Benchmarking Ireland’s g Competitiveness 2010 p
Annual competitiveness reports p p Volume 1: Benchmarking Ireland’ s Performance Ireland s Performance Volume 2: Ireland’s Compet it iveness Compet it iveness Challenge
What is competitiveness? Compet it iveness encompasses all t hose fact ors C i i ll h f which impact on t he abilit y of firms in Ireland t o compet e on int ernat ional market s in a way i i l k i which provides our people wit h t he opport unit y t i t o improve t heir qualit y of life. t h i lit f lif
Key findings y g ► Competitiveness is improving: ► Competitiveness is improving: � costs are falling; � skills availability has improved; y p ; � pressures on infrastructure have weakened as demand has fallen and as maj or proj ects are completed; and � some exporting sectors are performing relatively well. ti t f i l ti l ll ► However significant challenges remain: ► However significant challenges remain: � high levels of unemployment; � high private and public debt levels; � a high cost base; � weak productivity performance; and � limited access to new credit. li it d t dit
1. Ireland’s Competitiveness – where we stand S S ustainable t i bl Growth: Growth: ► national income, ► quality of life and ► quality of life, and ► environmental sustainability
Despite the sharp decline in Irish living standards, national income levels (GNP based) remain close to euro area average Levels of GDP per capita in constant prices (US Levels of GDP per capita in constant prices (US $ PPP) $ PPP) $55,000 2010 F 2005 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 US 28 DP ny 16 NP ea re nd ds en rk UK ce nd an in el nd ry nd ly Israe U OECD-2 euro area-1 Singapor Netherland Ireland GD Swede Denmar U German Japa Ireland GN South Kore Switzerlan Franc Finlan Spai New Zealan Polan Ita Hunga S ource: IMF, World Economic Out look, April 2010
Strong positive contribution from net exports… but driven by large decline in imports driven by large decline in imports. Contribution of Net Exports to GDP Contribution of Net Exports to GDP S ource: Forfás calculat ions, CS O Nat ional Account s.
Public debt is growing rapidly General Government Debt (as a % G l G t D bt ( % f GDP) 2000 2011F of GDP), 2000-2011F 100% Euroarea Ireland UK 90% 90% 80% 70% 60% 50% 40% 30% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 S ource: Eurost at , Economy and Finance; and European Commission, S pring Economic Forecast s May 2010
Very high levels of household debt are moderating but remain a drag on recovery moderating but remain a drag on recovery Household Borrowing Per Capita, 2010 Q1 g p , Q €70,000 2010 Q1 2005 €60,000 €50,000 €40,000 €30,000 €20,000 €10 000 €10,000 €0 ds urg nia aly ce gal ce 13 ria ny nd ain um nd Greec Franc Finlan Irelan Ita Portug Sloven Spa Luxembou Belgiu Austr euro area- Germa Netherlan S ource: European Cent ral Bank, Aggregat ed Balance S heet of euro area Monet ary Financial Inst it ut ions
Ireland has demographic advantages but ageing population will put pressure on public finances population will put pressure on public finances Gross Public Expenditure on Pensions (as a % Gross Public Expenditure on Pensions (as a % of GDP) 2007-2050 of GDP), 2007 2050 16% 2007 2020 2030 2040 2050 14% 12% 10% 8% 6% 4% Ireland UK Denmark Germany Euroarea Poland France S ource: European Commission, DG EcoFin, Pension schemes and pension proj ect ions in t he EU-27 members, Oct ober 2009.
Ireland has made real improvements in quality of life over the past decade life over the past decade Ranking in the United Nations Human Development Index 2007 Ranking in the United Nations Human Development Index, 2007 50 e Ranking 2007 2000 45 Worse 40 35 30 30 25 20 15 king 10 Better Rank 5 0 US nds nce and pan ain ark UK any ore rea and ary and den and taly and ael Spa Singapo Hunga Netherlan Swed Fran Switzerla Jap Finla New Zeala Germa South Kor Pola Irela Isr Denm It S ource: S ource: UN Human Development Indices, A S t at ist ical Updat e, 2009
Ireland’s environmental performance is marginally below the OECD average marginally below the OECD average Environmental Performance Index 2010 S Environmental Performance Index 2010, S cale (0-100 ) cale (0 100 ) 100 95 90 85 80 75 70 65 60 55 50 US any ore CD rea and den nce and UK and pan ain ark ary and nds and ael aly Ita Spa Hunga Denma Isra Germa Singapo Netherlan Switzerla Swed Fran Jap OE Pola South Kor Finla New Zeala Irela S ource: Yale Cent re for Environment al Law and Policy
Essential Conditions Essential Conditions Business Performance: T T T Trade and Investment d d I t t
Private sector investment has collapsed -from an average of 24.6% of GNP over the 2005-2008 period to 13.4% in 2009 Gross Fixed Capital Formation by the Private sector (as % p y ( of GDP) ) 30% 2009 2005-2008 25% 25% 20% 15% 10% 5% 5% 0% S US Spain n Japan n y Hungary euro area-16 6 y Germany 5 OECD-25 s Netherlands Ireland GNP P UK K P Ireland GDP Switzerland d France e Finland d k Denmark Poland d Sweden n y Italy S ource: European Commission, AMECO Dat abase
Irish exports held up well during the crisis… but countries which experienced sharp falls in 2009 are rebounding in 2010 Annual Growth in Exports Goods and S Annual Growth in Exports Goods and S ervices 2005- 2010F ervices, 2005 2010F 15% Ireland euro area 13 OECD-28 10% 5% 0% -5% -10% -15% -20% 2005 2006 2007 2008 2009 2010 S ource: OECD Economic Out look 86, December 2009
FDI performance remains strong, but our scores are falling Rate of Return to US -Owned Companies, S tock of Inward Direct Investment (as % 2009 GDP), 2008 S ource: Forfás Calculations, UNCTAD World Investment Report, 2009 S ource: US Bureau of Economic Analysis
Essential Conditions Essential Conditions Productivity
Significant room for improvement in Ireland’s productivity performance productivity performance Average Annual Growth in Out put per hour Worked, 2001 -2009 g p p , 6% 2005-2009 2001-2005 5% 4% 3% 2% 1% 1% 0% -1% -2% rea nd ary nd nd nd ds ark ain US CD UK DP an ce ny en NP aly Japa U Hunga OEC U Ireland GD Ireland GN Ita Denma Spa South Kor Finla Netherlan Pola Fran New Zeala Germa Switzerla Swed S ource: Groningen Growth & Development Centre, Total Economy Database, January 2010
Essential Conditions Essential Conditions Prices and Costs
Ireland’s cost competitiveness is improving Ireland s cost competitiveness is improving Harmonised Competitiveness Index, 2005 =100 � Ireland experienced a 7.7% loss in cost competitiveness (real HCI) between January 2005 and HCI) between January 2005 and April 2008 . � Ireland has regained some of its competitiveness since then p because of falls in relative prices and favourable exchange rate movements vis-á-vis key y trading partners. � In May 2010, Ireland’s real HCI was 6.1% below the January 2005 value. However, the real HCI remains 19% above the January 2000 level. S ource: Cent ral Bank,
Labour costs - unit labour costs are falling but performance varies by sector f i b t Annual Change in Unit Labour Costs Annual Change in Unit Labour Costs S ource: OECD, Unit Labour Cost, Quarterly Indicators
Property - still amongst the most expensive d despite significant falls in prices it i ifi t f ll i i Cost of Renting a Prime Office, 2006 -2009 � The cost of renting a prime office fell by 18% prime office fell by 18% in Ireland in 2009 making us cheaper than the US the US and Italy. and Italy. � However, larger price falls in S ingapore and g p S pain in 2009 mean they are now cheaper than Ireland. S ource: Cushman & Wakefield
Energy costs fall significantly but likely to be cyclical Industrial Energy Prices for Large Energy Users, 2007 -2009 � The price of electricity for large energy users for large energy users, decreased by more in Ireland (24% ) than in any other any other benchmarked location. � This downward adj ustment is largely due to the steep decline in global fuel prices (gas and coal) i ( d l) and temporary rebates which are to be phased out by the end of 2012 t b th d f 2012 S ource: Eurost at , Environment and Energy 23
Business services costs decline S S ervices Price Index 2006 100 ervices Price Index, 2006=100 S S ource: CS ource: CS O S O, S ervices Price Index ervices Price Index Not e: This indicat or is based on experiment al CS O dat a
Accountancy costs fall significantly but only marginal declines in legal services costs i l d li i l l i t Accounting and Legal S Accounting and Legal S ervices Index 2006=100 ervices Index, 2006 100 S ource: CS O, S ervices Price Index Not e: This indicat or is based on experiment al CS O dat a
Essential Conditions Essential Conditions Labour S upply
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