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Irish Competitiveness

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A study of the international competitive position of the Irish Economy just before the onset of the Credit Crunch

A study of the international competitive position of the Irish Economy just before the onset of the Credit Crunch

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  • 1. Irish Economic Policy Objectives
  • 2. Introduction
    • Irelands Location
    • 5 th highest GDP per capita
    • 2 nd highest GDP PPP per capita
    • Ranked 5 th highest in Human Development Index
    • Ireland has also high rankings for its …….
    • Ireland is a member of EU, OECD and the UN.
    • Ireland is not a member of NATO.
    • Ireland has a population growth rate of 2.5%
  • 3. Ireland as a regional economy $33,482 $50, 150 GDP (Nominal) Per Capita $16,574 billion $202.9 billion GDP (Nominal) Total $28,213 $43,600 GDP (PPP) Per Capita $14,953 billion $177.2 billion GDP (PPP) Total 1,669,807 sq mile 27,133 sq mile Area sq mile 1.6% 4,324,782 km2 70, 273 km2 Area km2 289 / sq mile 147.6 / sq mile Density per / sq mile 114 / km2 60.3 / km2 Density per / km2 0.8% 497,198,740 4,399,000 Population As a percentage European Union Ireland
  • 4. Ireland as a regional economy (cont)
    • EU comprises of 27 member states
    • The objective of regional economies is …..
    • Similar objectives include …..
    • Ireland as a regional economy has:
    • 1) No autonomy over monetary or exchange rate policy.
    • 2) Fiscal policy is constrained.
    • 3) Trade policy is determined by outside forces.
    • Regions approach to policy has a dual dimension and they are:
  • 5. Economic Growth
    • Is a primary objective of economic policy
    • Economic growth is the increase in value of the goods and services produced by an economy.
    • How economic growth is measured and calculated?
    • Rapid economic growth associated with higher living standards.
    • GNP and GDP are standard measures of economic growth.
    • GNP / Capita is a more appropriate policy objective.
  • 6. Distinguish between real and nominal growth
    • GDP is the value of all goods and services produced in a country.
    • Nominal GDP measures the value of all goods and services in current prices.
    • Real GDP measures the value of all goods and services produced expressed in constant prices.
    • GDP DEFLATOR = Nominal GDP / Real GDP
    • GNP is the value of all goods and services produced by a countries citizens regardless of geographic location.
    • GNP = GDP + Net Factor Payments
  • 7. CSO – Quarterly National Accounts
  • 8. GNP / Capita is a limited measure of welfare
      • Puts no value on leisure and household economy.
      • Does not take into account income distribution.
      • 3) Doesn't take resource depletion into account.
    • GNP / Capita does not give society the capacity to achieve a better quality of life.
    • GNP / Capita is good for a more sophisticated measure of human welfare.
    • Balance economic growth require that income rises in an:
    • 1) Efficient Manner
    • 2) Equitably Manner
  • 9. Economic growth and efficiency
    • Efficiency and Production Possibility Frontier.
    • Opportunity cost,
    • The economic meaning of points on the PPF, inside the frontier and outside
    • Allocative efficiency
  • 10. PPF graph
  • 11. Economic growth and efficiency
    • For a firm, equilibrium with given resources is at the most profitable and productively efficient point on PPF
    • For an economy, markets may lead to a wrong combination of goods compared to what is feasible on the PPF
  • 12. Economic growth and efficiency
    • If the technology improves, the PPF shifts to the right
    • A military or ecological disaster moves the PPF inward
  • 13. Economic growth and equity
    • It is widely accepted equity is important for the balanced economic growth.
    • However, it is hard to define equity properly.
    • In Ireland, equity is entitled as “social inclusion”
  • 14. Economic growth and equity
  • 15. Economic growth and equity
  • 16. Economic growth and equity
    • In China, to give priority to efficiency with due consideration to fairness is a major policy.
    • To promote balanced development to ensure sound and rapid economic growth.
    • To balance development of rural and urban areas.
  • 17. Economic growth and employment
    • The unemployment rate
    • In 2005, the worldwide labour force was over 3 billion people.
  • 18. Economic growth and employment
  • 19. Economic growth and employment
    • Okun’s Law describes a negative relationship between the change in the rate of unemployment and real GDP.
    • For every 1% excess of the natural unemployment rate, a 2% to 3% reduction in GDP is predicted.
  • 20. Economic growth and employment
  • 21. Strategy to achieve economic growth
    • Prudent fiscal policy and neutral budget
    • Invest in infrastructure
    • Provide education
    • Introduce flexibility into labour market
    • Increase competition in monopoly areas
    • Develop a transparent policy of immigration.
  • 22. Price stability
    • Inflation
    • Expressing inflation
      • avarage years growth of CPI
      • growth of CPI in comparison with the same month last year
      • growth of CPI in comparison with last month.
      • growth of CPI in comparison with basic time
  • 23. Inflation
    • 3 levels of Inflation
      • Moderate inflation
      • Galloping inflation
      • Hyperinflation (Germany,Argentina, Brazil, Zimbabwe)
  • 24. Inflation 2,7 2,2 2,3 4,0 4,7 4,0 5,3 2,5 2,1 1,3 Ireland 2,1 1,6 2,6 -0,1 1,4 4,5 3,9 1,8 9,7 8,0 Czech Republic   2,2 2,1 2,1 2,3 2,4 2,1 1,1 1,2 1,7 Euro-zone   2,1 2,0 2,0 2,1 2,2 1,9 1,2 1,3 1,7 EU-15   2,2 2,1 1,9 2,1 2,5 2,4 1,6 2,1 2,6 EU-25 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997  
  • 25. Inflation
  • 26. Projected Inflation
  • 27. CPI and HICP
    • Consumer price index (CPI)
      • Consumer basket
        • groceries
        • non – groceries products
        • Services
    • Harmonised indexes of consumer prices (HICP) Eurostat
  • 28. HICP, Index 2005 = 100 106,4 107,1 107,0 106,5 106,4 106,1 105,7 105,9 105,6 105,3 104,8 Ireland 111,1 107,6 107,0 106,1 105,4 105,7 105,4 105,1 104,8 104,4 103,6 Czech Republic 106,1 106,3 105,9 105,4 104,8 104,5 104,4 104,7 104,5 104,2 103,7 EU (25 countries) 106,3 106,6 106,1 105,6 105,0 104,7 104,5 104,8 104,7 104,4 103,8 EU (27 countries) 105,7  106,2 105,7 105,2 104,7 104,3 104,2 104,5 104,4 104,1 103,5 Euro area 2008 m01 2007 m12 2007 m11 2007 m10 2007 m09 2007 m08 2007 m07 2007 M 06 2007 m05 2007 m04 2007 m03 Teritories
  • 29. HICP, Index 2005 = 100
  • 30. HICP, Percentage change t/t-1 -0,7 0,1 0,5 0,1 0,3 0,4 -0,2 0,3 0,3 0,5 0,7 Ireland 3,3 0,6 0,8 0,7 -0,3 0,3 0,3 0,3 0,4 0,8 0,3 Czech Republic -0,3 0,4 0,5 0,5 0,4 0,1 -0,3 0,1 0,3 0,6 0,6 EU (25 countries) -0,2 0,4 0,5 0,5 0,4 0,1 -0,3 0,1 0,3 0,6 0,6 EU (27 countries) -0,4 0,4 0,5 0,5 0,4 0,1 -0,2 0,1 0,2 0,6 0,7 Euro area 2008 m01 2007 m12 2007 m11 2007 m10 2007 m09 2007 m08 2007 m07 2007 m06 2007 m05 2007 m04 2007 m03 Teritories
  • 31. HICP, Percentage change t/t-1
  • 32. Price stability
    • The goal
    • ECB requirements (2 %)
      • Good ?
    • What can happen when the price stability is missing?
  • 33. Competitiveness
    • The Ability to Achieve Success in International Markets.
    • Costs, Prices & Wages.
    • Improving Business Performance.
    • Small Open Economy Dependent on Trade.
  • 34. Decline in Competitiveness
    • Ireland Has Suffered From a Decline in Competitiveness Over the Last Decade (Source NCC)
  • 35. Decline in Competitiveness
    • Irelands Performance Against Competitors as Ranked by the WEF
  • 36. Strategy to Achieve Improved Competitiveness
    • Knowledge Economy
    • Cost of Doing Business
    • Energy
  • 37. Irelands Formal Education
  • 38. Irelands Formal Education
    • Weaknesses
    • 2 nd Lowest in E.U. for Pre-Primary Enrolment.
    • Maths 18 th & Science 13 th of OECD.
    • PhD Graduation 11 th of E.U. 15.
  • 39. Costs of Doing Business
    • Expensive to do Business in Ireland
    • 2 nd Highest Price Level in E.U. 15
    • 5 th Highest Inflation Rate in E.U. 15
  • 40. Costs of Doing Business
    • Strength of Euro against Dollar Affects Export Competitiveness
  • 41. Costs of Doing Business
    • Labour Costs
  • 42. Costs of Doing Business
    • Minimum Wage
  • 43. Costs of Doing Business
    • Prudent Fiscal Policies Needed to Ensure Demand does not Create an Environment for Inflation
    • Corporation tax rate 12.5%
    Inward investment of Greenfield projects per million of population
  • 44. Infrastructure Spending
  • 45. Infrastructure Spending
  • 46. Infrastructure Spending
  • 47. Energy
    • Ireland is Heavily Dependent on Fossil Fuel Energy
    • Annual Inflation of Electricity 5.1% Over Last Decade
    • Electricity 17% More Expensive than E.U. Average
    • 3 rd of E.U 25 Per Capita Oil Consumption
    • 4 th Most Oil Vulnerable of 19 Countries
  • 48. Energy
    • 2 nd Generation Renewables, Wind & Wave
    • More Competition on Irish Grid
    • Nuclear Energy?
    • Public Transport, “Transport 21”
  • 49.
    • Thank you for your attention ,
    • Any questions?