National Competitiveness Council Ireland’ s Competitiveness S corecard 2011 1
NCC Competitiveness Pyramid
Main Messages from Ireland’s Competitiveness Scorecard 2011 Positives • Economic growth for 2011 & 2012 (likely to continue to be driven by net exports) • Cost competitiveness continues to improve – but more is required • Enterprise environment holding its own Productivity improvements Ireland continues to attract and be attractive as a location for investment Trade share increases • S ignificant investment in physical infrastructure in past decade
Ireland’s net exports continue to drive growth.. Consumpt ion Government Invest ment Net Export s 12% 10% 8% 6% 4% Percent age of GDP 2% 0% -2% -4% -6% -8% -10% -12% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 2011 S ource: CS O Nat ional Account s
..even more so than other economies Components of Economic Growth 2010, Ireland, UK and Germany 6% Consumpt ion Government Invest ment Net Export s 4% 2% Percent age of GDP 0% -2% -4% -6% Ireland UK Germany S ource: Nat ional Account s
Cost competitiveness now at 2003 levels Det eriorat ion Improvement 100 105 110 75 80 85 90 95 Jan-00 Mar-00 May-00 Jul-00 Sep-00 Harmonised Competitiveness Indicators, 2000-2011 (Jan 2005= 100) Nov-00 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Nominal HCI Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 S Sep-05 ource: Cent ral Bank, Forf ás calculat ions Nov-05 R Jan-06 eal HCI Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11
But costs remain high relative to purchasing power Price levels and GDP per capita 2009 S ource: Eurost at
Labour costs continue to fall in 2011, but cost gap with competitors remain Labour cost index, annual and quarterly Labour costs and net wage indicators 2010 Ireland EU 27 euro area-16 7.0% Labour costs Net Wage $100,000 Percent age change compared t o corresponding period of 6.0% $90,000 $80,000 5.0% $70,000 $) 4.0% Annual Wage (US $60,000 t he previous year 3.0% $50,000 $40,000 2.0% $30,000 1.0% $20,000 0.0% $10,000 2001 2002 2003 2004 2005 2006 2007 2008 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 -1.0% $0 US Net herlands Hungary pain euro area-13 OECD 28 UK France weden Japan Germany Denmark Poland New Zealand out h Korea It aly Ireland Finland wit zerland -2.0% S S -3.0% S S S ource: Eurost at S ource: OECD, Taxing Wages
Unit labour costs continue to decline, securing a competitive gain for Ireland Ireland euro area-14 OECD-25 7 6 5 4 Annual percent age change 3 2 1 0 -1 -2 -3 -4 -5 2005 2006 2007 2008 2009 2010 S ource: OECD, Unit Labour Cost s, Annual Indicat ors
Declines in ULCs has been driven by compositional effects Manufact uring Indust ry Const ruct ion Trade, t ransport and communicat ion Financial and business services Market services Business sect or excl. Agricult ure 15 10 Annual Percent age Change 5 0 -5 -10 -15 -20 2005 2006 2007 2008 2009 2010 S ource: OECD, Unit Labour Cost s, Annual Indicat ors
Productivity growth rebounds after a decline in 2008-2009 (GNP terms) Annual Average Growth in Output per Hour Worked, 2005-2010 2009-2010 2005-2009 6% 5% Average annual growt h rat e 4% 3% 2% 1% 0% -1% US Japan Ireland GNP weden Net herlands OECD 28 UK Hungary France out h Korea Denmark Ireland GDP Poland wit zerland pain New Zealand It aly Finland Germany S S S S S ource: The Conf erence Board, Tot al Economy Dat abase
Ireland has one of the highest stock of FDI relative to income in the OECD (but scores are declining) FDI inward stock as a % of GDP , 2009 2009 2005 200% 180% 160% 140% Percent age of GDP 120% 100% 80% 60% 40% 20% 0% US Ireland GDP Net herlands UK Hungary ingapore Ireland GNP OECD 28 weden Denmark pain France Germany Japan wit zerland New Zealand Poland Finland Israel It aly out h Korea India China S S S S S S ource: UNCTAD World Invest ment Report 2010
Ireland’s share of world trade continues to grow Ireland’s S hare of World Trade Irelands S hare of Total World Trade Irelands S hare of Merchandise Ireland's share of S ervices 3.0 2.5 ) hare of world t rade (% 2.0 1.5 1.0 S 0.5 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 S ource: WTO Online
Ireland has invested significantly in infrastructure over the past decade.. Dwellings excluding land Other buildings & structures (incl roads) Roads Transport equipment Other machinery & equipment (incl office machinery & hardware) Cultivated assets Intangible fixed assets (incl computer software( €600,000 €500,000 €400,000 Billion euro €300,000 €200,000 €100,000 €0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 S ource: CS O, Est imat es of t he Capit al S t ock of Fixed Asset s
However the perception of Ireland’s infrastructure quality remains poor 8.0 Highly Developed 7.0 6.0 5.0 4.0 3.0 2.0 Poor Qualit y 1.0 0.0 US Net herlands UK wit zerland ingapore France Finland weden Germany Denmark Japan out h Korea pain OECD 28 New Zealand Hungary Greece It aly Poland Israel Ireland S S S S S S ource: WEF , Global Compet it iveness Report 2010/ 2011
010 Main Messages from Ireland’s Competitiveness Scorecard 2011 Negatives • Public debt remains a serious risk • Unemployment remains a huge economic and social problem • Access to credit remains an issue • Consumption remains subdued as deleveraging process of private debt underway • Investment significantly down (but public investment above EA 16 average). • Productive investment down also, but not as much • Number of concerning trends have emerged in the area of Ireland’ s human capital (PIS A results)
Growth in Public Debt remains serious risk General Government Consolidated Debt as % of GDP , 2000-2011F 140 2011F 2006 120 100 Percent age of GDP 80 60 40 20 0 S ource: European Commission DG EcoFin, European Economic Forecast S pring 2011
Employment and Unemployment 2005- Q1 2011 In employment full-time In employment part-time Unemployed Long-term unemployed 2,500 350 300 2,000 Persons in employment (000s) 250 Persons unemployed (000s) 1,500 200 150 1,000 100 500 50 0 0 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 S ource: CS O QNHS
The stock of credit to enterprise has been negative since March 2009 Ireland euro area 12 40.0 30.0 20.0 Annual Growt h Rat e (% ) 10.0 0.0 -10.0 -20.0 -30.0 -40.0 -50.0 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 S ource: ECB
Components of economic growth Consumpt ion Government Invest ment Net Export s 12% 10% 8% 6% 4% Percent age of GDP 2% 0% -2% -4% -6% -8% -10% -12% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 2011 S ource: CS O Nat ional Account s
Significant fall in investment in Ireland since 2005 Gross Fixed Capital Formation as a % of GDP Privat e sect or 2010 General government 2010 Tot al 2005 35 30 25 GDP 20 GFCF % 15 10 5 0 US Hungary Japan Sweden Net herlands UK Ireland GDP Spain Poland France Swit zerland It aly euro area 16 Finland Germany Denmark Ireland GNP S ource: Ameco Dat abase
Productive investment does not fall as much as overall private investment 18% 16% of GDP 14% Product ive invest ment as a % 12% 10% 8% 14.7% 12.5% 6% 9.3% 4% 7.7% 2% 0% 1999 2000 2005 2010 1995 2000 2005 2010 1995 2000 2005 2010 1995 2000 2005 2010 1995 2000 2005 2009 1995 2000 2005 2010 EU 27 euro area 12 Ireland GDP UK US Ireland GNP S ource: Ameco Dat abase
Significant decline in PISA performance compared with 2006 results Reading lit eracy Scient ific lit eracy Mat hemat ical lit eracy 580 560 540 Index of lit eracy 520 500 480 460 440 420 400 US Japan Net herlands UK out h Korea ingapore wit zerland Poland Germany weden France Denmark Hungary OECD It aly pain Finland New Zealand Ireland Israel S S S S S S ource: OECD PIS A 2009 dat abase
Policy Challenges ► Rebuilding Ireland’ s reputation and brand ► Improving living standards through innovating and increasing productivity ► Ensuring viable enterprises have the credit they require to grow and expand ► Maintaining a taxation regime that incentivises enterprise and employment ► Addressing areas of underperformance in educational and maximising attainment ► Continued focus on infrastructure
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