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Angel Gurría, Secrétaire général de l'OCDE

Launch of 2015 Economic Survey of Ireland

 

Introductory remarks by Angel Gurría,

Secretary-General, OECD

Dublin, 15 September 2015

(As prepared for delivery)

 

 

Minister Noonan, Ambassador Forbes, ladies and gentlemen,

 

When I launched the OECD’s 2011 Survey, the Irish economy was in the depths of a deep recession. Two years ago, when I launched the 2013 Survey, the clouds were beginning to clear. Today, I am delighted to be back in Dublin to present the 2015 Economic Survey of Ireland, and to see how far and how quickly the country has bounced back.

 

The economy is powering ahead. At 5.2%, Irish GDP was the fastest growing in the OECD in 2014. This year we expect growth of around 5% again - which would likely see Ireland remain the fastest growing economy in the OECD two years running!

Presentation of the Economic Survey of Ireland

15 September 2015 (from left) - OECD Secretary-General Angel Gurría and Ireland’s Finance Minister Michael Noonan during the launch of the 2015 OECD Economic Survey. Dublin, Ireland. 
Photo: Irish Department of Finance

This strong growth is making a big difference in people’s lives, allowing the social scars of the crisis to slowly heal. Having peaked at over 15%, unemployment has fallen below 10%, still above the OECD average (6.8%) but below euro area average (10.9%). Ireland is creating more than 1,000 jobs a week, most of them full time, and average earnings are picking up. Net emigration has fallen to a third of its 2012 peak as the labour market improves.

 

These successes owe much to the government’s steadfast commitment to reform. The banking system has been restructured and recapitalised, the fiscal deficit significantly reduced, government debt put on a declining path, public administration efficiency increased and public employment services revamped. Ireland is on the right path!

 

Of course, events in Greece over the summer – and in China, more recently – show just how fickle market sentiment can be. When the sun is shining – metaphorically, at least! – it’s important to keep fixing the hole in the roof until the job is done. Ireland’s public debt is still larger than GDP. Trade and FDI flows are crucial to the economy. These facts make Ireland especially vulnerable to external shocks. With Ireland’s economic crisis receding in the rearview mirror, now is the time to secure the recovery, to ensure that restored prosperity is shared by all, and to build resilience for the challenges ahead.

 

Now, let me share with you some of the Survey’s key messages.

 

                                                 

Boosting productivity to secure the recovery

 

Foreign investment has long been the cornerstone of Ireland’s dynamic IT, medical devices, pharmaceuticals and financial services sectors. Dublin’s cutting-edge IT cluster, the so-called “Silicon Docks”, houses the European Headquarters of the biggest names in the global digital economy: Google, Facebook, Twitter, LinkedIn, Airbnb.

 

In contrast, Irish-owned SMEs continue to lag behind, dragging aggregate productivity growth down to only 0.5% per annum – about a quarter the level in 2000. To give productivity a shot in the arm, government policy needs to better support the diffusion of knowledge and technological innovation from the FDI sector to domestic SMEs. Financial support for innovation should be rebalanced away from tax incentives – which often suit multinationals better – to direct funding, which is more accessible to smaller firms. Steps should be taken to ensure all firms can access the global talent pool. More needs to be done to encourage competition in business and legal services, as well as the utilities all firms use.  

 

To draw all these strands together, productivity needs a cross-government policy champion. A beefed-up National Competitiveness Council could play this role. To support such national champions, the OECD recently created an International Productivity Network where best practices and useful lessons will be shared. Ireland’s participation in the recent launch in my home country of Mexico was much appreciated, and we would warmly welcome your joining the Network permanently.

 

 

Ensuring restored prosperity is shared by all

 

But boosting productivity and growing the economy shouldn’t be an end in itself. Sustainably improving citizens’ living standards must be the over-arching goal. Ireland has experienced seven tough years to get its economy on the right track and its public finances under control.

 

Better-off households contributed progressively more, while core welfare payments to the retired and the unemployed have been largely protected. Remarkably, Ireland’s tax and transfer system still does more to reduce inequality than any other in the OECD: while Ireland has the most unequal distribution of market income in the OECD, inequality in disposable income is below the OECD average.

 

One area where huge strides have been made is in labour activation. Through initiatives like SOLAS – the revamped further education and training authority, Momentum, Springboard, the network of Intreo offices and now JobPath, the government has been trying to transform a largely passive welfare system into one where a person’s first day on welfare marks the first step on their path back to work.

 

But challenges remain. There are still nearly 120,000 people who have been unemployed for over a year. Many of these people lack the necessary skills to participate in the recovery. Efforts to redesign the apprenticeship system are therefore welcome. Training and apprenticeships need to cover a wide range of occupations and to be driven by the needs of employers, so that the unemployed – men and women! –acquire the skills they need to fill the jobs available.

 

More can be done also to end unemployment and poverty traps. Sometimes, as with housing and family income supplements, financial assistance is withdrawn too quickly as your earn more. At the same time, childcare costs are 40% of the average wage, the highest in the OECD. Much more needs to be done to make childcare affordable, particularly for low income families, so that re-joining the labour force becomes financially viable for more parents.

 

 

Ireland is well placed to benefit from a migration ‘brains exchange’

 

In Ireland’s case, ensuring an inclusive recovery also means further reducing emigration, welcoming home those that left in recent years and better integrating those that have arrived since the turn of the century, and continue to arrive in relatively large numbers.

 

The Irish people have a long-standing tradition of migrating in search of a better life, whether because of famine or economic crisis. Emigration nearly tripled when the recent crisis hit, peaking at about 1 in 50 of the population every year by 2013. It has since fallen slightly, but remains high, while inward migration has picked up again.

 

The net effect of inward migration has been unambiguously positive, but there remain both challenges and opportunities for policymakers to address. With this in mind, the 2015 Economic Survey of Ireland includes a dedicated chapter on migration.    

 

One striking feature of the migrant population, both into and out of Ireland, is that they are highly educated. More than half of have post-secondary qualifications. So, it is neither a ‘brain drain’ nor a ‘brain gain’ - but a ‘brains exchange’. To make the most of this exchange, Ireland needs to do better at attracting back its emigrants once they have benefitted from international experience, as well as integrating highly qualified immigrants into the domestic labour market.

 

Whether you are a returning emigrant, or a new immigrant, relocating to another country is a costly exercise. At present, Ireland focuses tax relief for this purpose on executives on the multinational sector, through the Special Assignee Relief Programme. There is a strong argument for replacing this with generalised tax rebates for relocation expenses which would be open also to Irish SMEs seeking to recruit high calibre candidates from overseas.

 

Ladies and gentlemen, in coming out the other side of a deep crisis, Ireland is once again among the leading lights of the OECD’s economies. In the months and years ahead, the challenge is not simply to continue in the same direction, but to make sure the recovery is sustainable and inclusive. This means your policy framework right! For its part, the OECD stands ready to work with Ireland every step of the way to design, develop and deliver better policies for better lives.

 

Thank you!

 

 

 

 

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