counter 
practices 
tax 
identified  by  the  revenue  services,  and  to  the  real 
estate  investment  trust  (REIT)  regime  and  to  the 
taxation  of  securitisation  vehicles,  to  strengthen 
anti-abuse  measures.  The  effectiveness  of  these 
new measures in limiting the scope for aggressive 
tax planning and their impact on corporate income 
tax  revenue  in  the  medium  term  will  need  to  be 
assessed. 

Graph 4.1.2:  Total outgoing royalty payments from EU 

Member States and share going to offshore 
financial centers**, average values 2013-2017 

(*) - countries which do not publish the share of royalty 
payments going to OFCs. 
(**) As defined in the Annex 7 of Balance of Payment 
Vademecum of Eurostat   
Source: Eurostat 

that 

towards 

trajectory 

The  carbon  tax  was  increased  by  €6  per  tonne 
and should reach €80 per tonne by 2030, though 
the  precise 
level 
remains uncertain. The Climate Change Advisory 
Council  had  advised  the  government  to  increase 
the carbon tax(28) to €35/tonne, in part to make up 
for the decision  not to raise it in the 2019 Budget 
(Department of Finance 2019d). Instead, the 2020 
Budget  includes  an  increase  to  €26/tonne,  from 
€20/tonne,  with 
to 
deferred 
non-automotive fuels until after the winter heating 
season. The proceeds from this measure, expected 

application 

(28)  The carbon tax was introduced in Ireland in 2010. It applies 
to kerosene, marked gas oil, liquid petroleum gas, fuel oil, 
natural  gas  and  solid  fuels.  It  applies  only  to  non-ETS 
(Emission Trading System) sector only.  

30 

0102030405060LVEELT*CYBGSIHRELMTSKPTROFICZDKATHUPLBESE*ESLUITDE*UKFR*NLIEbln. EURValue going to OFCsOther                                                           
   
 
                                                           
4.1. Public finances and taxation 

to  be  €130 million  in  a  full  year,  are  to  be 
ring-fenced  for  climate  action  measures  and  to 
protect  the  vulnerable  (Department  of  Public 
Expenditure  and  Reform,  2019a)  (see  Section 
4.5.2). (see Section 4.5.2). It is the intention of the 
government  to  linearly  increase  the  tax  by  €6  per 
year  and  bring  it  up  to  €80/tonne  by  2030 
(Department  of  Finance,  2019e;  Department  of 
Communications,  Climate  Action 
the 
Environment, 2019a). However, the authorities did 
not 
the 
trajectory  and  indicated  that  flexibility  should  be 
future  circumstances. 
to 
preserved 
Although  there  is  broad  political  consensus  about 
the need for future increases in the carbon tax, this 
means  that  investors  still  face  a  fair  degree  of 
uncertainty regarding the carbon price trajectory.  

legally  binding  approach 

to  adapt 

take  a 

and 

to 

to 

While the share of environmental taxes in total 
taxes  is  above  the  EU  average  (6.9%  in  Ireland 
versus 6.1% in the EU, in 2018),  the potential of 
environmental 
support 
taxation 
environmental objectives has not yet been fully 
exploited.  In  2018,  revenue  from  environmental 
taxes as a percentage of GDP (1.6%) appears to be 
below the EU average (2.4%), but this is due to the 
inflated  level  of  GDP  in  Ireland.  The  share  of 
environmental taxes was at 2.6% of GNI* in 2018. 
The  Climate  Action  Plan  includes  provision  for  a 
rolling strategy of reviews across all environmental 
tax  heads. However, there is  little detail so  far on 
how this will be implemented. Specific changes to 
environmental  taxes  in  the  2020  Budget  include 
the  replacement  of  the  1%  diesel  surcharge, 
introduced 
in  2019,  by  a  nitrogen  oxide 
emissions-based  surcharge,  the  equalisation  of 
electricity tax rates for business and non-business, 
and  the  increase  in  the  carbon  tax,  as  mentioned 
above. 

31 

 
 
 
4.2.  FINANCIAL SECTOR 

Table 4.2.1: 

Financial soundness indicators, all domestic and foreign banks in Ireland 

(1) For comparability reasons, annualised values are presented 
Source:  ECB Consolidated Banking Data 

4.2.1.  BANKING SECTOR  

is 

coming 

profitability 

return-on-equity 

Although  capital  levels  of  Irish  banks  are 
healthy, 
under 
increasing  pressure.  Profits  have  been  declining 
since  end-2018,  with 
(RoE) 
dropping  to  4.5%  as  at  June  2019,  down  from 
6.9%  a  year  before,  (Table  4.2.1).  Reduced 
profitability has been the result of a combination of 
factors, including a compressed net interest income 
margin,  driven  largely  by  lower  yields  on  debt 
securities, higher operating costs, the  maintenance 
of  legacy  assets,  and,  for  some  banks,  additional 
provisions required following the  Central Bank of 
Ireland’s  (CBI)  Tracker  Mortgage  Examination. 
All  major  banks  are  implementing  cost-cutting 
initiatives, including digitalisation investments and 
staff  reductions,  to  counteract  these  trends.  The 
aggregate  Common  Equity  Tier  1  (CET1)  capital 
position of all Irish banks was 21.8% in June 2019, 
down  from  23.0%  a  year  ago  but  significantly 
above  the  euro  area  average  of  14.8%.  However, 
foreign-owned  subsidiaries,  which  are  less  retail-
oriented 
largest  Irish  banks,  were 
responsible for most of this excess capital position 
(29).  

than 

the 

External  uncertainties  persist  and  continue  to 
undermine  the  market  performance  of  Irish 
banks.  Much  like  the  rest  of  the  Irish  economy, 
domestic  banks  remain  susceptible  to  external 

(29)  A  significant  part  of  this  excess  capital  is  due  to  foreign 
subsidiaries.  Indeed,  the  CET1  ratio  for  the  domestic 
banking  groups,  including  the  largest  three  Irish  banks 
Bank  of  Ireland,  Allied  Irish  Banks,  and  Permanent  TSB, 
was much lower at 17.6% in June 2019, slightly down from 
18.4% a year before.  

spillovers,  most  notably  related  to  the  UK's 
decision  to  leave  the  EU.  These  sources  of 
uncertainty have driven the stock prices of the Irish 
banks  down,  especially  in  the  third  quarter  of 
2019,  trading  well  below  the  euro-area  financial 
indices.  

loans.  Loans 

Credit  growth  is  subdued  overall.  Loans  to 
households  increased  by  2%  on  a  year-on-year 
basis  as  at  August  2019,  driven  by  both  housing 
and  consumption 
for  primary 
dwelling houses (PDH) continued to expand. This 
increase  was driven by fixed-rate mortgages, even 
though  flexible  rate  mortgages  still  account  for 
66%  of  PDH  mortgages.  Total  credit  to  domestic 
however, 
non-financial 
continued 
the  weak 
demand for credit and investments. 

(NFCs), 
to  contract,  underlining 

companies 

in 

progress 

reducing 

Over  the  past  year,  Irish  banks  have  made 
significant 
non-
performing  loans  (NPLs).  According  to  ECB 
consolidated banking data  covering both domestic 
banks  and  foreign  subsidiaries,  the  NPL  ratio  for 
the  banking  sector  was  4.2%  of  gross  loans  as  at 
June  2019,  down  from  8.5%  a  year  earlier  (Table 
4.2.1)  (30)  .  This  reduction  was  possible  due  to 
sizeable  portfolio  sales  by  the  three  largest  Irish 
banks  in  2018  and  early  2019.  A  significant 
proportion  of  the  NPL  stock  continues  to  be 
comprised of residential mortgages.  

Long-term  mortgage  arrears  in  the  banking 
sector  continue  to  represent  a  significant 
proportion  of  the  NPLs.  Loan  disposals  and 

(30)  The NPL ratio for domestic banking groups is higher, 6.0% 
of  gross  loans  as  of  June  2019,  down  from  9.1%  a  year 
before.  

32 

20142015201620172018q12018q22018q32018q42019q12019q2Non-performing loans21.614.913.19.99.88.57.85.54.74.2o/w foreign entities18.210.19.27.1n.a.n.a.n.a.n.a.n.a.n.a.o/w NFC & HH sectors28.420.516.614.113.711.810.98.27.36.8o/w NFC sector37.822.915.311.811.09.18.15.75.04.4o/w HH sector22.819.117.415.515.413.412.510.18.98.5Coverage ratio46.740.235.529.933.332.131.028.528.527.4Return on equity(1)8.56.86.35.06.36.96.44.95.24.5Return on assets(1)0.90.90.90.70.91.00.90.70.70.6Total capital ratio22.625.325.025.224.325.225.625.424.624.3CET 1 ratio20.122.322.222.922.123.023.422.921.921.8Tier 1 ratio20.523.223.023.422.623.523.923.422.522.4Loan to deposit ratio98.898.793.295.391.888.588.490.290.389.8 
                                                           
 
                                                           
 
   
 
720 

days 

(Graph 

securitisations  during  late  2018  have  reduced  the 
stock of long-term arrears, i.e. loans that are more 
than 
4.2.1). 
past-due 
Nevertheless,  these  loans  continue  to  represent 
approximately two-thirds of all loans that are more 
than  90  days  past-due.  This  portion  of  the  NPL 
stock is likely to be the most challenging for banks 
to  resolve.  The  Mortgage-to-Rent  scheme  (31), 
which  targets  long-term  arrears,  could  play  an 
important  role 
this  challenge. 
in  addressing 
Although  the  scheme  is  attracting  an  increasing 
number  of  applications,  approvals  remain  low, 
around  15%  as  of  September  2019.  Moreover,  a 
significant  number  of  applications  are  either 
terminated  or  deemed  ineligible  while  there  is 
evidence of increased delays in the entire process. 
It  remains  to  be  seen  if  these  challenges  will  be 
overcome by the recent renewed efforts.  

Graph 4.2.1:  Residential mortgage arrears in the banking 

sector 

4.2. Financial sector 

than  the  euro  area  average  of  47.7%.  Further 
analysis shows that the coverage ratios remain low 
for some of the Irish banks, even after controlling 
for  improving  macroeconomic  conditions  (e.g. 
rising  property  prices)  and  the  composition  of  the 
NPL  portfolio  (e.g.  higher  share  of  collateralised 
loans which carries lower provisioning) (European 
Commission, 2019b, pp. 14-16).  

to 

packages 

restructuring 

A  number  of  initiatives  have  been  proposed 
over  the  past  years  to  address  the  social  and 
economic  impact  of  the  non-performing  loans 
workout  process.  The  initiatives  expose  to  a 
different  extent  the  interests  of  homeowners  and 
lenders. Some of them, like the  Mortgage-to-Rent 
or  the  Abhaile  (32)  schemes,  aim  to  provide  help 
vulnerable 
and 
homeowners.  Others  may  have  unintended 
consequences  by  affecting  creditors’  rights.  Most 
recently, the Land and Conveyancing Law Reform 
Act  2019,  which  entered  into  force  in  August 
2019,  sets  out  the  considerations  the  courts  must 
take into account when a lender is seeking an order 
for  the  repossession  of  lands.  Another  recent 
initiative,  the  so-called  “No  consent,  no  sale”  bill 
that  was  proposed 
in  January  2019,  could 
adversely affect the process of loan disposals. The 
Bill passed second stage in Dáil Éireann in January 
2019.  

The Central Bank of Ireland continues to make 
active use of its macro-prudential policy toolkit. 
The Central Bank of Ireland (CBI) has decided on 
1  October  2019  to  maintain  the  countercyclical 
capital  buffer  (CCyB)  rate  at  1%.  The  CCyB  has 
been implemented in July 2019 with the objective 
of increasing the resilience of the financial system. 
the  macro-prudential  policy 
As  a  part  of 
framework  for  the  real  estate  sector,  the  CBI 
introduced in 2015 mortgages measures, i.e. limits 
on  loan-to-value  (LTV)  and  loan-to-income  (LTI) 
ratios, to increase the resilience of the banking and 
household  sectors  to  financial  shocks  (33).  In  its 

(32)  The Abhaile scheme provides independent expert financial 
and legal advice to  people who are insolvent or in serious 
mortgage arrears on their home. 

(33)  The mortgage measures provide for a set of upper limits on 
these  two  ratios,  which  differ  depending  on  the  type  of 
borrowers  and  purpose  (first-time  vs  subsequent  buyer, 
buy-to-let).  The  measures  take  the  form  of  ‘speed  limits’, 
allowing  lenders  to  exceed  to  caps  for  a  set  proportion  of 
mortgages.  Additional  exemptions  are  also  provided  for 
negative  equity  mortgages  (LTV),  switcher  mortgages 

(1) The graph distinguishes between all loans held by banks 
in terms of days past-due (‘dpd’). 
Source: Central Bank of Ireland (CBI) 

to 
Aggregate  provisioning  has  dropped 
historical  lows.  Following  a  prolonged  period  of 
decline,  the  coverage  ratio  for  the  banking  sector 
(ECB  figures)  was  27.4%  as  at  June  2019,  down 
from 32.1% a year earlier. This ratio is much lower 

(31)  The  Mortgage-to-Rent  scheme  supports  mortgage  holders 
in  arrears.  Under  the  scheme,  a  homeowner's  property  is 
bought by an approved housing body and rented out to the 
original  mortgage  holder,  who  remains  in  it  as  a  social 
tenant.  The  scheme  was  revised  over  the  course  of  2017 
with  a  range  of  amendments  to  eligibility  criteria  and 
administration  in  view  of  making  it  more  flexible  and 
accessible to borrowers.  

33 

0%10%20%30%40%50%60%70%80%90%100%02.0004.0006.0008.00010.00012.00014.00016.00018.00020.000Mar-2016Jun-2016Sep-2016Dec-2016Mar-2017Jun-2017Sep-2017Dec-2017Mar-2018Jun-2018Sep-2018Dec-2018Mar-2019Jun-2019% of >90 dpdEUR million>720 dpd90 to 720 dpd<90 dpd>720 dpd (rhs, %)    
                                                           
                                                           
4.2. Financial sector 

amplify  the  generation  and  propagation  of  shocks 
(European Central Bank, 2018a). The CBI aims to 
enhance  its  risk  monitoring  and  assessments, 
which are crucial for timely identification of risks. 

4.2.3.  ANTI-MONEY LAUNDERING 

11 

strengthened 

Ireland  has 
its  anti-money 
laundering framework, but more remains to be 
done.  In  its  2019  follow-up  of  the  2017  Mutual 
Evaluation  Report  (MER),  the  Financial  Action 
(FATF)  has  upgraded 
Ireland’s 
force 
task 
compliance 
40 
its 
of 
on 
rating 
recommendations.  While  this  points  to  a  good 
overall  progress  in  addressing  the  deficiencies 
the  2017  MER,  a  number  of 
identified 
weaknesses remain. This is particularly relevant, as 
Ireland  faces  some  inherent  money  laundering 
risks  associated 
internationally-oriented 
its 
economy,  the  significant  volume  of  foreign  direct 
investment,  as  well  as  the  presence  of  special 
purpose  entities,  often  set  up  on  behalf  of  non-
domestic  sponsors(34),  letterbox  companies  and 
shell companies.  

to 

in 

the  anti-money 

The new register of beneficial ownership should 
significantly  improve  the  available  information 
on  ownership  of  special  purpose  entities, 
letterbox companies and shellbox companies. In 
line  with 
laundering  (AML) 
Directive,  the  register  was  opened  in  July  2019. 
Once  all  the  required  information  has  been  duly 
submitted, the register will contribute to mitigating 
secrecy  and  reduce  the  possibility  of  money 
laundering. At the end of December 2019, 75% of 
companies registered in Ireland had done so. 

The 2017 national risk assessment considers the 
money laundering risk posed by companies and 
legal  structures  as  moderate,  but  this  is  under 
revision.  Following  a  2017  recommendation  by 
the  FATF,  Ireland  is  working  on  a  sector-specific 
risk assessment to complement its existing national 
risk  assessment.  Trusts  or  company  service 
providers are regarded as having a medium to high 
risk  level,  mainly  due  to  potential  exposure  to 
and 
high-risk 

jurisdictions 

customers, 

and 

34  Estimations  differ  as  to  the  share  of  FDIs  flowing  through 
special  purpose  entities,  from  5%  calculated  by  Ireland’s 
Central  Statistical  Office  to  62%  calculated  by  the 
International  Monetary  Fund.  No  official  statistics  are 
available  as  Ireland  does  not  provide  this  data  to  the 
OECD. 

latest  revision  in  the  fourth  quarter  of  2019,  the 
CBI  decided  not  to  change  any  of  the  parameters 
of  the  two  measures.  A  recent  assessment  by  the 
European  Systemic  Risk  Board  (ESRB)  has 
concluded  that  the  macro-prudential  measures 
implemented  by  the  Central  Bank  of  Ireland  are 
sufficient  to  address  the  identified  vulnerabilities 
in  the  residential  real  estate  sector  (ESRB,  2019). 
The authorities have also recently announced their 
willingness  to  give  CBI  the  power  to  activate  a 
systemic risk buffer (SyRB). 

4.2.2.  NON-BANKING SECTOR  

The  insurance  sector  continues  to  face  risks 
related  to  the  UK’s  decision  to  leave  the  EU. 
Nearly one-third of the gross premium incomes of 
Irish insurers and re-insurers are from the UK. The 
authorities  have  enacted  temporary  permissions 
regimes  to  provide  additional  time  to  insurers  to 
complete the implementation of their restructuring 
plans to prepare for the UK’s withdrawal from the 
EU. Beyond these, the Irish insurers and their UK-
based  head  entities  are  also  highly  exposed  to  the 
UK  market  through  their  investment  portfolios. 
This exposes them to significant exchange rate and 
market 
in  case  of  market  valuation 
risk 
fluctuations.  

the  past  years, 

Ireland’s large and growing non-bank financial 
sector  deserves  close  attention.  Total  assets 
managed  by  the  investment  funds  have  increased 
substantially  over 
reaching 
€2.7 trillion in June 2019, up from €375 billion ten 
years  ago.  According  to  the  latest  data  available 
for  end-2017,  72%  value  of  the  outstanding  fund 
shares  and  units  were  issued  in  other  Member 
States,  with  the  UK  issuance  representing  nearly 
40%.  Shares  and  units 
Ireland 
represented  only  8%  of  the  total  assets.  These 
figures clearly highlight the outward orientation of 
the  Irish  investment  fund  sector.  While  this  may 
limit  some  of  the  direct  exposure  and  potential 
spillovers  of  risks  to  the  domestic  economy,  the 
sheer  size  and  growing  interconnectedness  in  the 
sector  exposes  Ireland  to  global  shocks.  At  the 
same  time,  there  is  evidence  that  funds  are 
increasingly  holding  assets  with  higher  risk  and 
lower  liquidity  under  management,  which  may 

issued 

in 

(LTV  and  LTI),  and  lifetime  mortgages  (LTI,  effective 
from July 2019).  

34 

                                                                                   
 
                                                           
4.2. Financial sector 

4.2.4.  PRIVATE INDEBTEDNESS*  

Private  debt  as  a  share  of  GDP  is  high  but 
declining.  In  2018,  it  stood  at  223.2%  of  GDP, 
almost four times the size of government debt and 
well above the EU average (137.5%) and the MIP 
threshold (133%). However, it declined for a third 
consecutive year and is again approaching its pre-
crisis  level  (36).  This  recent  decline  reflects  a 
combination  of  particularly  strong  GDP  growth 
and active deleveraging in both the household and 
the  corporate  sectors.  The  bulk  of  the  stock  of 
private  debt  is  held  by  non-financial  corporations 
(181.5% of GDP), with households accounting for 
the remainder (41.7%). The assessment of the risks 
associated to these high debt levels, however needs 
to  take  account  of  the  implications  of  the  strong 
presence  of  multinational  companies  in  Ireland, 
which  affects  the  interpretation  of  measures  of 
both  corporate  debt  and  GDP  (Department  of 
Finance,  2019f).  Removing  the  debt  of  foreign-
controlled  corporates  from  the  private  sector  debt 
stock would bring the latter below the formal MIP 
threshold that is expressed as a percentage of GDP 
(see graph 4.2.2).  

Graph 4.2.2:  Private indebtedness 

lack  of 

challenges  with  customer  due  diligence  (lack  of 
face-to-face  contact, 
transparency  on 
beneficial  ownership  of  shares).  The  same  risk 
applies  to  professionals  (e.g.  auditors,  solicitors) 
servicing companies and trust, yet statistics are not 
always 
professionals 
providing  such  services,  which  hampers  the  risk-
based supervision of activities in the sector. 

available 

identify 

to 

The incomplete understanding of risk exposure 
to  money  laundering  by  professionals  engaged 
in  the  provision  of  services  to  companies  and 
trusts  might  hamper  their  role  as  gatekeepers. 
Professionals engaged in the provision of services 
to  trusts  and  companies  are  often  the  first  line  of 
defence against money laundering risk, as they are 
involved  in  the  first  stages  of  company  creation. 
Supervisory  inspections  by  the  Department  of 
Justice highlighted deficiencies in compliance with 
AML obligations. Suspicious transaction reporting 
by  professionals  engaged  in  the  provision  of 
services  to  trusts  and  companies  is  low  compared 
to the risk level (35), which was also stressed by the 
FATF. This limits the information available to the 
Financial  Intelligence  Unit  to  identify  suspicions 
of  money  laundering  and  to  disseminate  this 
law  enforcement  and  other 
information 
competent 
the 
understanding  of  risk  among  these  professionals, 
Irish  competent  authorities  have  issued  guidance 
and  organised  trainings,  including  with  regard  to 
letterbox  and  shell 
special  purpose  entities, 
and 
companies. 
guidance  will  be  key  to  ensure  that  the  level  of 
customer due diligence applied is commensurate to 
the risk. Given the significant presence of complex 
legal  structures  and 
the 
efficient  functioning  of  the  beneficial  ownership 
registers would be critical. 

to 
authorities. 

foreign  ownership, 

Strengthening 

supervision 

improve 

To 

(35)  The  number  of  reports  is  low  compared  to  the  size  of  the 
sector:  in  2018,  the  more  than  350  registered  trust  and 
company  service  providers  reported  only  15  suspicious 
transactions.  The  almost  10.000  solicitors  reported  13 
suspicious  transactions  and  the  almost  7.000  accountants 
and  tax  advisors  registered  in  the  country  reported  20 
suspicious transactions. 

Source: CSO 

While  corporate  debt 
is  high  overall,  the 
exposure of the domestic economy and financial 

(36)  Household  debt is  lower  than the  so-called  prudential  and 
the 
fundamental  debt  benchmarks 
Commission,  while  NFC  debt 
the 
benchmarks. Nonetheless, the benchmarks are known to be 
misleading  given  the  specific  characteristics  of  the  Irish 
economy,  such  as a  very  low  wage  share  in  GDP  and  the 
presence of MNE and SPE debt. 

calculated  by 
than 
is  higher 

35 

0501001502002503002009201020112012201320142015201620172018HouseholdsNFCs(Irish Parent)NFCs(Foreign Parent)%of GDP 
                                                           
   
                                                           
4.2. Financial sector 

system  to  it  is  more  limited.  Headline  indicators 
of  non-financial  corporation  debt  relative  to  GDP 
point  to  high  debt  burden  that  would  call  for 
further  corporate  deleveraging.  Analysis  of  the 
ultimate  ownership  of  firms  domiciled  in  Ireland  
however  shows  that  about  two  thirds  of  corporate 
debt  was  concentrated  in  foreign  controlled  firms 
(see  graph  4.2.2).  Corporate  debt  of  domestically 
controlled firms  was equivalent to 61.7% of GDP 
or  101.3%  of  modified  gross  national  income  (37) 
in  2018  after  declining  in  absolute  terms.  A 
breakdown  of  NFC  debt  by  location  of  the 
counterparty  reveals  that  Irish  counterparts  held 
about 22%, while 64% was held abroad, including 
in the form of intra-group loans. The remainder of 
the  debt  (14%) 
in  so-called 
redomiciled companies, i.e. firms that have located 
their  headquarters  in  Ireland  without  substantial 
real  activity  (see  graph  4.2.3).  Overall,  the  links 
between those corporates that account for the high 
debt and the Irish financial system are thus weaker 
than headline  figures  would suggest,  implying  the 
impact  of  possible  shocks  to  the  corporate  sector 
would be mitigated as a result. 

is  concentrated 

Graph 4.2.3:  Breakdown of NFC debt by location of 

counterparty, 2018 

Source: CSO 

reflects 

The  stock  of  household  debt  has  declined  to 
41.7%  of  GDP  in  2018,  almost  a  third  of  the 
2009  ratio  (116%)  but  remains  a  source  of 
active 
vulnerability.  This  decline 
deleveraging  in  all  years  since  2009,  combined 
with  high GDP growth. Household debt  is largely 
composed  of  mortgage  loans  (83%  at  the  end 
2018), which are secured on a property and imply 
a  lower  interest  burden  (Department  of  Finance, 
Analysis of Private  Sector Debt in Ireland, March 
2019).  While  the  stock  of  household  debt  in 
proportion  to  GDP  in  Ireland  is  below  the  EU 
average  (60.8%),  the  use  of  GDP  as  a  benchmark 
is of limited informational value in an Irish context 
(see section 1.1). Indeed, in proportion to modified 
gross  national 
income,  household  debt  was 
significantly  higher  at  68.4%  in  2018,  albeit  after 
steadily 
2009. 
from 
Furthermore,  when  expressed  in  per  capita  terms 
or  relative  to  disposable  income,  the  debt  of  Irish 
in  an  EU 
households  also  appears  high 
comparison.  Overall,  and  despite 
the  strong 
deleveraging,  the  household  debt  stock  remains  a 
source  of  vulnerability  in  the  event  of  adverse 
shocks. 

declining 

146% 

in 

The  continuous  and  substantial  decline 
in 
household  debt  over  recent  years  masks  some 
structural  challenges,  such  as  high  mortgage 
arrears.  While  the  share  of  Irish  borrowers  with 
longer-term  fixed  rates  is  low  in  an  international 
comparison, there has nonetheless been an increase 
in  the  share  of  mortgages  with  longer  fixation 
periods,  i.e.  five  years  or  more  (Central  Bank  of 
Ireland,  2019a).  Overall, 
increase 
households’ resilience against adverse interest rate 
shocks.  While  banks  have  made  significant 
progress in reducing their NPL-ratios (see above), 
long-term  mortgage  arrears  remain  an  important 
issue  for  many  borrowers,  despite  the  existing 
schemes  to  reduce  mortgage  arrears.  These  deep 
arrears  have  been  particularly  persistent  and  the 
utilisation of personal insolvency for borrowers  is 
relatively low.   

this  will 

(37)  The  difference  between  gross  domestic  and  gross  national 
income  is  particularly  high  in  the  case  of  Ireland,  due  to 
high  net  factor  payments  to  the  rest  of  the  world  (about 
22% of GDP in 2018). Modified GNI (GNI*) additionally 
corrects  GNI  for  some  factors  that  are  specific  to  the 
activities  of  multinational  enterprises  located  in  Ireland 
(notably  related  to  patents  and  aircraft  leasing).  In  2018, 
GDP exceeded GNI* by a factor of 1.6. 

4.2.5.  SME ACCESS TO FINANCE  

The  cost  of  credit,  especially  for  small  and 
medium enterprises (SMEs), remains a concern 
for  the  competitiveness  of  Irish  firms.  For 
smaller  new  loans  to  non-financial  corporations 
(< €1  million),  which  are  mostly  destined  to 

36 

Irish Parent(Irish Debt)14%Foreign Parent(Irish Debt)8%Irish Parent(ROW Debt)6%Foreign Parent(ROW Debt)58%RedomiciledPLCs14%    
                                                           
4.2. Financial sector 

SMEs, the Irish interest rates are the highest in the 
euro area, (Graph 4.2.4). Interest rates for loans to 
companies  in  certain  sectors  are  particularly  high, 
including  transport  and  storage,  Information  and 
Communication  Technology,  and  construction 
sectors,  (Central  Bank  of  Ireland,  2019b).  Weak 
competition in the market for SME loans, which is 
credit 
currently  dominated  by  only 
institutions, is one of the main reasons for the high 
interest rates. 

two 

Graph 4.2.4:  Comparison of new business loan interest rates 

(< €1 million) 

loans.  For 

Put  together,  these  results  suggest  a  mixed 
picture, with access to finance being an issue for 
smaller firms. According to SAFE survey results, 
working capital remains the  most common reason 
for  credit  applications  among  micro  and  small 
firms.  This  implies  that  high  interest  rates  are 
likely  to  be  deterring  smaller  firms,  as  well  as 
those  dependent  on  local  funding  sources,  from 
applying  for 
larger  firms,  credit 
applications  are  mostly  driven  by  growth  and 
expansion.  Meanwhile, 
firms 
expecting  substantial  growth  (i.e.  above  20% 
annually  in  terms  of  turnover)  has  declined 
substantially from a high of 15% in 2015 (highest 
in the euro area) to 9% by 2018, most likely due to 
the  UK’s  decision  to  leave  the  EU  (38).  This 
suggests that larger firms, or those that can obtain 
foreign  funding,  are  reducing  their  demand  for 
credit  due 
is 
confirmed  by  the  fact  that  the  share  of  firms  that 
use  internal  funds  is  now  much  higher  in  Ireland 
than across the EU, 25% vs. 15% at end-2018. 

to  growing  uncertainty.  This 

share  of 

the 

Graph 4.2.5:  Credit rejections/refusals 

Interquartile range corresponds to 25 to 75 percentage 
points for the cross-country distribution. Only loans to non-
financial corporations are considered, excluding evolving 
loans and overdrafts, convenience and extended credit 
card debt. 
Source: ECB 

than  sample  averages 

Loan  application  rates,  as  well  as 
loan 
rejections, are declining significantly. According 
to data  from the Survey on the  Access to Finance 
of  Enterprises  (SAFE),  the  share  of  firms  that 
applied  for  loans  has  declined  from  32%  in  early 
2010  to 19%  in  2019,  which  remains  consistently 
lower 
for  euro  area 
countries. Although applications have dropped, the 
share  of  Irish  firms  that  have  either  a  rejected 
application,  refused  offer,  or  those  that  did  not 
apply  due  to  expected  rejection  has  also  declined 
levels  comparable  with  other  euro  area 
to 
countries,  (Graph  4.2.5).  In  particular, 
loan 
rejections were 10% in 2019, down from a peak of 
28% in 2014.  

(1) The figure aggregates all bank loan and credit line 
applications that were rejected by the bank, refused by the 
borrower, or deterred because of a possible rejection *Due 
to data availability within the SAFE database, the eurozone 
benchmark consist of Austria, Belgium, Germany, Finland, 
France, Greece, Ireland, Italy, Netherlands, Spain, and 
Portugal were included for the eurozone benchmarks. 
Source: Survey on Access to Finance or Enterprises (SAFE) 
and European Commission 

(38)  Deeper  analysis  (not  provided)  here  shows  that  firms 
expecting substantial growth are 35% more likely to apply 
for bank loans in Ireland.  

37 

0%1%2%3%4%5%6%7%8%20032004200520062007200820092010201120122013201420152016201720182019Interest rateIrelandEurozone (high NPL)Eurozone (all)0%5%10%15%20%25%IrelandEurozone*% of sampled firms    
   
                                                           
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  LABOUR MARKET   

Ireland's labour market performance is robust. 
The  employment  rate  (20-64)  reached  74.1%  in 
2018,  slightly  above  the  EU  average  (73.1%). 
Solid  job  creation  across  most  sectors  continues, 
bringing  the  unemployment  rate  down  to  4.8%  in 
Q4-2019 (seasonally adjusted), its lowest level in a 
decade 
long-term 
4.3.1). 
unemployment rate has steadily improved (1.7% of 
the  active  population in Q2-2019 against 2.5% on 
average in the EU). Under a strong momentum for 
policy  reform,  climate  transition,  new  forms  of 
work and skills shortages are rising challenges for 
the labour market. 

(Graph 

The 

in 

increase 

the  EU  average.  The 
female 
employment  has  been  higher  in  low-paid  jobs, 
leading  to  a  higher  gender  pay  gap  over  the  past 
decade  (OECD,  2018).  A  new  Parents  Leave  and 
Benefit  Scheme  was  adopted  in  November  2019. 
This  provides  parents  with  an 
individual 
entitlement  to  two  weeks,  non-transferable  paid 
leave  in  the  first  year  of  a  child’s  life,  to  be 
extended  to  seven  weeks  by  2021.  The  2020 
Budget  will  finance,  among  others,  a  Returnship 
Programme  to  help  inactive  women  due  to  care 
responsibilities  get  back  into  the  workforce.  An 
integrated  strategy  to  promote  equal  opportunities 
for  all,  including  working  arrangements,  could 
address remaining gender gaps. 

Graph 4.3.1:  Unemployment by duration 

Source: Eurostat 

Some  groups  are  not  fully benefitting  from  the 
strong  labour  market  performance.  The  overall 
activity rate (15-64) stood at 72.9% in 2018, below 
the  EU  average  (73.7%),  suggesting  the  existence 
of  untapped  labour  potential.  The  female  activity 
rate  (15-64)  is  12.5  pps  lower  than  that  of  men 
(67.3%  vs  79.8%  in  Q3-2019).  Self-reported 
disability in Ireland is among the lowest in the EU. 
However,  the  employment  rate  of  people  with 
disabilities  (32.2% 
increased  6 pps 
compared to 2016, but remains well below the EU 
average (50.6%). (39) 

in  2017) 

The  gender  employment  and  pay  gap  have 
slightly  increased.  The  gender  employment  gap 
increased slightly to 12.2 pps in 2018, and is above 

(39)  Academic  Network  of  European  Disability  Experts 

(ANED) calculations based on Eurostat data. 
https://www.disability-europe.net/theme/eu2020  

The  transition  to  a  carbon-neutral  economy 
may shift the existing labour  market  structure. 
This transition is expected to have overall positive 
employment  effects,  but  with  differences  across 
sectors and regions. Job gains could be expected in 
the  construction,  manufacturing  or  renewable 
sectors. These might be partly offset by job losses 
in  sectors  such  as  fossil  fuel-related  mining  or 
quarrying  (European  Commission,  2019e).  The 
provision  of  new  and  more  adapted  skills  could 
help  better  exploit  the  job-creation  potential  and 
facilitate the labour transition of those at high risk 
of  joblessness.  Where  appropriate,  compensatory 
measures  can  also  contribute  to  a  socially  fair 
transition (see Section 4.5.2). 

Challenges  remain  to  enhance  the  provision  of 
early  childhood  education  and  care,  a  major 
obstacle  to  higher  female  labour  participation. 
Participation in early childhood education and care 
from  age  three  is  well  above  the  EU  average 
(93.1%  in  2018),  and  participation  in  formal 
childcare of  those  below three years (34.4%)  is at 
around the EU average. The share of children aged 
less  than  three  years  in  formal  childcare  for  30 
hours  or  more  (at  10.6%)  is  lower  than  the  EU 
average  (17.2%).  The  cost  of  formal  childcare  in 
Ireland  affects  to  a  greater  extent  low-income 
families.  For  them,  net  childcare  costs  as  a 
percentage  of  disposable  income  were  among  the 
highest  in  2018  (see  Graph  4.3.2).  The  low 
progressivity  of  childcare  costs  was  likely  to  be  a 
major cause of the existing inequality in childcare 
use in 2018. 

38 

0501001502002503003504002000Q12001Q12002Q12003Q12004Q12005Q12006Q12007Q12008Q12009Q12010Q12011Q12012Q12013Q12014Q12015Q12016Q12017Q12018Q12019Q1thsTotal> 6 months> 12 months> 24 months> 48 months 
    
                                                           
 
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 is a compass  for a renewed  process of upward convergence towards 
better working and living conditions in the European Union. It sets out twenty essential principles and rights 
in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion.  

continue 

to 
above 

Ireland  performs  relatively  well  on  a 
number  of  indicators  of  the  Social 
Scoreboard  supporting  the  European 
Pillar 
of  Social  Rights,  while 
challenges  remain.  Labour  market 
improve. 
outcomes 
Employment 
and 
is 
unemployment  below  the  EU  average. 
Real  disposable  household 
income 
(GDHI) per capita has been bolstered by 
accelerating  wage  growth  and  subdued 
inflation, but remains slightly below pre-
crisis  levels.  Overall,  the  Irish  tax  and 
benefit  system  continues  to  be  effective 
in reducing poverty and inequalities.  

of 

rate 

the  benefits 

Some  population  groups  have  yet  to 
reap 
economic 
expansion.  While  employment  rates  are 
above  the  EU  average  for  both  women 
and men, the gender employment gap is 
still above the EU average with no signs 
of  reduction.  Although  increasing,  the 
for  people  with 
employment 
disabilities is below the EU average. The 
share  of  people  living  in  low  work 
rapidly 
intensity 
households 
decreasing  but  remains  one  of 
the 
highest  in  the  EU.  The  share  of  the 
population  with  at  least  basic  digital 
skills is increasing. Child poverty is still 
a concern, with 1 in 4 children living in 
relative  poverty.  The  rising  number  of 
homeless people, due to rent increases in 
big  cities  and  insufficient  provision  of 
social  housing,  calls  for  further  efforts. 
In  this  regard,  individualised  support  in 
major  urban  areas  and  targeted  to  the 
groups most affected could help address 
this challenge. 

is 

Ireland  is  delivering  very  well  on 
education generally. The education system in Ireland continues to show positive outcomes, with the rate of 
early  school  leaving  at  5 %,  as  one  of  the  lowest  in  the  EU.  Higher  education  attainment  places  Ireland 
among  the  three  best-performing  EU  Member  States.  Ireland  ranks  top  in  terms  of  percentage  of  students 
from disadvantaged background and share of students with migrant background having attained a baseline 
level of skills (see Section 4.3.3).  

39 

 
 
4.3. Labour market, education and social policies 

tackle  early  childhood  poverty.  The  Budget,  and 
further  amended  in  the  revised  estimates  volume 
for  2020,  allocated  extra  funding  of  €103  million 
to  provide  additional  resources  to  a  number  of 
areas  including  Tusla,  the  Child  and  Family 
Agency,  Childcare  and  Youth  Services,  bringing 
the  allocation  for  the  Department  to  over  €1.6 
billion,  from  €1.1  billion  in  2016.  The  additional 
funding  will  be  targeted  at  those  with  the  lowest 
income, single parents and children with additional 
needs. The impact of these measures remains to be 
seen,  with 
requiring  a  close 
monitoring. 

future  plans 

have 

support 

disabilities 

for  people  with 
schemes 
While 
been 
their 
launched, 
disabilities 
labour  market  remains 
integration  to  the 
challenging.  People  with 
find 
difficulties in getting to work, in particular women 
(the  female  employment  rate  was  28.6%  in  2017, 
compared to 36% for  men).  The  employment rate 
gap between people with and without disabilities is 
the highest in the EU (42.2 pps vs 24.2 pps in the 
EU).  In  2015,  the  government  introduced  a  new 
"Comprehensive  Employment  Strategy  for  People 
with  Disabilities",  a  ten-year  programme  that 
supports  access  to  employment  for  those  who  are 
able  to  and  want  to  work.  The  impact  of  the 
strategy is still to be seen. 

The  share  of  workers  in  low-  and  middle-pay 
occupations  is  shrinking,  with  a  pronounced 
decrease  at  the  bottom  of  the  pay  distribution. 
Evidence  suggests  a  decrease  in  the  share  of 
middle-pay  occupations  in  total  employment  of 
0.4 pps  from  2011  to  2018,  while  employment  in 
low-pay jobs is declining even faster (2 pps in the 
of 
same 
employment in high-paid jobs increased 2.4 pps in 
the same period (European Commission, 2019f). 

period).  Conversely, 

share 

the 

of 

and 

training 

provision 

skills 
The 
development  remain  key 
for  employment 
outcomes  in  Ireland.  Disparities  between  the 
employment rates of people aged 20-64 with high, 
medium,  and  low  skills  are  significant.  While  the 
employment  rate  of  the  highly  skilled  was  84.7% 
in 2018, it was only 51.5% among the low-skilled. 
Efforts  to  upskill  the  workforce  are  ongoing  (see 
Section  4.3.2),  but  are  likely  to  require  further 
investments  to  lead  to  sustained  employment 
outcomes and career progression. 

Following  the  recent  launch  of  the  National 
Childcare  Scheme,  net  childcare  costs  fall  very 
substantially  for  lower-income  households.  For 
a  single  parent  with  two  children  earning  the 
average wage, net childcare costs fall from 30% of 
the  average  wage  to  1.2%  of  the  average  wage, 
improving  Ireland’s  rank  position  considerably. 
However,  net  childcare  costs  remain  among  the 
highest  for  middle  and  higher  income  households 
(26.5  and  31%,  respectively  in  2018).  While  the 
still  relatively  high  costs  of  early  childhood 
education  and  care  provision  require  careful 
to 
monitoring, 
significantly  improve  the  incentives  to  participate 
both  at  the  extensive  (i.e.  moving  into  work)  and 
intensive  (i.e.  increasing  working  time)  margins 
for low-income families helping them to reconcile 
work and care(40). 

the  Scheme 

expected 

is 

Graph 4.3.2:  Net childcare costs for a low-income family, 

by component 

Source: ESDE – Employment and Social Developments in 
Europe 2019 

Ireland  has  launched  a  key  reform  aimed  at 
improving  the  provision  of  affordable  and 
quality childcare. In line with the European Pillar 
of  Social  Rights,  it  launched  on  19  November 
2018 ‘First 5’, Ireland’s first ever strategy for early 
childhood. This ten-year strategy aims to deliver a 
broader  range  of  options  for  parents  to  reconcile 
work  and  care,  to  promote  child  health,  and  to 

(40)  The  impact  on  labour  market  participation  is  simulated 
using  the  OECD  tax  and  benefit  model.  The  assessment 
consists  of  indicators  pertaining  to  work  incentives  for 
including  net 
parents  with  children  requiring  care, 
childcare  costs  (NCC),  as  well  as  participation  tax  rates 
(PTRs)  and  marginal  effective  tax  rates  (METs)  after 
accounting for the cost of centre-based childcare. 

40 

-60%-40%-20%0%20%40%60%80%ITATHRPTCYEESECZHUDEESELBULUSLFRDKBELVLTPLNLFISKIEUK% of disposable incomeChildcare FeeTax reductionOther benefitsChildcare benefit    
                                                           
Graph 4.3.3:  Employment rate, by educational attainment 

Source: Eurostat 

The  impact  of  platform  work  is  apparent  in 
Ireland,  with  rising  concerns  about  the  quality 
of  employment.  A  European  Commission’s  Joint 
Research  Centre  study  (European  Commission, 
2018a)  indicates  that  13%  of  the  working-age 
population  in  Ireland  has  at  least  once  provided 
services via online platforms. The share of workers 
operating  on  platforms  as  their  main  job  remains 
small 
the  working-age  population). 
However,  as  remuneration  is  often  based  on  the 
task  performed,  platform  workers  might  not  be 
granted full social protection benefits, such as sick 
leave  or  sick  pay.  Platform  work  has  also  raised 
concerns as regards workers’ employment status. 

(2%  of 

Graph 4.3.4:  Share of platform workers across 16 EU 

Member States, year 

4.3. Labour market, education and social policies 

week for employees or €5,000 per year for the self-
employed.  However,  the  self-employed  do  not 
have  equal  access  to  social  protection.  Following 
up  on  the  2018  Council  Recommendation  on 
access to social protection for workers and the self-
employed,  in  2019  Ireland  extended  treatment, 
invalidity  and  jobseekers  benefits  to  the  self-
employed. As of 2020, self-employed people may 
claim 
(contributory), 
Widow's  Contributory 
Pension,  Guardian's 
Payment,  Maternity,  Paternity  and  Adoptive 
Benefit, Treatment Benefit, Invalidity Pension and 
they  are  still 
Jobseekers  Benefit.  However, 
excluded  from  formal  coverage  to  accident  and 
occupational injuries. 

the  State  Pension 

for 

from  2017 

the  recent  restriction  of  zero-hour 
With 
contracts,  improvements  in  working  conditions 
are  foreseen.  The  share  of  involuntary  part-time 
employment  decreased 
to  2018 
(Eurostat)  and  zero-hours  contracts  were  greatly 
restricted  following  the  implementation  of  the 
Employment  Act  in  March  2019(38)  Under  the 
new legislation zero hours contracts  are outlawed 
except  in  situations  where  the  work  is  of  a 
genuinely  casual,  emergency  or  shortterm  relief 
nature. 
the  Employment  Act 
implemented  seeks  to  improve  the  security  and 
predictability  of  working  hours  for  employees  on 
insecure contracts and variable working hours. The 
legislation  compels  employers  to  pay  a  new 
minimum payment to employees called into work, 
but  sent  home  again  without  work.  The  Act 
introduces  rules  on  banded  hours  for  employees 
who habitually work longer than reflected in their 
contract. Employers are now compelled to provide 
basic terms of employment within five days. 

In  addition, 

Despite  considerable  improvement  in  Ireland’s 
active  labour  market  policies  (ALMP),  some 
scope  for  improvement  remains.  In  the  current 
context,  reforms  are  needed  to  reach  out  to  those 
furthest  away  from 
labour  market.  Key 
the 
challenges include the high reliance on community 
education and second-chance education initiatives, 
which  create  weak  linkages  with  work-based 
vocational  training  programmes  and  employers. 
Secondly,  the  unresponsive  nature  of  ALMP 
funding  to  changes  in  unemployment,  which  is 
suggestive  of  ALMP  provision,  is  partially  driven 
by the funding needs of delivery bodies. Then, the 
need to link monitoring and evaluation practices to 
programme redesign. Lastly, lastly a lack of clarity 

Source:  

More  efforts  are  needed  to  provide  adequate 
social protection to the self-employed. The social 
security  system  covers  all  people  in  employment, 
provided their income meets the income threshold 
indicating attachment to the workforce, i.e. €38 per 

41 

40455055606570758085902000200120022003200420052006200720082009201020112012201320142015201620172018High skilledMedium skilledLow skilled% population20-6402468101214161820Main platform workersAll platform workers% of surveyedworkers   
    
4.3. Labour market, education and social policies 

as to how programmes are redesigned with the aim 
of better reaching out to the long-term unemployed 
and providing them more complex, individualized, 
services. 

The  budget 
for  early  childhood  education 
(learning)  and  care  from  €265  million  in  2015  to 
€574  million  in  2019,  an  increase  of  116%  
(Rogers, 2018)41. 

role 

Social 

partners’ 

(Eurofound,  2019).  However, 

Measures  have  been  taken  to  improve  social 
dialogue,  but  there  is  still  scope  for  greater 
and 
involvement. 
participation in collective bargaining has improved 
recently,  following  a  controversial  period  during 
the  crisis 
the 
renewed  promotion  of  Social  Partnership  still 
appears to be weak, with consultations restricted to 
a  narrow  range  of  topics,  mainly  around  pay  and 
terms  of  employment.  Discussions  on  the  annual 
budget plan are supported by the structured forum 
for  economic  dialogue  created  in  2015.  Besides, 
further efforts to promote the involvement of civil 
society  organisations  could  better  support  policy 
implementation  and  development,  in  particular  in 
the framework of the European Semester as well as 
the national and local climate initiatives. 

4.3.2.  EDUCATION AND SKILLS 

lowest  shares  of 

Quality  and  inclusiveness  of  education  remain 
high in Ireland. The 2018 PISA results show that 
Ireland  ranks  above  the  EU  average  in  reading, 
maths  and  science  (OECD,  2019).  For  all  these 
three domains, the shares of low achievers remain 
among the lowest in the EU: reading (12%), maths 
(16%)  and  science  (17%).  The  education  system 
has  become  more  equitable  as  Ireland  has  one  of 
the 
low-performers  among 
students  from  disadvantaged  backgrounds  (21% 
versus 35% in the EU) and among students with a 
migrant background (14% versus 35% in the EU). 
The  rate  of  early  leavers  from  education  and 
training  decreased  to  5%  in  2018.  The  early 
leaving rate  gap between people with and without 
disabilities  has  narrowed  down  from  22.5 pps  in 
2016 to 17.9 pps in 2017. However, certain groups, 
including  Irish  Travellers,  still  face  high  rates  of 
early  school  leaving.  This  calls  for  further  efforts 
to close existing educational gaps. 

Public  expenditure  on  education  continued  to 
increase  in  Ireland.  In  2019,  Ireland  dedicated 
€10.8  billion  to  education,  up  7%  from  2018. 
Between  2018  and  2019,  the  total  budget  for 
preschool,  primary  and  secondary  education 
increased  by  5%  and  by  1%  in  tertiary  education. 

Demand  for  higher  education  continues  to 
increase, well above the increase in spending. In 
2018,  the  tertiary  educational  attainment  rate 
reached 56.3%,  compared to 40.7% on average in 
the  EU.  Between  2007-2009  and  2014-2016,  the 
number  of  higher  education  students  increased  by 
15.5%,  while  real  public  expenditure  on  higher 
education  decreased  by  12.5%.  In  2016,  spending 
per  higher  education  student  in  purchasing  power 
standards  (€9,996)  was  below  the  EU  average 
(€10,817),  while  in  2012  it  was  above  the  EU 
average  (11,500  versus  10,550).  Potential  funding 
constraints  may  act  as  a  barrier  for  higher  quality 
education and addressing the future skills needs of 
the population. Plans to reform the funding model 
for  higher  education  are  under  discussion  since 
2018,  with  no  concrete  proposals  put  forward  yet 
(DES, 2018a). 

and 

communication 

Ireland is taking measures to address the digital 
skills  shortage,  with  existing  challenges  to  fully 
exploit  the  opportunities  of  the  digital  age.  In 
2019,  53%  of  the  adult  population  had  an  overall 
basic  or  above  basic  level  of  digital  skills,  still 
below  the  EU  average  (58%).  This  is  still  below 
the  EU  average  (58%).  While  the  share  of 
information 
technology 
specialists  in  the  overall  workforce  (4.3%)  is 
slightly  above  the  EU  average  (3.9%),  more  than 
half  of  the  firms  who  tried  to  recruit  such 
specialists  experienced  difficulties 
(European 
Commission,  2019h).  The  Government  has 
the  Third  ICT  Skills  Action  Plan 
approved 
(“Technology  Skills  2022”)  with  the  aim  of 
increasing  by  65%  its  number  of  information  and 
communication  technology  graduates  by  2022 
(DES,  2019a).  This  is  expected  to  contribute  to 
meeting 70% of the annual demand of people with 
high-level digital skills forecasted in the period. At 
the same time, the Future Jobs framework foresees 
to  close  the  gap  with  the  EU  in  terms  of  digital 
skills with a dedicated target by 2025. Progress in 
the  share  of  people  with  basic  and  above  basic 
digital skills requires close monitoring. 

41  Rogers,  M.  (2018).  Overview  of  Higher  Education.  In 
Ireland's  yearbook  of  education 

Mooney,  B. 
2018/2019. Dublin: Education Matters. 

(ed.) 

42 

                                                           
4.3. Labour market, education and social policies 

innovation  capacity  among  SMEs,  such  as  those 
promoting  the  use  of  technology  or  workforce 
development, would also bring actions more in line 
with Future Jobs Ireland. 

4.3.3.  SOCIAL POLICY 

The  population  at  risk  of  poverty  or  social 
exclusion continues to fall. The overall at-risk of 
poverty or social exclusion rate fell from 22.7% in 
2017  to  21.1%  in  2018,  slightly  below  the  EU 
average.  This  remains  negatively  affected  by  the 
high  share  of  the  population  living  in  households 
with  very  low  work  intensity.  Although  falling, 
this share remains well above the EU average, and 
is  of  concern  given  the  large  number  of  children 
living  in  such  households.  While  fewer  than  30% 
of  adults  in  jobless  households  live  with  children 
in the other EU-15 countries, more than half do so 
in Ireland. Irish jobless adults are less likely to live 
with  at  least  one  working  adult  than  in  other  EU 
countries, 
of 
joblessness at the household level. 

concentration 

suggesting 

a 

The efforts to extend the apprenticeship system 
continue,  with  additional  programmes  and 
more  apprentices.  In  2018,  10.3%  of  upper 
in  vocational 
secondary  graduates  enrolled 
education  and  training  programmes,  all  of  them 
combining  training  with  work  experience.  The 
action  plan 
to  expand  apprenticeship  and 
traineeship  aims  to  increase  apprenticeship  places 
(from 12,000 to 31,000) and programmes (from 27 
to above 70) by 2020.  

Measures  to  address  teacher  shortages  have 
been  reinforced,  but  results  are  still  awaited. 
Concerns  persist  about  teacher  supply  in  primary 
and  post-primary  schools  while 
the  Teacher 
Supply Action Plan (DES, 2018b; DES, 2019b) is 
being rolled out and a workforce planning model is 
to  be  developed  in  2020.  A  new  pilot  programme 
was  announced  in  September  2019,  which  targets 
the  areas  with 
levels  of  unmet 
the  highest 
substitute cover for primary school teachers (DES, 
2019c).  This  is  expected  to  address  some  of  the 
challenges for the schools, and it might prepare the 
national rollout of the programme. 

(resourced  by  a 

Skillnet  Ireland  might  help  address  the  skills 
deficit in SMEs, including managerial skills, but 
its  reach  is  limited.  In  2019,  17%  of  SMEs 
identified  the  availability  of  skilled  staff  and 
experienced  managers  as  their  biggest  problem 
compared  to  15%  in  2017.  19%  of  SMEs  used 
external financing (i.e. bank loans, credit lines) for 
hiring and training employees in 2019 compared to 
14%  in  2017  (European  Commission,  2019). 
Skillnet  Ireland  is  the  national  business  support 
agency  that  promotes  and  facilitates  workforce 
learning.  It  receives  funding  through  the  National 
levy  on 
Training  Fund 
employers). 
  This  funding  is  combined  with 
financial  contributions  by  businesses  participating 
within 69 Skillnet Training Networks that are both 
sectoral  and  regionally  based.  In  2018,  Skillnet 
provided training to 5.2% of the overall population 
of  SMEs  in  Ireland  and  to  more  than  54,000 
workers in Ireland, 23% of which were occupying 
managerial  positions  (Skillnet  Ireland,  2018).  The 
predominant  participation  of  highly  qualified 
employees  and 
the 
Midlands  region  require  attention.  In  addition, 
Skillnet  Ireland  could  benefit  from  additional 
funding,  greater 
its 
networks  and  with  stakeholders.  More  focus  on 
to  drive  productivity  growth  and 
initiatives 

collaboration  between 

low  participation 

the 

in 

43 

 
4.3. Labour market, education and social policies 

targeted  towards  those  with  the  lowest  income. 
However,  simulations  specific  to  Ireland  show 
challenges  as  regards  the  effectiveness  of  the 
changes  in  the  tax  and  benefit  settings  introduced 
between  2008  and  2018  to  improve  disposable 
income for most groups of the income distribution, 
in  particular  the  lowest  income  earners.  Overall, 
the model may show that social policies have been 
relatively  successful 
in  reducing  poverty  for 
households  below  the  median  income,  but  tax-
benefit  policies  might  be  better  targeted  at  the 
bottom decile. (43) 

Child poverty remains a challenge in Ireland. In 
2018, 23.9% of children were at risk of poverty or 
social exclusion, slightly below the EU average of 
24.3%.  While  overall  measures  fighting  poverty 
have  borne  fruit  in  recent  years,  the  at-risk-of-
poverty  rate  among  children  has  decreased  at  a 
slower  pace  (from  18.8%  in  2009  to  15.8%  in 
2018). here is also an increasing trend in the child 
poverty gap from 2013, indicating that the median 
equivalised  income  of  children  living  in  relative 
poverty  has  fallen  further  behind  the  poverty 
threshold. 

towards  concrete  actions 

Child  poverty  has  become  central  to  the  policy 
debate.  A  national  debate  including  all  major 
stakeholders  was  launched  in  2019  under  the 
‘NoChild  2020’  initiative.  Run  by  the  Children’s 
Rights  Alliance  in  partnership  with  the  Irish 
Times, it seeks to raise awareness and mobilise all 
to 
those  concerned 
eradicate  child  poverty.  A  new  methodology, 
based  on  weekly  minimum  essential  standard  of 
living  calculations,  is  gaining  momentum  in  the 
policy  debate.  Recent  evidence 
(Vincentian 
Partnership for Social Justice, 2019) shows that the 
deepest  income  inadequacy  is  found  in  single-
parent  households  and  households  with  older 
children, with important regional disparities. Based 
on  a  provision  in  the  2018  Social  Welfare, 
Pensions and Civil Registration Act, consultations 
have  taken  place  with  stakeholders  to  examine 
ways  in  which  social  welfare  rates  are  increased, 
the  adequacy  for  all 
ensuring 
recipients.  

through 

law 

(43)  European  Commission  analysis  carried  out  using  the 
the 
microsimulation  model  EUROMOD.  Based  on 
methodology  presented  in  Bargain  and  Callan  (2010),  the 
model isolates the pure effect of policy changes occurring 
over  the  period  2008-2018  from  changes  due  to  other 
factors. 

Graph 4.3.5:  Main social indicators 

(1) At-risk-of poverty rate is the percentage of the total 
population who have an equivalised disposable income 
below 60% of the national equivalised median income. 
Severe material deprivation rate is the percentage of the 
total population who experience at least 4 out of 9 
deprivations defined by EU-SILC.  People living in low work 
intensity households is the percentage of population aged 
0-59 who live in households where the adults (excluding 
dependent children) work less than 20% of their total work-
time potential during the previous 12 months. At-risk-of-
poverty or social exclusion are defined as fitting at least one 
of the three abovementioned categories. Provisional 2018 
data. 
Source: Eurostat 

Social  transfers  play  a  major  role  in  reducing 
poverty,  but  the  most  vulnerable  groups  could 
be better targeted. Minimum income benefits are 
among the most adequate in the EU (91.3% of the 
poverty  threshold  and  70.4%  of  the  income  of  a 
low-wage  earner).  Ireland  ranks  close  to  EU 
average  for  indicators  related  to  the  adequacy  of 
unemployment  benefits (42).  As  highlighted  in  the 
Social  Scoreboard  accompanying  the  European 
Pillar of Social Rights (see Section 4.3.1), in 2017 
social  transfers  reduced  the  at-risk-of-poverty  rate 
by 53%, and the poverty gap by 81% (compared to 
34%  and  55%  in  the  EU,  respectively).  On 
average, family benefits have the largest effect on 
the  poverty  rate  (33%).  This  is  followed  by 
(29%).  While  social 
unemployment  benefits 
benefits  have  a  relatively  small  impact  on  the 
poverty rate (around 1.34%), they contribute more 
to  reduce  the  depth  of  poverty,  as  these  are  more 

(42)  Benchmarking  Framework 

Incomes 
conducted  within  the  Social  Protection  Committee.  For 
details, see Proposal for a Joint Employment Report 2020. 

on  Minimum 

44 

0510152025303520052006200720082009201020112012201320142015201620172018% of populationAt-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 

Graph 4.3.6:  At risk-of-poverty rate gap, by age groups 

the  difference  between 

Note:  The  relative  median  at-risk-of-poverty  rate  gap  is 
calculated  as 
the  median 
equivalised  disposable  income  of  people  below  the  at-risk-
of-poverty  threshold  and  the  at-risk-of-poverty  threshold, 
expressed  as  a  percentage  of 
the  at-risk-of-poverty 
threshold (cut-off point: 60% of median equivalised income). 
(1) Provisional 2018 data. 
Source: Eurostat 

to 

support 

Budget  2020 
for 
includes  more 
vulnerable families. The 2020 Revised Estimates 
allocate  €21.2  billion 
the  Department  of 
Employment  Affairs  and  Social  Protection,  an 
increase of €705 million on the 2019 Estimate. An 
additional  €103million  has  been  allocated  to  the 
Department  of  Children  and  Youth  Affairs  for 
2020 including an increase in Tusla funding of €33 
million  and  increased  funding  for  Early  Learning 
and Care of €63 million. It still remains to be seen 
how  these  measures  contribute 
to  alleviating 
poverty. 

Shortages in housing supply and social housing 
have  created  a  challenging  situation.  The  rapid 
increase  in  the  population  of  Ireland,  along  with 
increases  in  rental  and  residential  property  prices 
since  2013,  have  created  affordability  challenges, 
especially  for  households  at  the  bottom  of  the 
income  distribution  (see  Box  4.3.4).  While  the 
population of Ireland increased by around 150,000 
people  from  2011  to  2016,  the  housing  stock 
increased  only  by  8,800  units.  Residential 
construction  has  been  strong  in  recent  years,  but 
housing completions still fall short of demand (see 
Box.3.1).  Social  housing  as  a  share  of  the  total 
housing stock has increased from 8.7% in 2011 to 

(8.8%). 

average 

The  share  of  the  population  living  in  quasi-
jobless  households  remains  an 
important 
challenge  in  terms  of  social  inclusion  and 
untapped  labour  resources.  The  share  of  people 
aged 0-59 living in households with very low work 
intensity is falling steadily (from 23.9% in 2013 to 
13.1% in 2018), although it is still well above the 
(quasi-)jobless 
EU 
households  have  a  high  likelihood  of  including 
children.  While  fewer  than  7.4%  of  adults  in 
(quasi-)jobless  households  live  with  children  in 
other  EU-15  countries,  14.7%  of 
low  work 
intensity households do so in Ireland. Irish jobless 
adults are also less likely to live  with at least one 
working  adult 
in  other  EU  countries, 
suggesting  a  concentration  of  joblessness  at  the 
household level. 

Irish 

than 

benefit 

households  may 

Jobless 
from 
complementing  in-cash  social  transfers  with 
policies activation measures and targeted social 
services.  The  Action  Plan  for  Jobless  Households 
is  targeted  at  those  excluded  from  the  labour 
market  by  extending  activation  measures  beyond 
the unemployed, in particular to improve outcomes 
for children living in jobless households. While the 
strategy  was  launched  in  2017,  to  date  no  update 
has  been  given  on  its  effectiveness  and  how  such 
measures  can  be  further  bolstered  through  links 
with enabling social services. 

People with disabilities are more likely to be at 
risk  of  poverty  or  social  exclusion  than  on 
average in the EU. In 2018, 36.9% of people with 
‘some or severe’ level of limitation were at risk of 
poverty or social exclusion, compared to 29.3% on 
average in the EU. The difference in the at-risk of 
poverty  or  social  exclusion  rates  between  persons 
with  and  without  disabilities  is  much  higher  than 
the  EU  average  (19.1  pps  vs.  9.4  pps  in  the  EU). 
Evidence shows that this is strongly linked to low 
intensity  for  people  with  disabilities44. 
work 
Budget  2020  announced  a  modest  but  targeted 
social protection package. In 2020, the initiative is 
expected 
the 
allowance  for  a  person  with  disabilities  living 
alone. 

increase  by  €316  per  year 

to 

44   Academic  Network  of  European  Disability  Experts 
(ANED)  calculations  based  on  Eurostat  data.  Note:  Self-
reported  disability  in  Ireland  is  among  the  lowest  in  the 
EU. 

45 

0510152025303520052006200720082009201020112012201320142015201620172018%Children (<18y)Working age (18-64)Elderly (65+)Total                                                           
      
4.3. Labour market, education and social policies 

9%  in  2018  (Irish  Council  for  Social  Housing, 
201945). However, this share is still 3.5 pps lower 
than the one in 1981 (Hearne and Murphy, 2017). 
In 2018, the share of under-occupied social homes 
(46) was still relatively high.  

remain. 

Concerns  over  homelessness 
In 
November  2019,  the  Department  of  Housing, 
Planning  and  Local  Government  counted  6,696 
homeless adults and 3,752 homeless children. This 
represents an 8.7% increase in the overall number 
since  November  2018  and  a  50%  increase  since 
November  2016.  The  high  number  of  homeless 
children implies that family homelessness remains 
a  problem.  Of  the  1,685  homeless  families  in 
November  2019,  56%  were  single  parents  with 
children.  There  are  still  substantial  regional  and 
urban differences, with 67% of all homeless adults 
concentrated in Dublin. 

45   Meeting with representatives of the Irish Council for Social 
Housing on the Fact Finding mission in autumn 2019. 
46  An under-occupied social dwelling is a dwelling deemed to 
be too large for the needs of the household living in it, in 
terms of excess bedrooms. 

The 

strategy 

rehousing  programme;  2) 

Policy  measures  are  being  taken  to  tackle 
homelessness  but  their  effectiveness  is  still 
limited. 
for 
government 
homelessness since 2016 has three main pillars: 1) 
housing  and 
rent 
supplementation; and 3) supportive services in the 
form  of  emergency  housing  for  individuals  and 
especially  families.  Regarding  the  first  pillar, 
investment  is  currently  envisaged  to  facilitate  the 
delivery  of  54,000  new  social  homes  by  2021. 
However  ,  this  might  not  be  enough  to  cover  all 
social housing needs (currently 68,000 households 
on  social  housing  waiting  lists).  Construction  of 
social  housing  gained  momentum  in  2019  with 
8,172  units  already  completed  and  additional 
14,549  homes  under  development  in  the  third 
quarter  of  2019.  However,  attaining  the  desirable 
level of social housing completions will take time. 
While 
is 
progressing, a big part of the actual social housing 
needs is covered by the second pillar. A challenge 
posed by the rent supplementation schemes is that 
they might have an inflationary effect on the rental 
market.  

construction  of 

social  housing 

46 

                                                           
4.3. Labour market, education and social policies 

Box 4.3.2: Social housing policy and provision in Ireland 

Residential property and rental prices continued to increase, making it more difficult for low-income 
households to  buy a  property or access affordable  rental.  Nation wide residential property prices have 
increased by 85.7% since early 2013, and by 94.9% from their February 2012 low in Dublin alone. Rental 
prices continued to increase both nationally and in Dublin in 2018. In the third quarter of 2019 (Q3 2019), 
the  national  standardised  average  rent  stood  at  €1,243  a  month,  up  8.2%  from  a  year  earlier,  while  the 
average rent for Dublin was €1,762, an increase of €110 since Q3 2018 (RTB Rent Index). 

Shortages in social housing have created a challenging situation. Social housing as a share of the total 
housing  stock  has  decreased  from  12.5%  in  1981  to  between  8%  and  9%  in  recent  years  (Hearne  and 
Murphy, 2017; Irish Council for Social Housing, 2019). Even though social home delivery has accelerated 
since  2015,  there  were  still  68,000  households  on  social  housing  waiting  lists  and  over  10,000  homeless 
people in Ireland in November 2019.  

Policy  measures  to  increase  the  supply  of  social  housing  are  in  place  but  their  effectiveness  is  still 
limited. Rebuilding Ireland, the Government’s 6-year action plan seeks to deliver over 50,000 new social 
housing units by 2021, through build, acquisition and leasing programmes thus meeting the housing needs of 
an additional 88,000 households through a housing assistance payment and a rental accommodation scheme. 
As of Q3 2019, the delivery of social homes has slightly exceeded its targets for each year since the launch 
of  the  action  plan.  If  implementation  continues  according  to  plans,  Rebuilding  Ireland  will  provide  social 
housing to over 73% of households on the current waiting list. For the timely delivery of homes to continue, 
all potential structural barriers need to be addressed (see Section 3 and below). Further efforts are needed to 
cover the needs of remaining households on the current list and of potential new applicants. 

A more systematic re-assessment of individuals’ rights for social housing might increase efficiency in 
allocating  social  homes.  With  a  relatively  high  share  of  under-occupied  social  homes  (1)  and  increasing 
homelessness in Ireland, a regular re-assessment of needs, including in terms of home size, might make the 
market more efficient. It is important that strategic planning regarding the size of newly built social homes 
reflects  on  changes  in  family  composition  and  builds  on  a  lifecycle  perspective.  Furthermore,  the 
geographical allocation of new social housing units might benefit from more coordination at national level.  

The regulatory environment in the social housing market may become more stable with the enactment 
of  the  Housing  (Regulation  of  Approved  Housing  Bodies)  Act  2019.  The  Act  provides  for  the 
establishment of a Regulator to oversee the effective governance, financial management and performance of 
Approved Housing Bodies. The legislation aims to safeguard public and private investment in the sector by 
providing further assurances to investors, tenants, and the Government that social housing providers operate 
in a well-regulated and stable environment.   

(1)  An under-occupied social house/flat is a unit deemed to be too large for the needs of the household living in it, in terms 

of excess bedrooms. 

the 

third  pillar, 

the  government’s 
Regarding 
response  to  the  housing  crisis  has  included  the 
introduction  of  Family  Hubs  –  emergency 
accommodation for children  and families  who are 
homeless.  In  his  critical  evaluation  of  the  Family 
Hubs,  the  Ombudsman  for  Children  calls  on  the 
Irish  government  to  provide  long-term  social 
instead  of  emergency 
housing 
for  Children’s 
accommodation 
Office, 2019). 

(Ombudsman 

for  children 

4.3.4.  HEALTHCARE AND LONG-TERM CARE 

Public  expenditure  on  health  care  and  long-
term  care  is  relatively  high  and  both  systems 
face  fiscal  sustainability  challenges.  Ireland 
spends around one-fifth more on health per capita 
than  the  EU  average.  From  2009  to  2018,  public 
expenditure  on  healthcare  rose  by  9%  from 
€14.8bn 
to  €16.2bn,  above  what  would  be 
expected  due  to  the  impact  of  population  growth. 
The  main  growth  drivers  for  health  care  over  this 
increased  acute  hospital 
period  have  been 

47 

 
 
4.3. Labour market, education and social policies 

Profile  2019).  Following  a  2019  independent 
review,  the  government  has  made  a  decision  to 
commence a process during 2020 of progressively 
and  incrementally  removing  private  activity  from 
public hospitals– a fundamental reform envisioned 
in  Sláintecare.  While  there  are  plans  to  increase 
hospital  capacity,  tackling  this  issue  remains 
essential.  

improving 

service  delivery 

The  implementation  of  the  Sláintecare  Report 
has so far prioritised organisational change and 
capacity  increases  over  entitlement  expansion 
The  current  government  has  made  noteworthy 
steps to implement parts of the Sláintecare vision, 
mainly 
through 
organisational  changes  and  increases  in  capacity. 
However,  plans  to  achieve  universal  coverage  
remain  less  detailed  and  seem  to  have  been  put 
the  Sláintecare 
the  second  half  of 
back 
to 
implementation 
general 
2019 
period.  The 
practitioner  contract  agreement  expands  resources 
and capacity across general practice from 2020 to 
2024 but does not contain provisions for expansion 
of entitlement to reach universal coverage over this 
period.  Universal  coverage  is  a  key  element  of 
making  Ireland’s  health  system  accessible  and 
cost-effective  in  the  long-run,  therefore  clear 
milestones  and  deadlines  are  important  to  ensure 
its  timely  implementation.  Expansion  of  primary 
care supply alone may not be enough to rebalance 
the  system  from  hospital  care  to  primary  care  if 
patients without a health card can by-pass paying a  
to  a  hospital 
general  practioner  by  going 
emergency department for free.  

For 
to 
long-term  care,  Sláintecare  plans 
support  the  expansion  of  home  care,  but  more 
detailed work is needed to improve accessibility 
and  fiscal  sustainability.  The  Sláintecare  Report 
proposes  long-term  care  reforms,  ,  including  new 
ways  of  working  in  the  community  through 
reorganisation  of  nursing  resources.  However,  as 
in health care, the transition and implementation is 
crucial  to  ensure  that  the  stated  policy  aims  are 
achieved.  Stocktaking  of  existing 
facilities, 
projections  for  future  growth  in  demand,  and  a 
commensurate 
‘gap’  analysis  are  necessary, 
followed by a plan for delivery. 

the  use  of 

expenditure, staff numbers and pharmaceuticals. In 
addition, long-term care in the form of long care is 
under-provided  and  under-regulated,  with  policies 
institutional  care 
incentivising 
(European  Commission,  2018),  which  is  more 
expensive  than  home  care  for  dependency  levels 
below a certain threshold. Expenditure projections 
show  that,  this  together  with  the  ageing  of  the 
population  are  likely  to  further  increase  future 
health  care  and 
long-term  care  expenditure, 
leading  to  fiscal  sustainability  concerns  in  both 
areas (see Section 4.1.1). 

than  50%  of 

Increasing  the  cost-effectiveness  of  the  health 
system  may  help  create  fiscal  space  for  the 
universal  coverage  of  primary  care.  Health 
status  in  Ireland  has  improved  substantially  since 
2000,  partly  due  to  improvements  in  treatments. 
However,  Ireland  remains 
the  only  western 
European  country  without  universal  access  to 
the 
primary  care,  with  more 
population paying the full costs out of pocket for a 
general practitioner visit. This can lead to delayed 
care and ultimately more expensive emergency and 
hospital  treatment.  The  health  system  may  be 
underperforming 
capita 
expenditure  ((State  of  Health  in  the  EU,  Ireland 
Country  Health  Profile  2019).  In  2017,  an  Irish 
cross-party parliamentary committee published the 
Sláintecare  reform,  a  ten-year  strategy  to  achieve 
universal  access  to  healthcare  in  Ireland.  The 
reform  rollout  may  be  endangered  by  a  lack  of 
sufficient  expenditure  control  which  results  in  a 
misallocation  of  public 
(House  of 
Oireachtas, 2017). In 2019, Ireland set up a Health 
Budget  Oversight  Group  to  monitor  and  help 
control  spending  and  staffing  numbers.  While 
budget overspends have still  occurred through-out 
2019, it is expected that the work of the group and 
HSE have contributed to moderating them. 

despite 

funds 

high 

per 

Long  waiting  times  for  treatment  remain  a 
challenge  for  public  hospitals  despite  recent 
positive  developments..  Ireland  has  the  largest 
largest market for duplicate insurance in Europe. A 
two-tier health system, where those with the ability 
to  pay  for  treatment  privately  get  faster  access  to 
care,  including  in  public  facilities,  combined  with 
inappropriate  use  of  some  hospital  resources  and 
the  lack  of  universal  primary  care,  contribute  to 
long waiting times for patients in the public health 
system (despite some recent improvements). (State 
of  Health  in  the  EU,  Ireland  Country  Health 

48 

 
4.4. COMPETITIVENESS, REFORMS AND INVESTMENT 

4.4.1.  PRODUCTIVITY AND COMPETITIVENESS  

Ireland  remains  a  highly  competitive  economy 
by  international  standards.  Ireland  scores  well 
on major World Bank and World Economic Forum 
competitiveness  indicators.  Productivity  growth 
continues  to  be  strong,  particularly  driven  by  the 
activities of foreign multinational enterprises, even 
though  the  rest  of  the  economy  also  performs 
better  than  many  other  European  countries  (see 
graph 4.4.1). There has also been a wide variation 
in  labour  productivity  growth  across  different 
sectors (see graph 4.4.2.). 

Graph 4.4.1:  Average labour productivity growth, 2010-

2017 

Source: CSO, Eurostat 

Graph 4.4.2:  Labour productivity index of main sectors 

in 

labour  productivity  growth 

other’ sector47, both above the EU average of 1.3% 
(National  Competitiveness  Council,  2019c).  In 
particular, 
the 
foreign  sector  was  6.1%  in  2017,  against  0.6%  in 
the  ‘domestic  and  other’  sector  (Central  Statistics 
Office,  2019c) 
(see  graph  4.4.3).  Foreign 
multinationals’  productivity  is  enhanced  by  the 
investment  they  tend  to  make  -  focused  on  R&D, 
while investment by domestic firms remains weak 
(see section 4.4.4.). In 2017, the annual growth in 
gross value added in sectors dominated by foreign-
owned multinationals was significantly higher than 
in other sectors (see graph 4.4.3).   
Graph 4.4.3:  Labour productivity and GVA, 2017 

Source: CSO 

Productivity is particularly high  in large firms, 
in  just  a  few  specific  sectors  of  economy. 
(notably  pharmaceuticals  and 
Manufacturing 
chemicals) made the largest contribution to labour 
productivity  growth  during  2000-2017,  followed 
by ICT, professional, scientific, administrative and 
support  services.  In  2018,  labour  productivity 
further  accelerated  in  manufacturing  and  services, 
where  it  was  9.1%  and  4.7%  respectively.  This 
increase  was 
total  factor 
productivity  growth,  which  increased  by  6.2%  in 
2018.  

turn  driven  by 

in 

Source: CSO 

The  foreign-owned  multinational  sector  is  the 
major driver of productivity, greatly improving 
the  competitiveness  of  the  Irish  economy.  
Annual  average  growth  of  labour  productivity  in 
multinational  firms  during  2000-2017  was  9.3%, 
compared  to  2.3%  growth  in  the  ‘domestic  and 

This  productivity  concentration  increases  the 
vulnerability  of  the  economy  to  sector-specific 
shocks.  The  National  Competitiveness  Council  

47  Foreign-owned  Multinational  Enterprise  (MNE)  dominated 
NACE A64 sectors occur where MNE turnover on average 
exceeds  85%  of  the  sector  total.  These  sectors  are 
Chemicals  and  chemical  products  (NACE  20),  Software 
and  Communications 
(NACE  58-63)  and 
sectors 
Reproduction  of  recorded  media,  Basic  pharmaceutical 
products  and  Pharmaceutical  preparations,  Computer, 
electronic  and  optical  products,  Electrical  equipment, 
Medical and dental instruments and supplies (NACE 18.2, 
21,  26,  27  and  32.5).  All  other  sectors  are  categorised  as 
domestic  and  other  sectors.”  (Central  Statistics  Office 
2019c, Appendix) 

49 

0510Annual Average Percentage Change050100150200250300350400ManufacturingConstructionInformation and communicationFinancial and insurance activitiesPublic Administration and DefenceTotal024681012Labour productivityHours workedGVAy-o-y %Foreign sectorDomestic sectorTotal 
    
 
   
    
                                                           
4.4. Competitiveness, reforms and investment 

There  are  several  challenges  affecting  the 
competitiveness  of  Irish  firms.  The  National 
Competitiveness Council in 2019 Competitiveness 
Challenge report focuses on the high cost of credit, 
legal  services  and  general  liability  insurance  as 
well  as  digital  economy,  infrastructure,  skills  and 
education.    The  Irish  Seanad  (Senate)  report  also 
highlights  a  number  of  major  issues  that  are 
threatening the viability of SMEs or are a barrier to 
growth,  notably  the  increasing  cost  of  doing 
business  in  Ireland  and  the  design  of  certain  tax 
provisions.  The 
and 
cost  of 
commercial  rent  and  the  cost  of  credit,  insurance 
and  of  business  services  are  a  particular  concern 
for 
Irish  SMEs (Seanad  Public  Consultation 
Committee, 2019). 

construction 

4.4.2.  INNOVATION  

Ireland  is  a  strong  innovator  and  ranks  10th  in 
the  European  Innovation  Scoreboard  2019.    It 
performed best in terms of impact of innovation on 
employment, presence of innovators and quality of 
human  resources,  including  share  of  population 
with tertiary education. Two of its weakest aspects 
are,  are  public  financial  support  for  R&D  and 
public-private  linkages  (European  Commission 
2019m).  Ireland  is  also  placed  12th  in  the  world 
and  7th  among  EU  member  states  in  the  Global 
Innovation  Index  (World  Intellectual  Property 
Organisation, 2019). 

While  there  are  many  strong  elements  in 
Ireland’s research and innovation system, some 
weaknesses  need  to  be  addressed.  In  particular, 
this  concerns  the  amount  of  R&D  funding,  the 
structure  of  public  support  for  business  R&D  and 
cooperation between firms and research bodies.  

Ireland’s current strategy for R&D, science and 
technology  until  2020  is  set  out  in  Innovation 
2020.  (DBEI,  2015).  A  mid-term  review  suggests 
that  most  of  its  objectives  are  on  course  to  be 
achieved.  Progress  so  far  includes  the  creation  of 
five  new  research  centres  by  Science  Foundation 
Ireland  and  the  establishment  of  a  Disruptive 
Technologies  Innovation  Fund,  with  a  total  value 
of  €500  million  until  2027, 
to  encourage 
collaboration  between  industry  including  large 
companies and multinationals but especially SMEs 
and  the  research  sector  in 
  developing  and 
deploying such technologies and applications on a 

to 

that 

leaves 

it  highly  exposed 

warns that Ireland’s economy is concentrated in a 
way 
the 
performance of a small number of firms in a small 
number  of  sectors  (National  Competitiveness 
Council,  2019c).  These  vulnerabilities 
are 
amplified  by  concentration  of  export  markets, 
notably  the  US  which  takes  a  quarter  of  all 
exports)  and  the  UK  (11%  of  all  exports).  This 
calls for a diversification of the economy and more 
diffusion of innovation from foreign multinational 
companies to local ones (see Section 4.4.2).  

framework 
The  cross-government  strategic 
Future  Jobs  Ireland  was  launched  in  2019  to 
define  a  new  economic  pathway  for  Ireland. 
This  framework  aims  to  support  innovation  and 
technological  change,  improve  the  small  and 
medium  enterprises  (SME)  productivity,  enhance 
skills,  increase  labour  force  participation  and 
smooth the transition to a low carbon economy. It 
is  intended  to  be  an  evolving  agenda  capable  of 
to  new  economic  challenges  and 
adapting 
opportunities 
through  a  comprehensive  cross-
government  approach.  The  strategy  identifies  key 
measures that have the potential to help address the 
weaknesses of the domestic economy, in particular 
concerning  SMEs.  Full  and  swift  implementation 
is  key  to  make  real  progress.  However,  according 
to the first progress report covering the first half of 
2019,  the  completion  rate  was  only  68%  (23 
measures were on target while 11 were delayed). 

Within the Future Jobs  Ireland framework, an 
SME strategy is expected to be launched in mid 
2020.  To  this  end,  an  SME  and  Entrepreneurship 
Consultation  Group  has  been  tasked  with  the 
follow-up to the recommendations from the OECD 
Review  of  SME  and  Entrepreneurship  Policy  in 
Ireland  (OECD,  2019b).  The  group  aims  to 
provide  a  platform  for  structured  engagement 
between  government,  agencies, 
representative 
bodies  and  small  businesses.  In  the  meantime, 
Government  has  completed  the  pilot  phase  of  its 
methodology to assess the impact of legislation on 
SMEs (the so-called SME test). In July 2019, each 
government department nominated a senior official 
as the designated point of contact in relation to the 
implementation  of  the  SME  Test  as  part  of 
Regulatory 
relevant 
legislation..  Despite  the  debate  on  the  extent  to 
which taxation is fit for SMEs, the SME test does 
not apply to taxation measures. 

Impact  Assessments  on 

50 

4.4. Competitiveness, reforms and investment 

for only 19% of all relevant firms, they accounted 
for  €2.9bn  or  64%  of  all 
innovation-related 
expenditure,  including  €1.4bn  on  in-house  R&D 
(Central Statistics Office, 2018b).  

Although  Ireland  provides  a  relatively  high 
amount of public support for companies, this is 
largely through an R&D tax credit. The cost of 
the 
tax  credit  has  risen  substantially  since 
introduction,  peaking  in  2015  at  €708m  before 
falling  back  to  €448m  in  2017,  and  a  significant 
share  is  claimed  by  large,  foreign-owned  firms. 
Direct  grant  support  for  R&D  rose  until  2010  but 
has  since  fallen  (Department  of  Finance,  2016). 
Recent  changes  seek  to  make  the  tax  credit  more 
attractive  for  micro  and  small  companies  and  the 
cap  on  outsourcing  to  third  level  institutions  has 
increased  (Department  of  Finance,  2019g).  While 
the  R&D  tax  credit  provides  valuable  support, 
more priority for direct funding instruments could 
innovation  and 
research  and 
help  stimulate 
improve  productivity  of  Irish  firms  especially 
SMEs (European Commission, 2019l)..  

under 

proposals 

firms  and  public 
Cooperation  between 
research centres continues to develop but faces 
challenges.  The  first  two  calls  for  collaborative 
project 
the  Disruptive 
Technologies Innovation Fund in 2018 and 2019 
allocated  €140  million  for  43  projects  involving 
collaborative  partnerships  (comprising  of  159 
organisations)  between  industry  and  SMEs,  and  
public  research  bodies,  in  applying  industrial 
research  under  the  six  themes  of  the  revised 
Research  Priority  Areas,  in  areas  such  as  health, 
climate  action,  food,  ICT  and  manufacturing 
(DBEI  2018/2019).  Also,  Innovation  2020  aims 
to  double  private  funding  of  R&D  in  the  higher 
education  sector  to  €48  million  by  2020  (DBEI, 
2019a).  However, 
collaboration 
between  Science  Foundation  Ireland  (SFI)  and 
the business sector rose between 2013 and 2017, 
an increasing share of this collaboration has gone 
to  multinational  firms  while  the  share  of  SMEs 
has  declined  (Department  of  Public  Expenditure 
& Reform (DPER), 2019c) 

although 

commercial  basis  (DBEI,  2019a).  Future  Jobs 
Ireland  2019  identifies  the  means  for  achieving 
quality  jobs  that  will  be  resilient  into  the  future 
including developing Ireland as a centre for testing 
new technologies, while also addressing the impact 
of  economic  transition  on  vulnerable  workers 
(Government of Ireland, 2019a).   

low 

However,  relatively 
levels  of  R&D 
investment  are  a  continuing  concern.  Ireland’s 
R&D  intensity  (gross  domestic  expenditure  on 
R&D  (GERD)  as  a share  of  GDP)  was  1.15%  in 
2018  compared  to  an  EU  average  of  2.11%  (48). 
Although GERD is growing in absolute terms, this 
is  not  keeping  pace  with  strong  economic  growth 
and Ireland is unlikely to achieve the target of 2.5 
timeframe  of  2020 
the 
%  of  GNP  within 
(Government of Ireland, 2019a).  

Public  R&D  expenditure,  while  increasing,  is 
still lower than past levels of investment, both in 
absolute  terms  and  as  a  percentage  of  GDP. 
Although  estimated  at  €766  million  in  2018,  up 
from  €739  million  in  2017,  the  level  of  the 
for  R&D 
government  budgetary  allocation 
(GBARD) is still well below the pre-crisis peak of 
€ 930  million  in  2008.  Public  R&D  intensity  is 
also  significantly  lower  than  the  EU  and  OECD 
averages (DBEI, 2019c).  

(BERD) 

While  business  R&D 
in  Ireland 
amounted  to  almost  €2.8  billion  or  0.86%  of 
GDP  in  2018  and  is  increasing  in  absolute 
terms,  it  is  considerably  below  the  EU  average 
of 1.41%. Also, in 2017 foreign owned companies 
accounted  for  69%  of  all  R&D  expenditure  and 
they  comprised  82%  of  the  largest  100  firms  by 
R&D  spend  (Central  Statistics  Office,  2018a).  
Furthermore,  despite  SME  innovation  indicators 
being  above  the  EU  average,  in  2016  a  general 
deterioration has been registered compared to 2014 
(European  Commission,  2019m).  In  2016,  only 
36%  of  Irish-owned  companies  (accounting  for 
81%  of  all  relevant  firms)  spent  on  innovation, 
compared  to  43%  of  foreign-owned  companies. 
Even  though  foreign  owned  companies  accounted 

(48)  Ireland is in just 20th place in the EU in 2018 in terms of 
R&D  intensity  measured  against  GDP,  although  this  is 
the  composition  and 
affected  by 
measurement of Ireland’s GDP.  In terms of modified GNI 
(GNI*),  that  excludes  distortions  from  foreign-owned 
firms, Ireland has a R&D intensity of 2% (2017).  

issues  relating 

to 

51 

  
                                                           
4.4. Competitiveness, reforms and investment 

financing  channels.  As 

sufficient  to  focus  on  helping  SMEs  make  use  of 
existing 
for  overall 
strategies,  the  Irish  Industry  4.0  strategy  was 
launched  in  December  2019  and  work  is  also 
underway to adopt a National Digital Strategy, and 
an  Artificial  Intelligence  Strategy.  Ireland  is  also 
member  of 
the  European  High-Performance 
Computing Joint Undertaking.   

Future-proof  digital 
infrastructure  remains 
crucial  for  the  digital  transformation  of  the 
economy.  For  rural  Ireland,  while  fast  broadband 
reached almost 90% (well above the EU average of 
52%), ultrafast broadband is  only available to 5% 
of  rural  premises  (well  below  the  EU  average  of 
29%).  Overall  (including  both  rural  and  urban 
premises),  at  56%  ultrafast  coverage  in  Ireland  is 
also  below  the  EU  average  (60%).  Ireland  is  also 
one of the EU's most expensive countries for fixed 
broadband.  Regarding  5G  networks, 
Ireland 
performs  relatively  well  on  the  5G  readiness 
indicator,  as  it  assigned  spectrum  in  the  3.4-3.8 
GHz band by the end of 2018 and the spectrum is 
expected  to  become  available  for  use  for  5G  by 
2020. 

The  public-funded  part  of 
the  National 
Broadband  Plan  is  ready  to  start.  On  19 
November 2019, the Government signed a contract 
for  implementing  public  intervention  under  the 
National  Broadband  Plan,  following  State  aid 
approval  from  the  European  Commission.  The 
public  intervention  covers  rural  premises  where 
private  commercial  operators  would  not  have 
rolled  out  high  speed  broadband.  With  an 
indicative budget of €2.6 billion, it aims to rollout 
a  predominantly  fibre  network  ensuring  ultrafast 
coverage  to  around  540,000  premises  in  rural 
Ireland.  The  contractor  will  also  maintain  and 
operate  this  state-funded  network  over  a  25-year 
term,  offering  wholesale  services  on  an  open-
access  basis  during  this  period.  The  scheme 
complements  investment  made  by  commercial 
operators, who have invested over €2.75 billion in 
upgrading and modernising their networks over the 
past  5  years,  with  further  investment  planned, 
covering most premises.  

4.4.4.  INVESTMENT  

4.4.3.  DIGITISATION AND ULTRAFAST 

BROADBAND  

Irish  SMEs(49)  continue  to  excel  in  integrating 
certain  digital  technologies,  but  lag  behind  in 
others.  Overall  around  32%  of  SMEs  in  Ireland 
can  be  considered  highly  or  very  highly  digitised 
above  the  EU  average.  Irish  SMEs  continue  to 
excel  in  e-commerce:  a  growing  35%  of  Irish 
SMEs  sell  online  and  18%  sell  outside  Ireland, 
well  above  the  EU  averages  of  18%  and  8% 
respectively.  29%  of  the  total  turnover  generated 
by  SMEs  comes  from  online  sales,  almost  three 
times the EU average of 11%. Irish companies also 
rank relatively  high on the use  of big data  (20%), 
cloud services (33%) and social media (44%).  On 
the  other  hand, Irish SMEs are just near or below 
the EU average when it comes to adopting other e-
chain 
business 
planning, 
management, 
customer 
radio 
frequency  identification,  etc.)  According  to  the 
EIB  the  construction  and  manufacturing  sectors, 
which together account for almost a third of SMEs 
in  Ireland,  are  lagging  behind  other  sectors  in 
adopting digital technologies. 

relationship  management, 

technology 

enterprise 

resource 

supply 

(e.g. 

funding  gaps 

The  European  Investment  Bank  has  identified 
knowledge  and 
that  are 
preventing the digitisation of Irish SMEs. In its 
March 2019 report it identified a scope to develop 
effective  financing  mechanisms  to  facilitate  the 
integration  of  digital  technologies  on  the  demand 
side  to  help  SMEs  willing  to  take  advantage  of 
digitisation.  It  is  also  recommended  to  strengthen 
the 
tech 
companies.  Finally,  while  recognising  various 
government  initiatives  to  support  the  digitisation 
of  businesses  in  Ireland,  the  EIB  notes  that  these 
are  not  fully  coordinated  between  government 
entities and are not embedded in a holistic national 
digital strategy.  

supporting 

side  by 

supply 

local 

The  Irish  Government  welcomed 
  the  EIB`s 
findings and initially committed to develop a pilot 
scheme  aimed  at  addressing  the  difficulty  that 
SMEs have in accessing finance in order to benefit 
from digitalisation. Following a further assessment 
of demand and financing channels available, and in 
view of the EU COSME pilot scheme launched in 
October 2019, it has subsequently been considered 

(49)  The  data  and  analysis  below  excludes  micro-enterprises 

with less than 10 employees. 

Total 
investment  has  recovered  after  the 
economic  downturn  but  the  main  investors 

52 

 
                                                           
4.4. Competitiveness, reforms and investment 

foreign 

spill-over  to  domestic  firms,  and  which  could 
provide  a  certain  substitute  for  investment,  is 
relatively  low.  This  calls  for  policies  facilitating 
and  domestic 
interactions  between 
companies  (National  Competitiveness  Council, 
2019b).  Domestic  investment  is  also  hindered  by 
the existence of structural barriers (see Box 4.4.1.) 
which  force  companies,  particularly  smaller  ones, 
to  rely  on  internal  resources  or  abstain  from 
investment. 

Graph 4.4.5:  Source of investment finance, 2017 

remain  multinational  companies.  Headline 
investment  figures  in  Ireland  are  volatile  and 
largely  inflated by the activities of  multinationals. 
Investment  by  multinationals  has  particularly 
increased  since  the  crisis,  reflecting  Ireland’s 
efforts  to  attract  them  and  restart  the  economy. 
Intellectual  property  is  by  far  the  main  type  of 
investment  made  by  multinationals,  followed  by 
smaller-scale  but  still  substantial  investment  in 
aircraft leasing. In 2015-2018, this accounted for a 
vast majority of all investments (see graph 4.4.4.). 
In  the  first  half  of  2019,  investment  sharply 
in 
increased,  again  bolstered  by 
intellectual 
‘core’ 
investment, which better reflects domestic activity, 
rose in 2018 but  fell  in the  first half of 2019 (see 
Section 1).  

Underlying 

investment 

property. 

Graph 4.4.4:  Intellectual Property Investments v Total 

Investments 

Source: Central Bank of Ireland, SME Market Report 2019 

Graph 4.4.6:  Sectoral investment rates 

Source: Eurostat 

large  gap  between 

The 
investment  by 
multinational  corporations  and  by  domestic 
firms  increases  the  dichotomy  of  the  Irish 
economy.  Productivity  in  the  multinational  sector 
headquartered  in  Ireland  is  very  high,  determined 
by  large-scale  investment,  particularly  in  research 
and development. Hence, Ireland’s export share in 
global trade keeps increasing. Meanwhile domestic 
firms invest relatively little, despite the post-crisis 
economic  rebound,  which  typically  favours  more 
investment.  The  unknown  terms  of  the  UK’s 
withdrawal  might  have  weighted  down 
their 
investment  decisions.  Lack  of  investment  hinders 
the productivity of domestic firms, which remains 
foreign  multinationals. 
that  of 
well  behind 
Furthermore,  domestic 
foreign 
sourcing  by 
companies,  which  allow  knowledge  and  skills  to 

Source: Eurostat 

and 

Industry  is  the  main  recipient  of  investment  in 
information  and 
Ireland,  followed  by  the 
communication 
sectors 
sector 
encompassing trade, transport, accommodation 
and  food  services.  On  the  back  of  large-scale 
investment,  the  industrial  sector  was  the  main 
contributor to Irish GDP in value added terms over 
several  years,  with  its  share  increasing  to  39%  of 
the total gross value added in 2018. This sector has 
also  been 
the  most  productive  since  2000. 
However, this type of investment is likely to have 

53 

05101520253035402000200120022003200420052006200720082009201020112012201320142015201620172018EU28 - Total investmentIE- Total investmentEU28 - Investment in intellectual property productsIE - Investment in intellectual property products% of GDP0%10%20%30%40%50%60%70%80%90%100%MicroSmallMediumAllMicroSmallMediumAllIREEUIntra-groupExternalInternal024681012Agriculture, forestry and fishing (A)Industry (except construction) (B-E)Construction (F)Wholesale, transport and tourism (G-I)Information and communication (J)Financial and insurance activities (K)Real estate  (L)Professional and support services (M-N)Public administration (O-Q)Arts and recreation (R-U)2005-20102011-20152016-2018% of GDP    
    
 
    
4.4. Competitiveness, reforms and investment 

neutral and circular economy. The Climate Action 
Plan  published  in  June  2019  (see  Section  4.4.5) 
specifies that public investment will remain at the 
level identified in the National Development Plan. 
It  is  difficult  to  rule  out,  however,  that  public 
investment  needs  will  remain  unaffected  by  the 
additional  policies  and  measures  foreseen  in  the 
plan.  Insufficient  digital  infrastructure,  including 
the  ultrafast  broadband,  is  also  a  barrier  to  long-
term  investment.  In  contrast  to  other  physical 
infrastructure,  there  were  efforts  to  address  this: 
investment  in  ICT  infrastructure  has  increased 
considerably in recent years, and there are concrete 
plans to further improve it (see section 4.4.3.).  

Graph 4.4.8:  Proportion of firms that are finance constrained 

Source: EIBIS 2019 

low 

from 

levels. 

Public capital investment is on an upward path, 
though 
In  2018,  public 
investment  increased  to  1.9%  of  GDP  (3.1%  of 
modified  gross  national  income,  GNI*),  and  is 
planned to reach 2.1% of GDP (3.5% of GNI*) in 
2019.  This  investment  is  concentrated  in  four 
sectors:  transport,  housing,  education  and  health, 
which  account  for  more  than  70%  of  overall 
expenditure. In each of these sectors, investment in 
physical infrastructure dominates. While budgeted 
expenditure  has  noticeably  increased  lately  and  is 
expected  to  keep  rising  (see  Section  1.7.),  it  will 
take a considerable effort to address the investment 
gaps that have accrued over the sustained period of 
low investment (2011-2017).  

the 

the 
Investment 

environmental 
in 

footprint 
increased 
substantially. 
information  and 
communication (ICT) was also substantial and led 
to a marked increase in its productivity and of the 
sector’s value added creation. Retail and wholesale 
trade,  transport,  accommodation  and  food  service 
activities  were 
largest  recipient  of 
third 
investments  in  Ireland,  but,  in  contrast,  relative 
value  added  by  this  agglomerated  sector  has 
the 
declined  over 
largest 
receiver  of 
in  pre-crisis  years, 
subsequently  saw  a  sharp  contraction.  Despite 
recent  renewed  interest  by  investors,  the  sector’s 
relative  value  added  and 
the 
economy continued to decline. 

time.  Construction, 

importance 

investment 

in 

Graph 4.4.7:  GVA by sector 

Source: Eurostat 

Investment in infrastructure appears necessary 
to  support  economic  growth.  Among  the  factors 
that enable firms to thrive, Ireland scores relatively 
low  in  infrastructure  (World  Economic  Forum, 
2019).  After  several  years  of  low  private  and 
public  investment  in  infrastructure,  the  available 
infrastructure  has  come  under  increasing  strain. 
The  financing  constraints  may  play  a  role  in 
infrastructure  underinvestment  (see  graph  4.4.8.). 
While  investment  is  needed  to  improve  quality  of 
roads,  transport  infrastructure  investment  dropped 
substantially  from  2015  and  has  not  recovered 
since.  Mobilising  additional  investment  in  the 
utility sector (electricity, water and wastewater) is 
required  to  ensure  the  transition  to  a  climate 

54 

0510152025303540Agriculture, forestry and fishing (A)Industry (except construction) (B-E)Construction (F)Wholesale, transport and tourism (G-I)Information and communication (J)Financial and insurance activities (K)Real estate  (L)Professional and support services (M-N)Public administration (O-Q)Arts and recreation (R-U)2005-20102011-20152016-2018% of totalGVA0%2%4%6%8%10%12%AllConstructionIntrastructureManufacturingServicesIrelandEU Average    
    
 
4.4. Competitiveness, reforms and investment 

Box 4.4.1: Investment challenges and reforms in Ireland 

Section 1. Macroeconomic perspective 

The  investment-to-GDP  ratio  stood  at  22%  in  2018,  somewhat  down  from  previous  years.  Investment  in  Ireland  is  very 
volatile,  with  headline  figures  inflated  by  the  activities  of  multinational  companies.  After  a  sharp  contraction  in  2018          
(-21%),  investment  jumped  in the  first half  of  2019  (112%  y-o-y),  driven  by  investments  in intellectual  property,  and  is 
projected to increase by 44% for the year as a whole. Meanwhile, domestic investment is dragged down by uncertainties 
(particularly related to the terms of the UK’s withdrawal from the EU), although some part of it, notably construction, is 
holding up well. Public investment is on an upward path.  

Assessment of barriers to investment and ongoing reforms  

In  additional  to  cyclical  macroeoconomic  issues,  investment  faces  several  structural  barriers.  For  small  and  medium 
enterprises  (SMEs),  affordability  of  financing  is  one  of  the  main  obstacles.  Ireland  scores  low  (among  the  five  worst 
countries in the EU) according to the European  Investment Fund’s SME’s finance index (1).  Irish firms are particularly 
dissatisfied  with  the  cost  of  finance  (see  Section  4.2.4),  the  type  of  finance  available,  and  the  collateral  requirements 
(EIBIS, 2019). The SME financing problem is also pointed out in the World Economic Forum Report (2019). As a result, 
Irish firms have to rely more on internal sources of investment financing (see graph 4.4.6).  

The  other  barriers  to  investment  are  energy  costs,  availability  of  skilled  staff  (see  Sections  4.3.1.  and  4.3.3.),  labour 
market  regulations  and  lack  of  appropriate  infrastructure.  As  regards  the  latter,  several  fields  with  insufficient 
infrastructure were identified, notably transport, utilities, digital (see Section 4.4.4.) and environmental infrastructure (see 
Section 4.5). Housing affordability also remains an important barrier. 

The EU supports investment and growth via the European Fund for Strategic Investments (EFSI). By December 2019 total 
financing under the EFSI amounted to € 1,507 million, intended to trigger EUR 7,247 million in additional investments. 
The  current  experience  with  the  EU  financial  instruments  and  the  EFSI  budgetary  guarantee  demonstrated  a  need  for 
simplification,  streamlining and better  coordination  of  the  EU’s  investment  support  instruments during the  next  2021-27 
programming period. By the end of 2020, EFSI and other EU financial instruments will come under the roof of the new 
InvestEU programme that promotes a more coherent approach to financing EU policy objectives and increases the choice 
of policy implementation options and implementing partners to tackle country specific market failures and investment gaps. 
In addition, under InvestEU, Member States can set-up a national compartment by allocating up to 5% of their structural 
funds  to  underpin  additional  guarantee  instruments  supporting  the  financing  of  investments  with  a  higher  level  of  local 
specificities.  InvestEU  will  be  policy-driven  and  focus  on  four  main  areas,  all  relevant  for  Ireland:  Sustainable 
Infrastructure, Research, Innovation, and Digitisation, Small Businesses, and Social Investment and Skills.  

(1)  which  itself  is  composed  of  four  sub-indices,  related  to  loans,  equity,  credit  and  leasing  as  well  as  general  macro-

economic environment. 

55 

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, skills, lifelong learning CSREnergyTransportLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
 
 
 
4.4. Competitiveness, reforms and investment 

advertising 

Regulation  Act  of  2015,  restrictions  remain  in 
place in the provision of legal services, hampering 
competition and thus increasing legal costs, to the 
in  particular. 
detriment  of  small  businesses 
Implementation  of  the  Act  is  ongoing,  with 
preparatory  work  and  public  consultations  under 
way.  However,  no  regulations  have  been  adopted 
so  far,  including  on  key  issues,  prioritised  under 
the  Strategic  Plan  2018-2020  such  as  regulations 
on 
legal 
partnerships  and  limited  liability  partnerships. 
Furthermore,  open-ended  provisions  allowing  for 
legal  persons  engaged  in  legal  practice  both  in 
Ireland and throughout the EU to become partners 
in law firms set-up in Ireland are yet to materialise, 
even in draft form. Other reforms, crucial to ensure 
a  dynamic  and  competitive  legal  service  market, 
introduction  of  multidisciplinary 
such  as 
practices  and  direct  professional  access 
to 
barristers,  lack  a  firm  implementation  schedule  as 
yet. 

introduction  of 

and 

the 

facing 

capacity 

constraints 

The  premiums  for  motor  vehicle  and  liability 
insurance  policies  have  been 
increasing 
significantly  in  recent  years.  This  development 
can be explained by a number of factors specific to 
the Irish market. One of the principal factors is the 
raising of the maximum liability award limits and a 
general lack of guidance on the amounts courts can 
award in injury cases. In addition, the Irish police 
have  been 
in 
investigating  fraudulent  and  exaggerated  claims 
cases.  Recent  data  from  the  Central  Bank  of 
Ireland on private  motor vehicle insurance reveals 
that  increased  cost  of  claims  can  only  explain  a 
part  of  the  recent  hike  in  insurance  premiums, 
(CBI, 2019c). Legal costs in personal injury cases, 
which  have  also  grown  significantly  in  recent 
years,  are  also  driving  up  the  cost.  In  addition, 
several  insurers  have  left  the  motor  vehicle  and 
liability 
insurance  markets,  driven  partly  by 
increased  costs  and  uncertainty  in  this  line  of 
business.  This  development  has  undermined 
competition,  resulting  in  an  additional  potential 
upward pressure on insurance premiums. 

In 

are 

there 

skilled 

contrast, 

although 

to  work 

low-quality 

In  social  infrastructure,  Ireland  leads  in  some 
fields but lags in others. Long-term, flexible and 
efficient  investment  in  education,  health  and 
affordable  housing  is  vital  for  economic  growth 
and welfare as it reduces transaction costs, enables 
knowledge  and  innovation  and  boosts  community 
resilience. 
social 
infrastructure  may  limit  economic  opportunities, 
cause  markets 
less  efficiently  and 
marginalise  some  groups  (European  Commission, 
2018b).  Ireland’s  current  workforce  is  generally 
highly 
some 
shortcomings (see section 4.3.3.), but the skills of 
the  future  workforce rank  much lower than of  the 
current,  according  to  the  World  Economic  Forum 
(WEF)  Global  Competitiveness  Report  (2019). 
This  suggests 
in 
education,  particular  linked  to  pupil-to-teacher 
ratio  (primary  education)  and  development  of 
critical  thinking.  While  life  expectancy  in  Ireland 
is above the EU average, the healthcare system in 
Ireland    has  serious  weaknesses  (see  section 
4.3.4.).  But  there  are  in-depth  reform  plans  and 
investment  is  ongoing  in  this  field  (e.g.  the 
National  Children’s  hospital).  The 
the  most 
problematic factor in the social infrastructure pillar 
is  affordable  housing  (see  section  4.3.2.  and  Box 
3.1.).  

investments 

the  need 

for 

Mobilising  additional 
investment  might  be 
required  to  ensure  the  transition  to  a  climate 
neutral  and  circular  economy.  Ireland  has  not 
broken the link between greenhouse emissions and 
economic  growth  and  has  been  consistently 
lagging  in  implementing  climate-related  policies 
and  measures.  The  publication  of  the  Climate 
Action  Plan  in  June  2019  constitutes  a  potential 
breakthrough  (see  Section  4.4.5),  but  the  plan 
makes it clear that public investment will remain at 
the  level  identified  in  the  National  Development 
Plan. It is difficult to rule out, however, that public 
investment  needs  will  remain  unaffected  by  the 
additional  policies  and  measures  foreseen  in  the 
plan.  

4.4.5.  MARKET FUNCTIONING  

The tackling of barriers in the market for legal 
services  lacks  ambition  and  is  much  delayed.  
the  Legal  Services 
Since 

the  adoption  of 

Addressing  barriers  to  entry  in  the  retail 
market  could  support  competitiveness  and 
consumer  choice (European  Commission,  2019c) 
the  ‘Retail  Planning 
A  future  evaluation  of 
Guidelines’  could  consider  how  requirements  on 
shop  size  and  location,  such  as  the  sequential 
approach or maximum retail floor caps, contribute 

56 

 
4.4. Competitiveness, reforms and investment 

4.4.6.  REGIONAL DISPARITIES  

Regional  disparities  in  terms  of  regional  GVA 
per  capita  in  Ireland  are  among  the  highest  in 
the  EU,  and  they  are  increasing. (Eurostat, 
2017).  Regional  growth  follows  a  distinct  spatial 
pattern  with  particularly  dynamic  developments 
around  Dublin  and  Cork (51).  This  is  due  to  the 
location  of  a  limited  number  of  globally  highly 
competitive  multinational companies around these 
cities 
business 
environment  that  has  developed  around  them. 
While  Dublin  has  a  regional  GVA  per  capita  of 
248%  of  the  EU  average,  the  region  bordering 
Northern  Ireland 
is  at  66%.  The  difference 
between the richest and the poorest NUTS3 region 
in Ireland doubled between 2000 and 2016. (52) 

growth-friendly 

and 

the 

Graph 4.4.9:  Labour productivity, EU28, NL NUTS-2 regions 

Source: Eurostat 

Stark  differences  in  productivity  levels  are  one 
these  growing 
important  driver  behind 
disparities.  The  Southern  region  is  the  most 
productive  region  (240%  of  the  EU  average), 
followed by Eastern and Midland (190%), which is 
close  to  the  Irish  average  of  192%.  Northern  and 
Western  Ireland  is  significantly  less  productive  at 
98% of the EU average.  Real productivity  growth 
was  very  high  at  6.6%  in  Southern  Ireland  and 
around 3.2% in the other two regions, contributing 
labour 
to  widening  disparities.  Furthermore, 
productivity  at  NUTS3  level  has  continued  to 
diverge widely in 2004-2016 (see graph 4.4.11).  

(51)  NUTS3 regions Dublin region and South-West region.  
(52)  GVA per capita at NUTS 3 level, Central Statistical Office 

to  vibrant  city  centres.  Some  existing  rules  risk 
deterring,  delaying  or  increasing  the  costs  of 
opening  new  shops 
(European  Commission, 
2018d)  Assessing  whether  less  restrictive  rules, 
can  be  equally  effective  in  achieving  the  public 
policy  objectives  pursued,  might  contribute  to  a 
more  dynamic  market.  This  might  also  give 
the 
retailers 
transformation  the  sector  is  undergoing  with    the 
growth  of  e-commerce  and  changes  to  the  supply 
chain (European Commission, 2019c). 

to  adapt 

flexibility 

some 

to 

two 

Ireland has notified relatively few national draft 
technical  regulations  under  the  Single  Market 
Transparency Directive. In 2018, Ireland notified 
the  Commission  about 
technical 
just 
the  average  of  24 
regulations,  well  below 
notifications per Member State. In the previous 10 
years,  Ireland  had  consistently  notified  very  little 
(about  five  notifications  a  year).  Certain  draft 
technical regulations, which could have a negative 
impact on trade, might not have been notified. As a 
result,  the  Commission  and  stakeholders  did  not 
have a chance to react. This risks creating barriers 
to  trade,  affecting  economic  growth  and  the 
functioning  of  the  single  market,  as  a  tool  for 
competitiveness.(50). 

One  year  after  its  launch,  the  new  all-island 
electricity  market  trading  arrangements  are 
bringing  positive  results.  These  market  reforms, 
along  with  the  first  capacity  market  auction  (in 
December 2018), aimed to bring Irish market rules 
into  line  with  EU  legislation  and  support  the 
security of electricity supply in Ireland. Indicators 
show that one year after going live, markets work 
well,  with  successful  capacity  auctions,  reduced 
of 
imbalances 
interconnectors to price signals. For the authorities, 
work  during  this  first  year  focused  on  ensuring 
market  stability  and  fixing  some 
initial  and 
emerging defects. 

improved 

response 

and 

(50)  See Recitals (5)-(7) in Directive 2015/1535. Moreover, see 
e.g.  Prof  Micossi,  “Thirty  Years  of  the  Single  European 
Market”,  Bruges  European  Economic  Policy  Briefings, 
41/2016,  referring  to  the  SMTD  as  one  of  three  essential 
pillars  of  the  EU  legislative  action  together  with  the 
principle  of  mutual  recognition  that  “bring[s]  about  a 
radical  shift  in  economic  philosophy:  market  opening  is 
placed at the centre of economic policies not only to foster 
growth, but also [to] improve the welfare of citizens.” 

57 

406080100120140160180200000102030405060708091011121314151617thousands of EUR per  employed personCapital regionOther NUTS2 regionsEU28National average                                                           
    
                                                           
4.4. Competitiveness, reforms and investment 

Graph 4.4.10: GVA per worker index by NUTS3 region 

national  average,  while  other  predominantly  rural 
remote  areas  at  the  border  with  Northern  Ireland 
and  in  the  centre  of  the  country  lag  significantly 
behind.  The  gap  between  the  maximum  and 
minimum value of per capita disposable income, at 
NUTS3  level,  increased  from  €7,061  in  2016  to 
€8,739  in  2017,  due  to  a  near  7%  increase  in 
incomes  in  Dublin  and  stagnating  incomes  along 
the border.   

Source: OECD 

is 

in 

another 

important 

relatively  well 

The  ability  of  the  regions  to  offer  an attractive 
and  sustainable  environment  for  firms  and 
residents 
factor 
determining  the  variations  in  their  economic 
performance.  The  Eastern  and  Midland  region 
the  Regional 
performs 
Competitiveness 
Index (European  Commission, 
2019d)  as  the  89th  most  competitive  region  in  the 
EU (53).  It  does  particularly  well  in  terms  of 
technological  readiness,  higher  education  and 
lifelong  learning  and  health.  The  Southern  region 
ranks  129th,  performing  well 
terms  of 
technological 
less  well  on 
infrastructure.  The  Northern  and  Western  is  only 
177th, due to lower than average results in terms of 
infrastructure, market size and efficiency. Existing 
differences raise concerns about whether the trend 
of increasing disparities can be reversed in the near 
future. 

readiness  but 

in 

Employment  in  both  high-tech  and  knowledge-
intensive services is concentrated in the Eastern 
and  Midland  Region  and  is  below  the  national 
average  in Northern and Western. The share of 
high  tech  employment  is  10%  in  the  Eastern  and 
Midland,  8%  in  the  Southern  region  and  only  5% 
in  the  Northern  and  Western  region.  Knowledge-
intensive services are 50% of total employment in 
Eastern  and  Midland  and  around  the  EU  average 
(39%) in the other two regions.  

Disposable  income  follows  a  similar  spatial 
pattern.  The  only  place  where  per  capita 
disposable  income  is  higher  than  the  national 
average is Dublin. Areas within the Dublin metro-
region  and  in  the  Mid-West  are  close  to  the 

(53)  Out of total of 268 regions 

of 

in  Eastern  and  Midland 

Uptake 
information/communication 
technologies varies. Only 81% of households in 
the Northern and Western region have access to 
broadband, compared to 87% in Southern and 
54.  Online 
92% 
interactions  with  the  authorities  over  the  last  12 
months was close to the EU average of 52%. In the 
three  Irish  regions  between  50%  and  55%  of 
individuals in a region had such contact.     
Graph 4.4.11: Disposable income per person 

Source: CSO 

in 

rural 

within 

jobs  are 

the 
particularly 

While 
increasingly  concentrated 
locally, high costs of living in cities drive people 
hinterland. 
to 
reside 
the 
Suburbanisation, 
commuting  distance  of  Dublin,  can  have  negative 
effects on vehicle mileage, land use and residential 
energy  consumption.  Ireland  has  the  seventh 
lowest  population  density  in  Europe,  and  the 
average  person  in  Ireland  has  to  drive  long 
distances 
local  facility, 
particularly  in  the  west  of  Ireland  and  along  its 
border to Northern Ireland. 

the  nearest 

to  reach 

The process of effective and fair transformation 
in  Ireland,  to  decarbonise  the  economy,  is 
expected  to  have  a  significant  impact  on  local 
in  the  Midlands.  
communities,  particularly 

54  “Eurostat  2019,  Percentage  of  households 
connectable to any kind of a broadband network” 

that  are 

58 

901001101201301401502004200520062007200820092010201120122013201420152016BorderWestMid-WestSouth-EastSouth-WestDublinMid-EastMidlands-30-20-100102030BorderWestDublinMid EastMidlandMid WestSouth EastSouth West20172016% deviationfrom     
                                                           
    
                                                           
4.4. Competitiveness, reforms and investment 

However,  the  transition  to  a  climate  neutral 
economy  should  also  offer  significant  new  job 
opportunities across the economy and including in 
the  regions  that  could  be  affected  most  by  job 
losses. See section 4.5 for details.  

Graph 4.4.12: Ease of doing business, by dimension - 2020 

strategies 

Ireland  would  benefit  from  considering  place-
based  approaches  for  sector-specific  or  all-
government 
to  counter  uneven 
regional  development.  Ireland’s  Clarification  is 
needed  on  whether  existing  strategies 
fulfil 
requirements  of  ‘smart  specialisation’  strategy/  or 
strategies,  a  prerequisite  for  obtaining  funding 
from  the  European  Regional  Development  Fund. 
would  benefit  from  a    more  detailed  regional 
analysis 
and 
strong 
implementation mechanism.   

governance 

and 

a 

4.4.7.  INSTITUTIONAL QUALITY AND 

GOVERNANCE  

a 

has 

Ireland 

‘enforcing  contracts’ 

While 
business-friendly 
environment  overall,  its  position  in  the  World 
Bank’s  ‘ease  of  doing  business’  ranking  has 
worsened  slightly.  In  2019,  Ireland  ranked  24th, 
one  place  less  than  last  year (55)  (World  Bank, 
2019).  While  Ireland’s  business  environment 
the  most 
generally  remains  business-friendly, 
problematic  dimensions  for  the  country’s  ranking 
are 
‘registering 
property’ (60th) and ‘trading across borders’ (52nd). 
Concerning  enforcement  of  contracts,  Ireland 
scores poorly on all three indicators (time required 
to  enforce  a  contract  through  the  courts,  cost 
required  and  quality  of  judicial  process).  In 
particular, the cost, which corresponds to 26.9% of 
the claim value, is particularly affected by attorney 
fees  (18.8%  of  the  value).  Ireland’s  strongest 
performance, in relative terms, is in ‘paying taxes’ 
(4th),  ‘protecting  minority  investors’  (13th)  and 
‘resolving insolvency’ (19th). (see Graph 4.4.13) 

(91st), 

(55)  Ten  years  ago,  in  2010  Ireland  ranked  8th  out  of  190 

economies surveyed by the World Bank. 

Source: World Bank 

Despite  some  action,  efficiency  challenges  for 
the  justice  system  remain.  A  new  Courts  Act 
increased the maximum number of ordinary judges 
of the Court of Appeal from 9 to 15. This is likely 
to  decrease  delays  in  the  process  of  appellate 
jurisdiction.  The  average  length  of  proceedings  in 
the  High  Court  which  hears  commercial  cases  at 
first instance had increased from 287 days in 2017 
to  321  in  2018  (CS,  2018).  For  claims  of  at  least 
€1  million  and  other  major  commercial  disputes, 
the  High  Court  offers  shorter  disposition  times 
through  its  commercial  proceedings  list.  A  Bill 
establishing  a  compensation  scheme  to  award 
the  event  of  protracted  court 
damages 
proceedings (required by the McFarlane judgment 
of the European Court of Human Rights), is yet to 
be  tabled  in  the  Oireachtas.  The  draft  Bill 
envisaging  a  new  body  for  proposing  judicial 
appointments,  which  raised  concerns  (European 
Commission,  2019c),  has 
the 
dissolution of Dáil.   

lapsed  with 

in 

High legal costs might hamper SME’s access to 
public  procurement 
remedies.  Companies 
bidding  in  Member  States  where  the  cost  of 
seeking redress is  high tend to reduce the  number 
of  reviews  claims,  even  if  there  are  reasonable 
grounds  for  complaint.  In  Ireland,  there  are  only 
five to ten public procurement review decisions by 
the  courts  every  year.  The  relatively  low  number 
of  review  applications  might  be  due  to  the  legal 
costs,  reported  as  ranging  between  €200,000  and 
€350,000   (Risk  &  Policy  Analysis,  2018).  This 
could  make  complaints  by  SMEs  particularly 
challenging. 

59 

020406080100Ease of doing business scoreStarting a businessDealing with construction permitsGetting electricityRegistering propertyGetting creditProtecting minority investorsPaying taxesTrading across bordersEnforcing contractsResolving insolvencyEU averageIreland                                                           
    
4.4. Competitiveness, reforms and investment 

in 

Public  procurement  deficiencies  are  present  in 
the  health  sector.  The  Irish  Comptroller  and 
Auditor  General  concluded  that  non-compliance 
the  health 
with  procurement  requirements 
service  is  ‘systemic’  and  goods  and  services  are 
procured in a  non-competitive  manner (Houses of 
the  Oireachtas,  2019).  Professionalising  public 
procurers  and  developing  support  tools  such  as 
guidelines,  standardised  tender  documents  and 
training  might  help  deliver  goods  and  services  of 
better quality and value for money for the patients.   

60 

 
 
4.5.  ENVIRONMENTAL SUSTAINABILITY 

Recent trends in greenhouse gas emissions outside 
the  Emissions  Trading  System  remain  a  concern. 
However, in 2019, the Irish government published 
a  Climate  Action  Plan  that  raises  climate  policy 
ambitions  and  sets  out  how  Ireland  expects  to 
meets  its  emissions  objectives,  including  its  2030 
target  under  the  Effort  Sharing  Regulation.  The 
plan  also  sets  a  new  70%  target  for  renewable 
electricity  by  2030.  Whether  the  plan  delivers  on 
its  stated  ambition  will  depend  on  early  and 
sustained 
and 
measures,  and  the  identification  of  additional 
supporting  measures  as  necessary.  The  transition 
to  a  climate-neutral  and  circular  economy  will 
define  a  transformative  agenda  for  the  Irish 
economy  over  the  coming  decades,  requiring 
strategic attention by policy makers. It will require 
significant  private  and  public 
in 
energy, 
the  built  environment  and 
circularity,  among  others.  The  revenues  from  the 
carbon tax  will help tackle the social costs of this 
transition.  

implementation 

investment 

transport, 

policies 

of 

4.5.1.  TRANSITION TO A CLIMATE NEUTRAL 

ECONOMY 

Ireland  faces  challenges  in  the  United  Nation’s 
sustainable  development  goals  related  to  clean 
energy and greenhouse gas emissions (SDGs 13 
and 7). In recent years, Ireland has failed to reduce 
greenhouse  gas  emissions  as  foreseen  under 
SDG13  —  Climate  Action.  Ireland  also  scores 
poorly  in  several  indicators  related  to  SDG7  — 
Affordable  and  Clean  Energy.  In  particular,  the 
share  of  renewable  energy 
in  gross  energy 
consumption is well below EU average and energy 
consumption  has  increased  (see  Annex  E).  All  of 
this emphasises the  need to implement effectively 
the changes set in the Climate Action Plan. 

While  overall  emissions  remained  flat  in  2018, 
trends  for  sectors  outside  the  EU  emissions 
trading  system  remain  a  concern.  Provisional 
inventories indicate that greenhouse gas emissions 
stabilised  in  2018,  mainly  because  those  from 
power  generation  declined  by  almost  12% 
following  the  closure  of  Ireland’s  only  coal-fired 
power  plant  from  August  2018  to  the  second  half 
of  2019.  In  sectors  outside  the  EU  emissions 
trading system (non-ETS sectors), the rising trend, 
which  started  with 
recovery, 
persisted in 2018, with an increase in emissions of 

the  economic 

2.8%  compared  with  2017.  Transport,  buildings 
and agriculture emissions all increased in 2018.  

Ireland  will  likely  need  to  purchase  significant 
allocations  to  comply  with  the  2020  climate 
targets. The latest projections indicate that Ireland 
will  exceed  its  cumulative  allocations  under  the 
Effort Sharing Decision by around 8.5 million tons 
of  CO2  equivalent  during 
the  2013-2020 
compliance period (56), with emissions in non-ETS 
sectors  about  5%  lower  in  2020  than  2005  (57). 
Excess  allocations 
in  other  Member  States 
that  Ireland  can  remain 
nevertheless  suggest 
compliant through the trading flexibility, although 
at  a  cost  to  the  Exchequer  and  to  the  economy  as 
the delayed action implies a more forced and hence 
more costly reduction of carbon intensity. 

the  2030 

Achieving 
targets  and  climate 
neutrality  by  2050  will  be  a  major  challenge. 
The  recent  trends  in  emissions  and  their  sectoral 
composition point to insufficient mitigation efforts 
made  so  far  and  major  challenges  ahead.  The 
projected  level  of  emissions  for  2020  means  that 
the  linear  trajectory  between  2021  and  2030 (58) 
will be steep and require a major intensification of 
mitigation efforts. Ireland will benefit by receiving 
a  higher  level  of  cumulative  allocations  over  the 
compliance  period  because  of  the  method  used  to 
determine the starting point for the linear reduction 
trajectory in emissions towards the 2030 target . 

Credible  and  ambitious  plans  to  reverse  the 
emissions  trajectory  are  being  spelled  out. 
Tackling  climate  change  was  a  key  subject  of 
discussion  in  the  Citizens’  Assembly  in  2017. 
Building  on 
the  Joint  Oireachtas 
Committee on Climate Action issued its own set of 
recommendations  in  early  2019  (Joint  Committee 
on  Climate  Action,  2019a).  These  represent  a 
broad political consensus and a significant shift in 

its  work, 

(56)  Annual  emissions  allocations  are  determined  for  all 
Member States under the Effort Sharing Decision, based on 
a  linear  trajectory  between  the  starting  point  and  the 
greenhouse  gas  emissions  reduction  objective  in  2020. 
Under the Decision, Member States with excess allocations 
over  actual  emissions  are  allowed  to  sell  their  surplus  to 
Member  States  with  excess  emissions  over  allocations 
(trading  flexibility).  Compliance  is  determined  based  on 
cumulative emissions and allocations over the period 2013-
2020. 

(57)  On the basis of existing measures only and compared with 

a target of -20% in 2020. 

(58)  Ireland  has  a  target  of  -30%  under  the  Effort  Sharing 

Regulation. 

61 

 
                                                           
4.5. Environmental sustainability 

mentality  among  politicians,  denoting  a  sense  of 
urgency not seen before. Building on the report of 
the  Joint  Oireachtas  Committee,  the  government 
published the Climate Action Plan 2019 to Tackle 
Climate  Breakdown  in  June  2019 (Department  of 
Communications,  Climate  Action 
the 
Environment, 2019b). The plan significantly raises 
Ireland’s climate policy ambitions and spells out a 
number  of  critical  objectives, 
the 
achievement  of  the  2030  targets  strictly  on  a 
domestic  basis,  without  purchasing  allocations 
from  other  Member  States  and  without  using  the 
ETS flexibility. It also endorses the EU’s ambition 
to become climate neutral by 2050 (Box 4.5.1). 

including 

and 

increase 

renewable  energy 
its 

Measures  from  the  Climate  Action  Plan  will 
feed into the final National Energy and Climate 
Plan.  In  June  2019,  the  European  Commission 
called  on  Ireland 
to  put  forward  additional 
measures to cost-effectively meet its 2030 target in 
non-ETS sectors, contribute by at least 31% to the 
target  and 
Union’s  2030 
substantially 
efficiency 
ambition.  (Commission  Recommendation  2019/C 
297/07)  The  final  National  Energy  and  Climate 
Plan,  which  was  not  available  ahead  of  the 
finalisation  of  this  report (59),  is  expected  to 
translate  into  concrete  measures  Ireland’s  stated 
the  annual  emissions 
to 
ambition 
allocations 
in  non-ETS  sectors  on  a  strictly 
domestic basis. Doing so would require prolonged 
and  sustained  policy  efforts,  with 
forceful 
implementation of measures. 

to  adhere 

energy 

The  effective  implementation  of  the  plan  and 
addition  of  further  specific  measures  will 
determine  its  success  in  mitigating  emissions. 
While  concrete  measures  have  already  been 
identified,  additional  action  might  be  required  to 
meet  the  number  of  broad  objectives  identified  in 
the plan (see Box 4.5.1). The objectives on electric 
vehicles  and  housing  stock  retrofitting  will  be 
particularly challenging, also because they relate to 
investment decisions by individual households and 
will  depend  both  on  financing  constraints  and 
willingness to invest in energy efficient renovation 
or  new  types  of  vehicles.  In  addition,  the  path 
towards  a  climate-neutral  agriculture  and  land 
sector  (an  objective  defined  separately  from  the 

(59)  The  Commission  will  assess,  in  the  course  of  2020,  the 
final  national  energy  and  climate  plans  submitted  by  the 
Member States. 

carbon 

the  natural 

Climate  Action  Plan),  including  the  means  to 
enhance 
an 
environmentally sustainable manner, remains to be 
adequately  defined.  The  authorities  recognise  that 
additional  policies  and 
regulations  will  be 
necessary  to  channel  and  promote  such  types  of 
investments. 

sink 

in 

Graph 4.5.1:  Projections in non-ETS sectors 

(1) Scenario with existing measures by sector and scenario 
with additional measures overall (additional measures 
scenario does not fully reflect the measures foreseen under 
the Climate Action Plan). 
Source: Environmental Protection Agency and European 
Environment Agency 

The Climate Action Plan sets a new 70% target 
for  renewable  electricity  by  2030,  which  will 
require  large  private  investments.  The  delayed 
replacement  of  the  old  public  support  scheme  for 
renewable  electricity  has  been  hindering  new 
projects.  Meeting  targets  for  renewable  electricity 
would  require  that  auctions  under  the  new  public 
support start without delay and thus as planned in 
2020. Corporate power purchasing agreements will 
also  be  key  to  financing  projects  without  public 
funding.  Addressing  administrative  barriers  in  the 
consent and planning process and  grid connection 
delays  will  boost  the  development  of  wind  power 
in particular.  

in  electricity 

infrastructure 

Investing 
is  a 
prerequisite  to  reaching  the  70%  renewables 
target  and  transitioning  to  a  climate  neutral 
economy.  The  700  MW  Celtic  interconnector 
between  France  and  Ireland,  with  a  total  cost  of 
€900 million,  will  be  the  first  electricity  link 
between  Ireland  and  the  European  continent.  In 
2019,  it  received  a  €530 million  grant  from  the 
Connecting  Europe  Facility  (CEF)  to  fund  its 
construction work. It is expected to be operational 
in  2025/2026  and  enable  the  Irish  system  to 

62 

05101520253035404550Million tons CO2 equivalentEnergy industriesTransportBuildingsAgricultureOthersWAM, non-ETSESD allocationsESR allocations                                                           
   
4.5. Environmental sustainability 

Investment  in  public  clean  transport  would  be 
required  to  ease  congestion  and  reduce  carbon 
emissions. The return to economic growth and the 
suburban sprawl has led to a high share of workers 
commuting daily from outside the main cities (60). 
This has aggravated congestion in recent years and 
resulted  in  increasing  CO2  emissions  and  costs 
(61). While the  share of passengers  using trains or 
buses  increased  by  0.8pps  to  17.4%  in  2017,  the 
fleet  of  buses  and  trains  is  still  highly  reliant  on 
diesel  engine  (European  Commission,  2019).  The 
National  Development  Plan  2018-2027  has 
committed  to  promote  compact  urban  growth, 
transition 
fleets  and 
low-emission  buses 
partially  electrify  the  Dublin  Commuter  Train 
network. This, together with other key clean public 
transport projects proposed in the Plan, will require 
increasing 
transport  by 
around  90%  compared  to  the  previous  decade. 
While  in  2018  and  2019,  investment  in  public 
transport increased by 20% with respect to the two 
previous  years,  its  share  with  respect  to  total 
transport  investment  has  remained  relatively  flat. 
Rapidly moving key public transport projects from 
the  project-and-planning  phase  to  construction 
might  help reduce emissions  and congestion costs 
more rapidly. 

investment 

in  public 

to 

4.5.2.  JUST TRANSITION TO A CLIMATE NEUTRAL 

ECONOMY 

in 

The  transition  to  a  climate  neutral  economy  is 
expected 
local 
to  affect  employment 
communities significantly. The transformation of 
the electricity-generation sector in Ireland, moving 
away  from  peat  burning  power  stations  into 
renewable  energy  sources,  will  potentially  affect 
around 4,000 jobs in the Midlands region, out of a 
total  of  110,000  people  employed 
there.  In 
addition, the scheduled closure of the Moneypoint 
coal-fired power plant by end-2025 will also affect 
around 750 jobs in county Clare. 

(60)  In  2016,  the  share  of  the  workforce  commuting  from 
outside  the  city  and  suburbs  was  25%  in  Dublin,  40%  in 
Cork  and  50%  in  Galway.  An  average  driver  has  spent 
more than 35 hours per year in traffic congestion in 2017, 
the seventh highest in the EU. 

(61)  A study of the Department of Transport, Tourism and Sport 
(DTTS,  2017)  estimated  that  the  cost  of  time  lost  due  to 
aggravated  congestion  in  the  Greater  Dublin  amounted  to 
€350 million in 2012 and was expected to grow to EUR2.8 
billion per year in 2033. 

other 

supply.  Three 

receive  a  high  share  of  variable  renewables  in  its 
electricity 
electricity 
interconnection  projects  with  the  UK,  eligible 
under  CEF,  might  also  improve  the  security  of 
energy  supply 
future,  major 
in  Ireland.  In 
investment might be also required at low voltage to 
manage  the  integration  of  electric  vehicles  and 
heat pumps into the electricity network.  

The  transition  also  requires  Ireland  to  further 
exploit  its  potential  for  energy  efficiency,  in 
particular  in  the  residential  construction  and 
transport  sectors.  Ireland’s  energy  consumption 
remains  on  an  increasing  path  since  2016,  in 
particular in the building and transport sector. The 
need to accelerate retrofitting of existing buildings 
is  well  reflected  in  measures  proposed  in  the 
Climate  Action  Plan.  In  2019,  €25 million  were 
allocated 
retrofitting 
programme.  Ireland  could  now  expand  its  efforts 
to include long-term renovation strategies required 
under 
the  Energy  Performance  of  Buildings 
Directive,  and  include  their  key  elements  in  the 
final National Energy and Climate Plan.  

social  housing 

to 

a 

is 

laudable  but 

The  Climate  Action  Plan  ambition  of  having 
close  to  one  million  electric  vehicles  on  Irish 
roads  by  2030 
seems 
particularly  challenging  in  light  of  existing 
trends and policy. The plan includes a number of 
measures  to  promote  the  early  uptake  of  electric 
vehicles,  including  an  expansion  of  the  charging 
network  and  tax  and  subsidy  policies.  However, 
Aat  the  end  of  20198  there  were  2.7  million 
vehicles on Irish roads, of which only 4,82515,549 
were  electric  or  plug-in  hybrid.  Sales  of  private 
cars in 2018 were around 220,000, of which some 
93%  were  petrol  or  diesel  and  approximately 
100,000  (45%)  were  second-hand  cars  imported 
primarily from the UK. The new tax on emissions 
of nitrogen oxide (NOx) from passenger cars, to be 
introduced  from  January  2020,  should  reduce  the 
incentives  to  buy  diesel  cars,  in  particular  older 
imported cars. However, the price and availability 
of  diesel  and  petrol  cars,  especially  second-hand, 
to  be  more  attractive.  In  addition, 
continue 
concerns  about  the  range  of  electric  vehicles  (  ) 
and  car  dealerships’  lower  incentives  for  selling 
electric  vehicles  (O’Neill  E.  et  al.,  2019)  might 
also  make  it  challenging  to  grow  the  share  of 
electric  vehicles  significantly  in  the  near  future, 
even  though  this  would  be  desirable  to  meet  the 
Climate Action Plan target. 

63 

                                                           
4.5. Environmental sustainability 

Advisory  Council  has  already 
flagged  skill 
shortages  in  the  housing  sector,  but  others  are 
expected  to  arise  as  the  climate  and  energy 
transition progresses (see Section 4.3). 

Revenues  from  the  carbon  tax  will  be  partially 
earmarked 
spending, 
for  climate  related 
including the promotion of a fair transition. All 
revenues  from  the  increase  in  the  carbon  tax 
(around  €90 million 
in  2020)  will  be  fully 
allocated  for  climate-related  spending.  Part  of 
them (€6 million) will be dedicated to establishing 
an Irish ‘Just Transition Fund’ for the Midlands  – 
covering  investment  in  retraining  and  reskilling 
and  helping  local  communities  and  businesses 
adjust  to  the 
low  carbon  transition.  A  Just 
Transition  Commissioner  has  been  appointed  to 
stakeholders  and 
work  closely  with 
to  an 
coordinate 
accelerated 
electricity 
this  could  provide 
generation.  If  successful, 
valuable  input  for  implementing  the  EU’s  Just 
Transition  Fund,  proposed  by  the  Commission 
under its next 7-year budget (see Annex D). 

local 
the  government’s  response 
from  peat 

exit 

for 

4.5.3.  TRANSITION TO A CLEAN AND CIRCULAR 

ECONOMY 

Ireland  performs  well  in  the  United  Nations’ 
Sustainable  Development  Goals 
(SDGs) 
addressing  sustainable  communities.  According 
to the indicators set by Eurostat to evaluate SDGs, 
Ireland  performs  well  in  SDG11  —  Sustainable 
Cities and Communities. In particular, Ireland has 
one  of  the  lowest  percentages  of  population 
exposed  to  noise  (9.4%)  or  air  pollution  (7.7%). 
The recycling rate for municipal waste increased to 
40.4%  in  2016,  in  line  with  the  EU  average. 
However,  housing  affordability  is  a  concern  (see 
Section  3  and  4.4.3). Ireland  performs  well  in  the 
water quality dimension of SDG6 — Clean Water 
and Sanitation. In particular, the levels of harmful 
phosphates,  nitrates  and  biochemical  oxygen  in 
rivers  are  significantly  below  EU  average. 
However,  the  share  of  population  connected  to  at 
least secondary wastewater treatment is among the 
lowest in Europe (see below). 

Municipal  waste  generation  per  capita  is  20% 
above EU average. While projections indicate that 
Ireland  might  be  close  to  meeting  the  2020 
recycling  target  for  municipal  waste,  progress  has 

However,  the  transition  to  a  climate  neutral 
society  also  has  potential  to  provide  new  job 
opportunities.  Opportunities  could  emerge  in  the 
renewable  energy  and  building  sectors,  waste 
recycling  as  well  as  in  new  green  businesses.  As 
suggested by a number of initiatives, some of them 
supported  by  EU  funding (62),  the  restoration  of 
peatlands  might  provide  jobs  and  could  attract 
tourists,  while  delivering  major  side  benefits  for 
climate  mitigation,  adaptation  and  biodiversity. 
The  regional  spatial  and  economic  strategy  of  the 
Eastern  and  Midlands  region (63)  further  identifies 
potential for diversification in sustainable  farming 
and  food  production,  tourism,  bio  economy  and 
circular  economy.  The  Irish  regions’  ‘smart 
specialisation’  strategies  (64),  underpinned  by 
transition labs, (65) can provide further guidance on 
improving the regions’ competitive advantage..  

and 

education 

Further 
skills  provision 
throughout Ireland could help workers adapt to 
the transition. The sectors prone to transformation 
still  represent  a  major  share  of  employment  in 
Ireland.  Many  of  the  workers  in  these  sectors 
would  need  re-skilling  and  up-skilling  to  adapt  to 
this  transition.  The  climate  and  energy  transition 
will create new green jobs (European Commission, 
2019e),  which  may  require  skills  not  fully 
labour  market,  nor 
available 
provided  by  the  education  system.  Ireland’s  latest 
review of skills needs in the green economy by the 
Expert  Group  on  Future  Skills  Needs  (Expert 
Group on Future Skills Needs, 2010) dates back to 
2010 and is now out of date. As part of the Climate 
Action  Plan,  the  Expert  Group  on  Future  Skills 
Needs  has  committed  to  assess  the  skills  required  
to deliver key elements of the Plan. This is part of 
the  Group’s  work  programme  for  2020  and  will 
kick  off  later  this  year.  The  Climate  Change 

the  current 

in 

(62)  See  for  instance  the  EU  LIFE  project  ‘Restoring  Active 
Raised  Bog  in  Ireland’s  Special  Area  of  Conservation 
Network  2016-2020’,  known  as  ‘The  Living  Bog’s,  the 
Irish Peatland Conservation Council’s Visitor centre at the 
Bog of Allen in Co. Kildare or the Lough Boora discovery 
park in a former peat production area in Co. Offaly. 

(63)  Eastern and Midland Regional Assembly, 2019 
(64)  Smart  specialisation  is  a  place-based  approach  enabling 
regions  to  identify  and  develop  their  own  competitive 
advantages. 

(65)  Innovation  platform  engaging  a  diverse 

range  of 
stakeholders across regions to work together in addressing 
complex  systemic  challenges  related  to  the  diversification 
of the economy through smart specialisation. The transition 
lab could fund feasibility studies, collaborative projects and 
pilots and has been proven successful in other countries. 

64 

                                                           
4.5. Environmental sustainability 

can 

aquatic 

damage 

in  Dublin  and  Cork,  poses  a  health  risk  to  people 
and 
ecosystems 
(Environmental Protection Agency, 2019). It could 
lead  to  substantial  financial  penalties,  following 
the  ruling  of  the  European  Court  of  Justice  on 
Ireland´s  breach  of  the  aforementioned  Directive. 
The  Irish  Water  Strategic  Funding  Plan  estimates 
the investment requirement in  water infrastructure 
at €6.1 billion in 2019-2024. The 2020 budget will 
provide  €592  million 
this 
investment. 

to  fund  part  of 

Legislation  allowing  for  extra  charges  for 
excessive  domestic  water  use  can  help  reduce 
water  leaks  and  excessive  consumption.  In 
November  2017,  legislation  added  an  ‘excess  use 
charge’  for  customers  who  use  water  above  an 
annual allowance of 1.7 times the average volume 
per  household.  Analyses  of  the  Commission  for 
Regulation  of  Utilities  and  Irish  Water  indicate 
that  approximately  7  to  10%  of  metered  domestic 
households,  many  of  which  may  have  leaks,  use 
more  than  this  annual  allowance  and  account  for 
almost 40% of all domestic  water consumption in 
the  process  by  which 
Ireland.  Proposals  on 
customers  can  engage  with  Irish  Water  before 
receiving  a  bill  were  not  approved  until  mid-July 
2019. First excess use water use bills are expected 
in early 2021, giving households a year from being 
formally  notified  in  early  2020,  to  reduce  their 
consumption or fix their leaks. 

the 

in  2016  and 

slowed  in  the  recent  years  (Eunomia,  2018).  The 
recycling rate slightly increased from 37% in 2013 
to  41% 
landfill  rate  fell 
substantially  from  38%  to  26%  on  the  back  of  a 
successful  increase  in  the  landfill  levy.  However, 
some caution is required regarding the increase in 
incineration capacity from 16% to 29% which may 
discourage efforts to increase recycling. However, 
Ireland’s toxic waste rate is below the EU average, 
suggesting a good potential for recycling. 

Ireland  performs  well  in  the  early  stages  of 
delivering  eco-innovation  but  it  is  weaker  in 
technology development and diffusion. Ireland’s 
eco-innovation index is around the EU average but 
its  eco-innovation  activities  have  been  decreasing 
since 2015, showing the  need to boost investment 
in innovation in firms and manufacturers. In terms 
of eco-innovation inputs, Ireland is  very  strong in 
R&D  personnel  and  researchers  and  green  early 
stage  investment,  which  reflects  the  strong  R&D 
base and Ireland’s capacity to attract high levels of 
(Eco-innovation 
foreign 
investment 
for 
2017).  But 
Observatory, 
rates 
and 
technology  development 
environmental 
diffusion are below the EU average.   

direct 

the 

Ireland still has significant  investment needs in 
the  water  and  wastewater  sectors.  Ireland  has  a 
very high leakage rate in its water supply systems 
(44%  leakage)  (European  Commission,  2017), 
partly due to an ageing infrastructure not renewed 
the  crisis  period.  In  addition,  while 
during 
treatment  standards  improved  in  the  previous  two 
years, 
the  wastewater 
generated  by  large  urban  areas  was  treated  at 
plants  complying  with  the  requirements  of  the 
Urban Waste Water Treatment Directive. This low 
rate  of  compliance,  which  is  largely  explained  by 
lack of proper treatment in large population centres 

in  2018  just  42%  of 

65 

 
 
 
  
4.5. Environmental sustainability 

Box 4.5.1: Transition to a climate-neutral and circular economy 

Ireland  faces  significant  challenges  in  transitioning  to  a  climate-neutral  and  circular  economy. 
Although significant progress was achieved in 2000-2010 in reducing emissions per capita, the early period 
of the Celtic Tiger years and the accompanying strong GDP growth had led to an initial increase in emissions 
per  head  (graph  4.5.2).  Since  2011,  emissions  per  head  have  been  relatively  stable,  which  places  Ireland 
among  the  countries  with  the  highest  level  of  emissions  per  capita  in  the  EU.  Looking  forward,  Ireland  is 
among the EU countries whose population is expected to increase more strongly up to 2030 and 2050, and its 
growth is also projected to be above the EU average. This will make meeting the 2030 targets and the climate 
neutrality objective by 2050 particularly challenging. 

Graph 4.5.2: Greenhouse gas emissions per capita, 2017 vs. 1990 

Source: Eurostat 

The 2019 Climate Action Plan is a major stepping stone to tackling the decarbonisation challenges. It 
constitutes  a  breakthrough  compared  to  previously  muted  policy  action  on  climate  change  in  that  it  is 
significantly more ambitious, comprehensive and will be backed by a strong legal framework and governance 
process.  Importantly,  the  wide  political  consensus  behind  the  Plan  is  expected  to  increase  ownership  and 
support  its  effective  implementation  over  time,  eventually  leading  to  better  socioeconomic  outcomes.  The 
Climate Action Plan provides a mix of concrete measures and broader objectives. Key among  those are to: 
(1) source  70%  of  electricity  from  renewables;  (2) phase  out  coal-  and  peat-fired  power  generation(1); 
(3) increase the number of electric vehicles to 936,000 by 2030 while banning the sale of new fossil fuel cars 
as  of  2030;  (4) retrofit  500,000  houses  with  increased  energy  efficiency  and  install  600,000  heat  pumps; 
(5) promote  diversification  of  activity  in  agriculture  and  rural  areas  towards  low-carbon  opportunities;  (6) 
significantly  reduce  the  disposal  of  waste  at  landfills;  (7) reduce  food  waste  by  50%  by  2030;  (8) increase 
recycling  (to  reach  70%  of  packaging  waste  by  2030  and  65%  of  municipal  waste  by  2035);  (9)  take 
measures  on  limiting  single-use  plastic  items;  (10) carbon-proof  all  government  decisions  and  investments; 
and (11) establish a ‘just transition’ review group to identify specific needs. 

A new legal framework will drive the definition of targets and the governance process. The government 
published  the  general  scheme  of  a  Climate  Action  (Amendment)  Bill  in  January,  which  will  provide  an 
unprecedented national legal basis for setting mitigation targets and the governance of climate policy. Under 
the  proposed  legislation,  Ireland  will  adopt  five-year  carbon  budgets  at  national  level,  following 
recommendations by a strengthened, statutorily independent Climate Action Council. Three five-year budgets 
(i.e. up to 2035 in the first instance) would be approved by the Government and by the Dáil. In addition, the 
Government is proposing to set target ranges and trajectories for each sector within the overall carbon budget.  
It  is  proposed  that  considerations  such  as  distributional  effects  and  cost  effectiveness  will  be  taken  into 

66 

-50-40-30-20-10010200510152025303540MTSEROLVHRHUPTFRITLTESSKDKSIBGELATFIBECYPLDENLCZIEEELU% changeTons CO2 equivalent1990 (lhs)2017 (lhs)% change 1990 - 2017 (rhs)   
4.5. Environmental sustainability 

account in setting budgets and target ranges, following criteria to be set out in the legislation. The targets and 
criteria will need to take into account the treatment of agriculture, a large source of emissions in Ireland, as 
well as issues related to the differences in the discount rate used to determine marginal abatement cost curves 
and those used by investors.  

The  plan is a transformative  agenda for the  entire economy.  While the impacts  will be strongest in the 
power  sector,  the  built  environment,  transport  and  agriculture,  the  plan  will  affect  others  sectors.  This  is 
recognised  in  the  whole-of-government  approach  that  has  been  adopted  for  implementing  the  plan.  The 
governance  of  the  plan  will  follow  the  approach  successfully  applied  in  the  Action  Plan  for  Jobs.  A  very 
detailed list of actions are assigned at department level and implementation will be monitored and reported on 
a quarterly basis under the supervision of the Department of the Taoiseach(2). The plan and its list of actions 
will be updated annually. 

The  success  of  the  plan  will  largely  depend  on  consistent  and  effective  implementation  as  well  as 
constant review and updating of policies and measures. The Climate Action Plan sends a strong signal to 
economic  operators  on  the  course  Ireland  intends  to  embark  on.  Its  publication  is  nevertheless  only  the 
beginning  of  a  long  process  whose  success  will  depend  on  supporting  policies  and  measures.  These  will 
consist of a mix of regulatory requirements (e.g. energy efficiency of buildings or banning sales of new fossil 
fuel  cars),  price  mechanisms  (e.g.  the  carbon  tax),  financial  and  support  measures  (e.g.  the  renewables 
electricity support scheme or financial incentives for retrofitting), public infrastructure investment and labour 
market measures and education policies to ease the transition and ensure the necessary skills are available.  

A  number  of  challenges  remain  to  ensure  a  steady  and  durable  reduction  of  emissions  over  time. 
First, investment  and  financing  needs  and  capacities  have  not  been  sufficiently  assessed  so  far,  both  for 
households and businesses, though this is important for the design of policies and measures. Second, a vision 
for a ‘carbon neutral’ agriculture and land sectors still needs to be spelled out. Third, there has been limited 
progress so far in defining the long-term climate and energy strategy and the intermediate benchmarks, in part 
due to capacity constraints in the public administration.  

A new circular economy policy and action  plan for Ireland  are expected to replace the government’s 
current package of waste and resource efficiency policy, plans and programmes in 2020-21. Inspired by 
the  EU’s  Circular  Economy  Action  Plan,  Ireland’s  response  will  provide  policy  direction  on  waste 
prevention,  eco-design,  reuse,  repair,  recycling,  recovery  and  waste  disposal,  and  lead  a  cross-government 
reflection on how these principles can be  embedded throughout the country’s public policy frameworks.  A 
public  consultation process  launched  at  the  end  of  December  2019  and  will  remain  open  until  21 February 
2020.  Submissions  will  inform  the  subsequent  drafting  of  the  new  national  action  plan  for  a  circular 
economy.  

(1)  Ireland’s single coal-fired power station is scheduled to close by 2025 and the Electricity Supply Board announced in 
November 2019 the closure of its two (out of three in Ireland) peat-fired power stations in 2020, earlier than previously 
anticipated. 

(2)  The Annex of actions to the Climate Action Plan contains 183 concrete actions to be delivered over the next few years. 
These vary in scope from preparatory steps like analytical reports or organising consultations to concrete delivery of 
policies  and  measures,  like  launching  the  renewable  electricity  support  scheme  or  setting  carbon  budgets.  The  First 
Progress Report was published at the end of October 2019. 

67 

 
ANNEX A: OVERVIEW TABLE 

2019 country-specific recommendations (CSRs)  

Summary assessment ([1])  

Ireland  has  made  Limited  Progress  in  addressing 
CSR 1  

CSR  1:  Achieve 
the  medium-term  budgetary 
objective  in  2020.  Use  windfall  gains  to  accelerate 
the  reduction  of  the  general  government  debt  ratio. 
Limit the scope and number of tax expenditures, and 
broaden the tax base. Continue to address features of 
the  tax  system  that  may  facilitate  aggressive  tax 
planning,  and  focus 
in  particular  on  outbound 
payments.  Address  the  expected  increase  in  age-
related expenditure by making the healthcare system 
more  cost-effective  and  by  fully 
implementing 
pension reform plans.  

Achieve  the  medium-term  budgetary  objective  in 
2020.  Use  windfall  gains  to  accelerate  the  reduction 
of the general government debt ratio.  

The compliance assessment with the Stability and 
Growth Pact will be included in Spring when final 
data for 2019 will be available.  

Limit the scope and number of tax expenditures, and 
broaden the tax base.  

in 

Limited  Progress  Recent  revenue  measures  are  not 
meaningfully  contributing  to  broadening  the  tax 
base.  The  main  revenue-raising  measures  in  Budget 
2020  include  an  increase  in  the  carbon  tax  rate,  an 
the  stamp  duty  on  non-residential 
increase 
property and several anti-avoidance measures. Some 
measures  introduced  for  limiting  aggressive  tax 
planning practices may help broadening the tax base 
loopholes.  Some  measures 
by  closing  existing 
included in the 2002 Budget even broaden the scope 
for  tax  expenditure  and  narrow  the  tax  base.  These 
include increases in certain tax credits, an extension 
of  the  Help-to-Buy  scheme  and  higher  capital 
acquisition tax allowances.  

Continue  to  address  features  of  the  tax  system  that 
may  facilitate  aggressive  tax  planning,  and  focus  in 
particular on outbound payments.  

Limited  Progress  Aside  from  the  transposition  of 
EU Directives in this area, there are some additional 
reforms,  such  as  the  extension  of  transfer  pricing 
rules  to  non-trading  transactions  and  to  SMEs, 
however their effectiveness in addressing the issue of 
aggressive tax planning remains to be seen.  

the  expected 

Address 
in  age-related 
expenditure  by  making  the  healthcare  system  more 
cost-effective  and  by  fully  implementing  pension 
reform plans.  

increase 

the 

to 
Limited  Progress  Despite  some  measures 
increase 
cost-effectiveness  of  healthcare, 
expenditure  has  continued  to  increase  rapidly.  The 
ambitious  Sláintecare  reform  provides  a  credible 
vision  for  making  the  health  system  universally 
accessible 
its 
implementation  is  endangered  by  the  difficulties  in 
improving  budget  management  in  the  health  system 
to  avoid  recurrent  overspends.  A  Health  Budgetary 
Oversight  Group  was  established  in  2019  with  the 

sustainable.  However, 

and 

68 

 
 
A. Overview table 

aim  of  monitoring  and  helping  control  health 
spending  and  staffing  numbers  within  the  budget 
allocation, and to act as an early warning mechanism 
for any variances. The Roadmap for Pension Reform, 
published  in  2018,  aims  to  address  the  long  term 
sustainability  of  the  state  pension  system.  However, 
the  envisaged  reforms  have  not  yet  been  finalised. 
The  2020  Budget  has  not  reported  on  any  new 
measures to address these issues.  

CSR  2:  Provide  personalised  active  integration 
support  and  facilitate  upskilling,  in  particular  for 
vulnerable  groups  and  people  living  in  households 
with 
to 
affordable and quality childcare.  

Increase  access 

low  work 

intensity. 

Ireland has made Some Progress in addressing CSR 
2  

Provide  personalised  active  integration  support  and 
facilitate  upskilling,  in  particular  for  vulnerable 
groups  and  people  living  in  households  with  low 
work intensity.  

taken 

the  progression 

include  developing  a 

Some Progress The share of people aged 0-59 living 
in households with very low work intensity is falling 
steadily  (from  23.9%  in  2013  to  13.1%  in  2018), 
although it is still well above the EU average (8.8%). 
revised 
Measures 
activation  framework  with  a  particular  focus  on 
improving 
to  employment  of 
vulnerable, inactive individuals by the Department of 
Employment  Affairs  and  Social  Protection  and  the 
launching  of  the  Social  Inclusion  and  Community 
Activation  Programme  (2018-2022)  which  provides 
funding  to  tackle  poverty  and  social  exclusion. 
Ireland’s latest review of the skills needs of the green 
economy  by  the  Expert  Group  on  Future  Skills 
Needs (Expert Group on Future Skills Needs, 2010) 
dates  back  to  2010  and  is  now  out  of  date.  The 
Climate  Change  Advisory  Council  has  already 
flagged  skill  shortages  in  the  housing  sector,  but 
others are expected to arise as the climate and energy 
transition  progresses.  Measures  have  been  taken  to 
increase  basic  and  advanced  levels  of  digital  skills, 
but  further  efforts  would  be  needed.  Only  a  low 
percentage  of  the  population  has  basic  digital  skills, 
which  might  hinder  their  active  participation  in  a 
society 
tools. 
Providing workers with the skills required, including 
digital and those for a smooth and just transition to a 
climate  neutral  economy,  would  require  investing 
more in education and training.  

reliant  on  digital 

increasingly 

Increase access to affordable and quality childcare.   Substantial  Progress  Participation 

in 

early 
childhood education and care from age three is now 
well  above  the  EU  average  (93.1%  in  2018),  and 
participation in formal childcare of those below three 
years  (34.4%)  is  at  around  the  EU  average.  At  the 
same time, the share of children aged less than three 

69 

A. Overview table 

years  in  formal  childcare  for  30  hours  or  more  (at 
10.6%)  is  lower  than  the  EU  average  (17.2%). 
Limited  availability  of  formal  childcare  in  Ireland 
affects  low-income  families  to  a  greater  extent.  For 
them,  net  childcare  costs  as  a  percentage  of 
disposable  income  were  among  the  highest  in  2018. 
Recently  launched  programmes  (National  Childcare 
Scheme,  Early  Learning  and  Care  Programme,  First 
5) supporting predominantly low-income  families in 
reconciling work and care are likely to be effective in 
increasing access to affordable and quality childcare, 
as  well  as 
labour  market 
improving 
participation rates in the coming years.  

female 

Ireland has made Some Progress in addressing CSR 
3  

CSR  3:  Focus  investment-related  economic  policy 
on low carbon and energy transition, the reduction of 
transport, 
greenhouse  gas  emissions,  sustainable 
water, digital infrastructure and affordable and social 
housing,  taking  into  account  regional  disparities. 
Implement  measures,  including  those  in  the  Future 
Jobs strategy, to diversify the economy and improve 
the  productivity  of  Irish  firms  -  small  and  medium 
enterprises  in  particular  -  by  using  more  direct 
funding 
to  stimulate  research  and 
innovation  and  by  reducing  regulatory  barriers  to 
entrepreneurship.  

instruments 

Focus  investment-related  economic  policy  on  low 
carbon  and  energy  transition,  the  reduction  of 
greenhouse gas emissions,  

Some  Progress  Some  Progress  Ireland  adopted  the 
Climate Action Plan 2019, which represents a major 
step  towards  more  ambitious  policies  and  measures 
to advance in the transition towards a climate neutral 
economy. The plan should help steer public, business 
and  household  investment  towards  low  greenhouse 
gas  projects.  However,  the  impact  of  the  plan  on 
actual  investment  decisions  will  materialise  fully 
only  once  the  implementation  of  the  range  of 
measures  and  policies  progresses  over  the  coming 
years. The increase  in the carbon tax to €26 per ton 
and the stated intention to increase the tax to €80 per 
ton  by  2030  also  sends  a  positive  price  signal.  In 
turn, the decision to raise the shadow price of carbon 
in  the  Public  Spending  Code  will  enable  Ireland  to 
better integrate climate impacts in public investment 
decisions. Work also continues towards the adoption 
of a new Renewable Electricity Support Scheme. The 
National  Development  Plan  2018-2027  commits 
around €30 billion to address the climate and energy 
transition, 
including  a  substantial  envelope  for 
sustainable  transport.  However,  the  plan  and  the 
envelope  dedicated  to  climate  action  will  not  be 
updated  in  light  of  the  Climate  Action  Plan.  A  first 
call for applications  under the €500 million  Climate 

70 

sustainable transport,  

water,  

A. Overview table 

Action  Fund  led  to  the  selection  of  seven  projects 
that  will  receive  €77  million  of  financial  support. 
Ireland  has  not  adequately  assessed  so  far  the 
(private  and  public)  investment  needs  related  to  the 
transition towards a climate neutral economy, though 
this  is  important  for  the  design  of  policies  and 
measures.  

the 

sparse 

Some Progress A very substantial increase in public 
clean  transport  investment  is  still  needed  to  ease 
congestion  and  reduce  carbon  emissions.  The  return 
to  economic  growth  and 
spatial 
distribution of the population has led to a high share 
of  workers  commuting  daily  from  outside  the  main 
cities. This has aggravated congestion in recent years 
and resulted in increasing  CO2 emissions and costs. 
While  the  share  of  passengers  using  trains  or  buses 
increased  by  0.8pps  to  17.4%  in  2017,  the  fleet  of 
buses  and  trains  is  still  highly  reliant  on  diesel 
engine.  The  National  Development  Plan  2018-2027 
has committed to promote urban compact growth, to 
transit  to  low  emission  buses  fleets  and  to  electrify 
partially the  Dublin  Commuter Train network. This, 
together  with  other  key  clean  public  transport 
projects proposed in the Plan, will require increasing 
investment  in  public  transport  by  around  90%  with 
respect  to  the  previous  decade.  While  in  2018  and 
2019, investment in public transport has increased by 
20% with respect to the two previous years, its share 
with  respect 
investment  has 
remained  relatively  flat.  Rapidly  moving  key  public 
transport  projects  from  the  project  and  planning 
phase  to  construction  might  help  reduce  emissions 
and congestion costs more rapidly.  

transport 

total 

to 

Some Progress Significant investment needs remain 
outstanding  in  the  water  and  wastewater  sectors  as 
very  high  leakage  rate  in  its  water  supply  systems 
persists and country breaches the requirements of the 
Urban  Waste  Water  Treatment  Directive  (only  42% 
of the wastewater generated by large urban areas was 
treated  at  complying  plants).To  address  it,  the 
Government  has  approved  an  investment  plan  to 
support the country's operation, repair and upgrading 
of the country’s water and wastewater infrastructure. 
The amount foreseen is significant and appears to be 
sufficient, in order to cover the needs in the sector, as 
identified  both  by  the  national  authorities  and  an 
OECD  study  about  to  be  published,  and  allow 
Ireland to reach compliance with the respective legal 
requirements.  

71 

A. Overview table 

digital infrastructure  

Some  Progress  Significant  investments  have  been 
made  in  digital  infrastructure  and  the  public-funded 
part  of  the  National  Broadband  Plan  has  become 
ready to start in 2019.  

and  affordable  and  social  housing,  taking  into 
account regional disparities.  

Some  Progress  Even  though  social  home  delivery 
has  accelerated  since  2015,  there  were  still  68,000 
households on social housing waiting lists and more 
than 10,000 homeless people in Ireland in July 2019. 
Policy  measures  to  increase  the  supply  of  social 
housing  are  in  place  but  their  effectiveness  is  still 
limited. Rebuilding Ireland, the Government’s 6-year 
action  plan  seeks  to  meet  the  housing  needs  of 
138,000  households.  This  will  be  delivered  through 
the provision of 50,000 new  social  housing units by 
2021, 
leasing 
through  build,  acquisition  and 
programmes,  and  supporting  88,000  households 
through  a  housing  assistance  payment  and  a  rental 
accommodation scheme. As of Q2 2019, the delivery 
has  slightly  exceeded  its  targets  in  each  year  of 
Rebuilding  Ireland.  If  implementation  continues 
according  to  plans,  Rebuilding  Ireland  will  provide 
social  housing  to  over  73%  of  households  on  the 
current waiting list.  

Implement  measures,  including  those  in  the  Future 
Jobs strategy, to diversify the economy and improve 
the  productivity  of  Irish  firms  -  small  and  medium 
enterprises  in  particular  -  by  using  more  direct 
funding 
to  stimulate  research  and 
innovation  

instruments 

Ireland 

institutions 

(Technology  Gateways), 

Some  Progress  Enterprise 
supports 
Collaborative Innovations between industry and third 
level 
in-
company R&D projects, participation in Technology 
Centres  and  development  of  Knowledge  Transfer 
Ireland  while  Call  2  under 
the  Disruptive 
Technology  Innovation  Fund  (DTIF)  supports  16 
projects with €65 million to 2022 for a wide range of 
activities.  In  addition,  Phase  2  funding  for  Science 
Foundation  Ireland  supports  six  Science  Foundation 
Ireland  (SFI)  Research  Centres  with  €230  which  is 
matched  by  industry.  However,  although  public 
research funding is increasing in absolute terms, it is 
still  below  levels  in  earlier  years  and  Ireland  is 
unlikely to achieve its R&D intensity target of 2.5% 
of GNP within the timeframe of 2020. It also remains 
the  case  that  the  bulk  of  public  support  for  R&I  in 
firms  is  through  the  Research  and  Development  tax 
credit, 
although 
adjustments  in  Budget  2020  target  the  tax  credit 
more at micro and small companies.  

than  direct 

support, 

rather 

and 
by 
entrepreneurship.  

reducing 

regulatory 

barriers 

to 

the  Retail  Planning 
Some  Progress  While 
Guidelines  have  not  been  reviewed, 
the  Irish 
Authorities have taken some steps to address barriers 
to opening new shops by setting up the new Planning 
Regulator and implementing initiatives to  make city 

72 

A. Overview table 

centres more attractive using an Urban Regeneration 
Fund. The tackling of barriers in the market for legal 
services  lacks  ambition  and  is  much  delayed.  Since 
the adoption of the Legal Services Regulation Act of 
2015, restrictions remain in place in the provision of 
legal  services,  hampering  competition  and  thus 
increasing  legal  costs,  to  the  detriment  of  small 
businesses in particular. Implementation of the Act is 
ongoing  with  preparatory  work 
and  public 
consultations,  but  concrete  measures  are  yet  to 
materialise.  

The  employment  rate  for  20-64  years  old  workers 
increased up to 74.1% in 2018, 0.9 pps above the EU 
average (73.2%) and 1.8 pps below the upper Europe 
2020 target (75%) for 2020. The employment rate for 
women  aged  20-64  stood  at  68.1%,  slightly  below 
the 69%-71% national target for Ireland. 

Europe 2020 (national targets and progress)  

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

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

Ireland is now aiming  to reach a target of GERD as 
2.5% of GNP only in 2025 instead of 2020. 

Although  public  and  business  research  funding  are 
increasing in absolute terms, public research funding 
is still below the level in 2009. 

National  greenhouse  gas  (GHG)  emissions  target:     
-20%  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading scheme) 

that 

indicate 

cumulated 
National  projections 
emissions  (on  the  basis  of  existing  measures)  over 
the  2013-2020  compliance  period  will  exceed 
allocations  by  around  8  million  tons  of  CO2 
equivalent  and  that  emissions  in  2020  will  be  only 
about  5%  lower  than  the  2005  level,  i.e.  around  15 
percentage  points  short  of  the  reduction  target.  This 
means that Ireland will need to buy allocations from 
other  Member  States  in  surplus  in  order  to  comply 
with  the  Effort  Sharing  Decision  and  it  will  put 
Ireland  in  a  difficult  starting  position  for  the  2021-
2030  compliance  period  under  the  Effort  Sharing 
Regulation. 

2020 renewable energy target: 16% 

National projections indicate  that Ireland is on track 
to  fall  short  of  its  renewable  target,  with  overall 
achievement  approximately  13%.  This  shortfall  will 
require Ireland to purchase statistical transfers, as per 
the Renewable Energy Directive 2009/28/EU. 

73 

 
 
A. Overview table 

Energy efficiency, 2020 energy consumption targets:  

Ireland's  2020  energy  efficiency  target  is  31,925 
GWh  of  savings  expressed  in  primary  energy 
consumption 

National projections indicate  that Ireland is on track 
to fall short of its energy efficiency target by about 4 
percentage  points.  Reaching  the 
target  requires 
additional measures. 

Early school/training leaving target: 8%. 

The  rate  of  early  school  leaving  (18-24  years  old) 
stood at 5.0% in 2018, ranking among the lowest in 
the EU and well below the Irish Europe 2020 target. 

Tertiary  education  target:  60%  of  population  aged 
30-34. 

the  share  of  30-34  year-old 

In  2018, 
tertiary 
graduates increased to 56.3%. It is well above the EU 
average (40.7%), but 3.7 pps below the Europe 2020 
national target. 

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number of people: 200 000 (baseline year: 2010). 

The  number  of  people  at  risk  of  poverty  or  social 
exclusion  has  decreased  since  2013.  In  2018,  1  023 
000  people  were  at  risk  of  poverty  and  social 
exclusion,  compared  to  1  220  000  in  2010,  getting 
therefore close to the national Europe 2020 target. 

([1])  The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific 
(CSRs):  
recommendations 
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; 

74 

 
A. Overview table 

  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 fully 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.  

75 

ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

76 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio63.659.053.952.649.647.145.043.141.740.439.338.437.6Changes in the ratio (-1+2+3)-4.2-4.6-5.1-1.3-3.0-2.5-2.1-1.8-1.5-1.2-1.1-0.9-0.8of which(1) Primary balance (1.1+1.2+1.3)1.71.71.51.61.20.90.60.40.20.10.1-0.1-0.2(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1.00.50.81.31.00.80.60.40.20.10.1-0.1-0.2(1.1.1) Structural primary balance (bef. CoA)1.00.50.81.31.31.31.31.31.31.31.31.31.3(1.1.2) Cost of ageing0.20.50.70.91.11.21.21.41.5(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component0.71.20.80.30.20.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures-0.10.00.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-4.0-2.5-1.7-1.5-1.8-1.6-1.5-1.4-1.3-1.2-1.1-1.0-1.0(2.1) Interest expenditure1.61.41.11.00.80.70.70.60.50.50.50.40.4(2.2) Growth effect-5.1-3.4-2.0-1.7-1.8-1.4-1.2-1.1-1.0-0.8-0.7-0.7-0.7(2.3) Inflation effect-0.6-0.5-0.9-0.8-0.9-0.9-0.9-0.9-0.8-0.8-0.8-0.8-0.8(3) Stock-flow adjustments1.5-0.4-1.81.70.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. b. For the medium term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps of GDP. The DSA results are used to further qualify the long term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018 and the DSM 2019.IE - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 3040506070809010011020172018201920202021202220232024202520262027202820292030Debt as % of GDP -IEBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506070809010011020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -IEp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3040506070809010011020172018201920202021202220232024202520262027202820292030Debt as % of GDP -IEBaselineHistorical SPB scenarioSGP scenario3040506070809010011020172018201920202021202220232024202520262027202820292030Debt as % of GDP -IEBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2030)37.656.239.839.940.8Debt peak year20192019201920192019Percentile rank34.0%72.0%Probability debt higher7.7%Dif. between percentiles22.9MEDIUMLong termMEDIUM(S2 = 2.9)S1S2Short termLOW(S0 = 0.1)DSALOWDebt sustainability analysis (detail)Medium termLOWLOW(S1 = -2.6) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualized. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

77 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)554.2413.5395.9354.3340.1359.2Share of assets of the five largest banks (% of total assets)47.645.944.345.546.1-Foreign ownership of banking system (% of total assets)(2)48.348.448.348.851.455.9Financial soundness indicators:(2)              - non-performing loans (% of total loans)21.614.913.19.95.54.2              - capital adequacy ratio (%)22.625.325.025.225.424.3              - return on equity (%)(3)8.56.86.35.04.94.5Bank loans to the private sector (year-on-year % change)(1)-10.0-6.4-3.52.10.42.1Lending for house purchase (year-on-year % change)(1)-3.9-1.1-4.22.74.02.4Loan-to-deposit ratio(2)98.898.793.295.390.289.8Central bank liquidity as % of liabilities(1)4.12.41.71.80.70.6Private debt (% of GDP)278.4305.1284.4250.5223.2-Gross external debt (% of GDP)(2) - public73.454.349.444.841.640.0    - private697.7701.5645.2563.7615.2566.5Long-term interest rate spread versus Bund (basis points)*120.468.764.648.455.460.8Credit default swap spreads for sovereign securities (5-year)*53.537.045.727.917.520.4 
 
 
 
 
 
 
   
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

(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 2019.       
(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 2019 for the employment rate, unemployment rate and gender employment gap.       
Source: Eurostat 

78 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)6.76.86.05.05.0:Gender employment gap (pps)11.812.312.112.112.212.4Income inequality, measured as quintile share ratio (S80/S20)4.94.54.44.64.2:At-risk-of-poverty or social exclusion rate(1) (AROPE)27.726.224.422.721.1:Young people neither in employment nor in education and training (% of population aged 15-24)15.314.312.610.910.1:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)68.169.971.473.074.174.9Unemployment rate(2) (15-74 years)11.910.08.46.75.85.1Long-term unemployment rate (as % of active population)6.65.34.23.02.11.7Gross disposable income of households in real terms per capita(3) (Index 2008=100) 90.893.597.3101.3103.4:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)247262499425510:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)0.080.401.99:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)55.855.551.452.651.8:Children aged less than 3 years in formal childcare27.430.628.634.437.7:Self-reported unmet need for medical care3.72.72.52.82.0: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 status on PISA (OECD) scores. Value for 2018 refers to reading.  
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.       
Source: Eurostat, OECD 

79 

Labour market indicators201420152016201720182019 5Activity rate (15-64)71.872.172.772.772.973.2Employment in current job by durationFrom 0 to 11 months14.114.615.214.815.6:From 12 to 23 months8.58.69.910.19.9:From 24 to 59 months14.714.515.617.018.6:60 months or over60.259.455.653.050.5:Employment growth* (% change from previous year)2.73.63.73.03.22.7Employment rate of women(% of female population aged 20-64)62.363.865.467.068.168.8Employment rate of men (% of male population aged 20-64)74.176.177.579.180.381.2Employment rate of older workers* (% of population aged 55-64)52.655.456.858.460.461.3Part-time employment* (% of total employment, aged 15-64)23.022.221.920.119.519.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)10.39.69.09.19.99.6Transition rate from temporary to permanent employment(3-year average)38.940.939.943.3::Youth unemployment rate (% active population aged 15-24)23.420.216.814.413.813.0Gender gap in part-time employment20.020.319.719.719.420.7Gender pay gap(2) (in undadjusted form)13.9:::::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)7.06.56.59.012.5:Underachievement in education(3):15.0::15.7:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)54.653.854.654.556.3:Variation in performance explained by students' socio-economic status(4)::::10.7: 
 
 
 
  
 
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 

80 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7.97.45.75.85.6:Disability1.11.10.80.80.8:Old age and survivors6.76.24.85.14.8:Family/children2.11.81.41.31.2:Unemployment2.92.51.81.51.3:Housing0.70.60.50.50.5:Social exclusion n.e.c.0.20.20.10.10.1:Total21.619.815.015.214.3:of which: means-tested benefits6.96.24.54.33.9:General government expenditure by function (% of GDP)Social protection15.113.810.410.09.5:Health7.26.85.35.25.1:Education4.74.33.33.33.3:Out-of-pocket expenditure on healthcare14.314.013.312.812.3:Children at risk of poverty or social exclusion (% of people aged 0-17)*34.430.429.027.325.223.9At-risk-of-poverty  rate(1) (% of total population)15.716.416.216.815.614.9In-work at-risk-of-poverty rate (% of persons employed)5.05.44.95.15.14.9Severe material deprivation rate(2)  (% of total population)9.98.48.56.75.2:Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan0.40.00.90.00.20.0Tenant, rent at market price2.31.60.63.21.32.8Proportion of people living in low work intensity households(4) (% of people aged 0-59)23.921.018.717.816.213.1Poverty thresholds, expressed in national currency at constant prices*112531137312160126741288813996Healthy life yearsFemales12.112.312.013.213.4:Males10.911.411.412.012.5:Aggregate replacement ratio for pensions(5)0.40.40.40.40.30.4Connectivity dimension of the Digital Economy and Society Index (DESI)(6):46.255.560.764.7:GINI coefficient before taxes and transfers*58.257.555.154.6::GINI coefficient after taxes and transfers*30.030.829.829.5:: 
 
 
 
 
   
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

*While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR indicators. 
1 Value added in constant prices divided by the number of persons employed. 
2 Compensation of employees in current prices divided by value added in constant prices.  
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.  
4 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 
75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is still 
pending or don't know. 
5 Percentage population aged 15-64 having completed tertiary education. 
6 Percentage population aged 20-24 having attained at least upper secondary education. 
7 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 
8 Simple average of the indicators of regulation for lawyers, accountants, architects and engineers. 
9 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). 

81 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry-7.639.4671.82-1.314.8111.24Labour productivity growth in construction6.43-1.99-8.271.304.54-0.36Labour productivity growth in market services-0.123.797.101.904.285.25Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry8.03-5.96-41.533.40-1.33-2.94ULC growth in construction-6.731.535.997.730.643.71ULC growth in market services-1.11-2.22-0.251.400.82-2.62Business environment201320142015201620172018Time needed to enforce contracts3 (days)650650650650650650Time needed to start a business3 (days)16.012.012.011.011.011.0Outcome of applications by SMEs for bank loans40.791.230.730.260.730.67Research and innovation201320142015201620172018R&D intensity1.571.501.191.191.231.15General government expenditure on education as % of GDP4.704.303.303.303.30:Employed people with tertiary education and/or people employed in S&T as % of total employment555455555655Population having completed tertiary education5373839404041Young people with upper secondary education6909394949494Trade balance of high technology products as % of GDP1.980.572.342.822.924.72Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1.581.351.451.38OECD PMR7, retail0.871.531.530.94OECD PMR7, professional services81.601.251.251.48OECD PMR7, network industries93.322.492.211.26 
 
 
  
 
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 including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR).  
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR).  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels.  
Aggregated supplier concentration index: Herfindahl index covering 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. Smaller values indicate larger diversification.  
* European Commission and European Environment Agency - 2018 provisional data.  
Source: 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). 

82 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.080.070.060.060.060.05Carbon intensity kg / €0.340.310.250.250.23-Resource intensity (reciprocal of resource productivity)kg / €0.580.520.420.430.430.44Waste intensity kg / €-0.08-0.06--Energy balance of trade % GDP-3.2-2.7-1.5-1.1-1.2-1.4Weighting of energy in HICP%11.6711.1510.628.848.508.48Difference between energy price change and inflation p.p.3.01.0-4.9-4.90.86.9Real unit of energy cost% of value added4.64.44.85.5--Ratio of environmental taxes to labour taxesratio0.190.190.260.260.25-Environmental taxes% GDP2.52.41.91.91.81.6Sectoral Industry energy intensity kgoe / € 0.060.050.030.030.030.03Real unit energy cost for manufacturing industry excl. refining% of value added6.76.46.77.0--Share of energy-intensive industries in the economy% GDP3.383.382.692.612.592.54Electricity prices for medium-sized industrial users€ / kWh0.140.140.140.130.120.13Gas prices for medium-sized industrial users€ / kWh0.040.040.040.030.030.04Public R&D for energy % GDP0.000.000.000.000.000.00Public R&D for environmental protection% GDP0.010.000.000.010.000.00Municipal waste recycling rate%-39.8-40.7--Share of GHG emissions covered by ETS*%27.127.728.128.827.825.5Transport energy intensitykgoe / €0.760.770.740.760.730.71Transport carbon intensitykg / €1.751.851.882.002.091.95Security of energy supplyEnergy import dependency%91.786.288.969.167.1-Aggregated supplier concentration indexHHI11.411.09.54.79.1-Diversification of energy mixHHI35.133.433.434.434.435.6 
  
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR IRELAND 

Building  on  the  Commission  proposal,  this  Annex(66)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  Ireland.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050 in Ireland, assessed in this report. This Annex 
provides  the  basis  for  a  dialogue  between  Ireland  and  the  Commission  services  as  well  as  the  relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Ireland (67). 

Ireland’s  transition  away  from  carbon-intensive  sources  of  energy  towards  more  sustainable,  renewable 
energy  sources  will  have  a  significant  impact  in  the  Midlands  region  and  the  workers  in  its  electricity-
generating industry. Its peat burning power stations will cease to operate by the end of 2020, potentially 
affecting around 4,000 jobs, out of a total of 110,000 persons employed in the region. Workers affected 
by  this  transition  would  need  to  be  equipped  with  new  and  in-demand  skills  to  increase  their 
employability  prospects  and  receive  tailored  support  by  employment  services  to  find  new  employment. 
Based on this preliminary assessment, it appears warranted that the Just Transition Fund concentrates its 
intervention on that region. 

The smart specialisation strategies (68) provide an important framework to set priorities for innovation in 
support  of  economic  transformation.  In  order  to  tackle  these  challenges,  investments  needs  have  been 
identified to diversify the regional economy making it more modern and competitive and to alleviate the 
socio-economic costs of the transition. Key actions of the Just Transition Fund could target in particular: 

• 

• 

• 

• 

• 

• 

• 

upskilling and reskilling of workers; 

job-search assistance to jobseekers; 

productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 

the creation of new firms, including through business incubators and consulting services; 

investments 
technologies; 

in  research  and  innovation  activities  and  fostering 

transfer  of  advanced 

investments in the deployment of technology and infrastructures for affordable clean energy, in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 

investments in enhancing the circular economy, including through waste prevention, reduction, 
resource efficiency, reuse, repair and recycling. 

(66)  This Annex is to be considered in conjunction with the EC proposal for a Regulation of the European Parliament and of the 
Council  on  the  Just  Transition  Fund  2021-2027  (COM(2020)  22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020) 23) 

(67) SWD(2019) 1006 final 
(68) As defined in Article 2(3) of Regulation EU 1303/2013 (CPR) 

83 

 
                                                           
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

Assessment of Ireland’s short-term progress towards the SDGs (69) 

Table E.1 shows the data for Ireland and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for  monitoring progress towards the SDGs in an EU context (70). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the  SDI dedicated section of 
the Eurostat website.  

(69)  Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(70)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

84 

 
 
 
                                                           
References 

Table (continued) 

(Continued on the next page) 

85 

 
 
 
 
   
 
References 

Table (continued) 

(Continued on the next page) 

86 

 
 
 
 
   
 
References 

Table (continued) 

(Continued on the next page) 

87 

 
 
 
 
   
 
References 

Table (continued) 

Source: Eurostat 

88 

 
 
 
   
 
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