Belfast Telegraph

Economy Watch: view from Dublin

By Danny McCoy

The late 1990s was a seminal era in Ireland's recent history. It will be mostly remembered for the optimism of the Good Friday Agreement, and the belief that the Celtic Tiger was not a jobless growth phenomenon, but that Ireland could not only employ its native population but also give opportunities to many other nationalities.

In an economic context, the main event was saying goodbye to the punt, with the euro traded for the first time in January 1999.

Summer 2015 has felt a bit like those heady days of the late 1990s.

I sense we now really believe economic recovery is under way and that a swell of hope and optimism is returning to the country. It's not just that the economic recovery has become more tangible - it feels like we are about to see a dramatic gear shift in our economic fortunes.

The main economic indicators are all now pointing to a balanced and robust economy. Consumers are spending again - retail sales (excluding cars) were up 6% in the first seven months of the year. Industry is also doing well as output grew almost 20% in the same period.

While it is disappointing that housebuilding recovery has been so timid, overall investment in the economy is contributing strongly to growth. The most spectacular aspect of the Q1 economic output numbers was that the value of GDP growth was up 12% in the year.

We haven't seen a set of national accounts like it for almost a decade. The buoyancy was further reinforced by end-August tax receipts, which showed that tax revenue was up 10% in the year, €1.4bn (£1bn) more than expected.

While many have been surprised by these much better than expected economic indicators, our experience of the 1990s shows just how quickly debt and unemployment problems can be turned around. One of the most striking features of the economy in the late 1990s was the speed at which unemployment plummeted.

It dropped three percentage points in 1998 to move from double digits to 7.4%. In the second quarter of this year the unemployment rate was down two percentage points, but jobs growth could easily improve further, particularly if housebuilding activity moved closer to the level that the economy actually needs.

A rapid turnaround in migration patterns will inevitably follow the jobs market improvement. The first signs of this are already evident in the most recent numbers, although these are probably already a little dated. In the year ending April 2015 our population jumped by 26,000.

Interestingly, the population increase in the booming economy of 1998 was just 22,000. Back then migration trends were even more closely linked to job prospects than they are now. Around 30,000 people left Ireland in 1998. Last year it was nearly three times that, largely unchanged from the previous year's level.

Danny McCoy is chief executive of Irish employers' group Ibec

Belfast Telegraph


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