Table Of Content/IRELAND/ITALY/JAPAN /NORWAY/POR1rUCAUSPAIN/
TURKEY/UNITEDHNCD
GERMANY/ 3 J ' fr
/ .-1 *i '." J' ' ' ".
J<N- - » (L >#
/
/ N - p . z,. T-j'>.,:...,.^.y.V. :
Lr-1
/TOttY
llTCTTFn
OECD
OECO
ECONOMIC SURVEYS
f>
cA
'-£ . " *'.*
^ .^^iXyi^.^::**/ /
sz-
IRELAND
ORGANISATION FORECONOMIC CO-OPERATIONANDDEVELOPMENT
Pursuanttoarticle 1 oftheConventionsignedinParison 14th December,
I960,andwhichcameintoforceon30lhSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policies designed:
- toachievethe highest sustainableeconomicgrowthand employment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to the development ofthe
world economy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in the processofeconomic development; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD arc Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey, theUnited Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28thJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
The Socialist Federal Republic ofYugoslavia lakes part in some ofthe
work ofthe OECD (agreement of28lhOctober, 1961).
Publiéégalement en français.
OOECD, 1987
Application for permission toreproduce ortranslate
all or part ofthis publication should be made to:
Head ofPublications Service, OECD
2, rue Andre-Pascal, 75775 PARIS CEDEX 16, France.
Table of contents
Introduction 9
I. Recent trends, policies and outlook 1 1
Recent trends 1 1
Budgetary policy 19
Monetary and exchange rate policy 23
Outlook 30
II. The labour market: characteristics and problems 33
Key features 33
Structure of unemployment 36
Towards greater wage flexibility 40
Labour market institutions and regulations 43
Special labour market and manpower policies 45
General causes of high unemployment 46
Conclusions 51
III. Correcting macroeconomic imbalances 52
Introduction 52
The dynamics of debt 52
Medium-term borrowing targets 60
The tax burden 61
Cutting current expenditure 63
Persistent external deficits and indebtedness 68
Enhancing competitiveness 70
IV. Conclusions 77
Notes and References 82
Annexes
I. Technical notes 89
II. Debt dynamics in Ireland 101
III. Chronology of main economic events and policy measures 108
Statistical annex 1 18
Tables
Text
1. Demand and output 1 1
2. Foreign companies in the Irish economy 13
3. Balance of payments 14
4. Financing of the balance of payments 16
5. Labour force and employment 17
6.. Prices and costs 18
7. Fiscal adjustment: plan and performance 20
8. Budget indicators and expenditure 22
9. Financing of the public sector 27
10. Money supply formation 28
1 1. Recent economic indicators 31
12. Short-term prospects 32
13. Labour market statistics 34
14. Unemployment, migration and inflation 37
15. Participation and unemployment rates by age and sex, 1979 and
1985 39
16. International comparisons of budget deficits and national debt 54
17. Exchequer debt and borrowing 57
18. Some indicators of external position, 1985 69
19. GDP deflators by sector 74
20. Profitability, bankruptcies and lay-offs 75
Annex tables
Al. Public sector employment 94
A2. Pay comparisons for the government sector 94
A3. Average transfer payments 95
A4. Sources of tax revenue 95
A5. Average and marginal tax rates and unemployment benefits 96
A6. Historical accounts of public enterprises 97
A7. New social welfare schemes 98
A8. Pension projections for the public service 99
A9. Statutory minimum wage levels 99
A10. Expenditure on main manpower policies 100
All. Indirect tax rates in Ireland 100
A12. Theoretical debt dynamics in Ireland 107
Statistical annex
Selected background statistics 1 18
A. Expenditure on gross national product, current prices 119
B. Expenditure on gross national product, constant 1980 prices 120
C. Agricultural output and income 121
D. Prices and wages 122
E. Household appropriation account 123
F. Budgetary position 124
G. Public expenditure 125
H. Government revenue 126
I. Public sector debt 127
J. Public sector external debt 128
K. Balance ofpayments 129
L. Foreign trade and payments 130
Diagrams
1. Production, productivity and unit labour costs 12
2. Interest rates 24
3. Sterling exchange rate, interest rate differentials and capital flows 26
4. Unemployment rate in Ireland, EEC and USA 36
5. Unemployment by duration 38
6. Inflation and unemployment 41
7. Social benefits and the tax wedge 47
8. Unemployment benefit "replacement ratios" 49
9. Government shares of GNP 53
10. Irish external public debt 55
11. Dynamics of external debt 56
12. Budget balances and debt/GNP ratios: some scenarios 59
13. Measures of competitiveness 7]
14. Comparative price levels and GDP per head 72
15. The trade balance adjusted 73
BASIC STATISTICS OF IRELAND
THELAND
Area(thousandsq.km) 70 Populationofmajorcities, 1986census(thousands):
Agriculturalarea, 1981,aspercentoftotalarea 69 Dublin(CountyandCo. Borough) 1 021
Cork,Co. Borough 133
Limerick,Co. Borough 56
THEPEOPLE
Population(April 1986) 3540500 Netemigration:
No.ofinhabitantspersq.km 50 Annualaverage 1981-1986 14400
Increaseinpopulation:Annualaverage Annua)averageperthousandofpopulation 4.1
1981-1986 19400 Labourforce,total,April 1986 1 302000
Naturalincreaseinpopulation:Annualaverage Civilianemploymentin:
1981-1986 33800 Agriculture,forestryandfishing 168000
Industryandconstruction 301 000
Othersectors 606000
THEGOVERNMENT
Publiccurrentexpenditureongoodsandservices, 1986 CompositionofParliament(endOctober, 1987):
(aspercentofGNP) 20 scats
Generalgovernmentcurrentrevenue, 1986 FiannaFail 81
(aspercentofGNP) 49 FineGael 51
Publicdebt,31stDecember1986(aspercent ProgressiveDemocrats 14
ofcentralgovernmentcurrentrevenue, 1986) 323 Labour 12
WorkersParty 4
Others 4
Lastgeneralelection:February, 1987
FOREIGNTRADE
Exports: Imports:
Exportsofgoodsandservices,aspercentofGNP Importsofgoodsandservices,aspercentofGNP'
(1986) 64 (1986) 60
Mainexports,1986(percentoftotal): Mainimports, 1986(percentoftotal):
Machineryandelectricalgoods 30 Machineryandelectricalgoods 26
ofwhich: Officemachineryanddataprocessing Petroleum,petroleumproductsandrelated
equipment 20 materials 6
Mealandmeatpreparations 7 Textilemanufactures 4
Dairyproductsandbirds1eggs 5 Ironandsteel 2
Textilemanufactures 3 Clothingandfootwear 4
Liveanimalschieflyforfood 3 Mainsuppliers, 1986(percentoftotal):
Clothingandfootwear 2 UnitedKingdom 42
Beverages 2 OtherEuropeanEconomicCommunity 26
Organicchemicals 7 UnitedStates 16
Medicinalandpharmaceuticalproducts 2
Maincustomers, 1986(percentoftotal): *Preliminary.
UnitedKingdom 34
OtherEuropeanEconomicCommunity 38
UnitedSûtes 9
THECURRENCY
Monetaryunit:Irishpound CurrencyunitperUSdollar,
averageofdailyfigures:
Year 1986 0.74
September 1987 0.68
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study pre¬
paredfor the annual review ofIreland by the Economic
and Development Review Committee on 12th Oc¬
tober1987.
After revisions in the light ofdiscussions during the
review, final approval ofthe Surveyforpublication was
givenbythe Committeeon12th November1987.
The previous survey ofIreland was issued in April
1985.
Introduction
Recent Irish economic performance has been dominated by the legacy of
massivefiscal stimulusduring muchofthe 1970s. Over a relatively shortperiod, the
cyclically-adjusted budget deficit widened by around 9 per cent of GNP. By 1981,
the public sector borrowing requirement had reached over 20 per cent of GNP,
two-thirdsofwhich wasfinanced byofficial borrowing abroad. Thecurrent external
deficit amounted to about 15 per cent of GNP, and inflation accelerated to over
20percent.WiththeexchangeratefixedintheEuropeanMonetarySystem,thereal
exchangerateappreciated about30percentagainstotherEMScurrencies (1979 to
1982). However,thestrongappreciationofsterlingandthedollarduringmuchofthis
period limited the loss in overall competitiveness to about 10 per cent. The shift of
policiesin a restrictivedirection in theearly 1980s was small and delayed1. In early
1983, a new Government, enjoying a stronger Parliamentary position than the
previous three governments, introduced a very restrictive budget, with Exchequer
borrowing reduced by over 3 per cent of GNP in 1983 and with a substantial
carryovereffectinto 1984. Althoughexpendituregrowthwasrestrained,virtuallyall
the burden of adjustment fell on taxes, reducing the real disposable income of the
average worker in manufacturing by around 6 per cent. For the first time in years,
anddespiteadeclineinGNPof2 percent,the Budgettargetswerelargelyattained:
the cyclically-adjusted change in the budget deficit exceeded 6 per cent of GNP.
But the 1984, 1985 and 1986 Budgets sought rather less fiscal adjustment.
While tight limits were maintained on public sector employment and investment,
currentgovernmentexpenditure (including transfers) continued to increase, both in
realtermsandasapercentageofGNP. By 1986,Exchequerborrowingwasstillover
13 percentofGNP,approximatelythesameasin 1983,anddebthadrisento 140per
centofGNP,amongthehighestintheOECD area.Theeffectsofservicingthisdebt
-abouthalfofwhichisheldabroad-andofheavyincreasesintaxationhada major
deflationary impact on the economy with final domestic demand falling by about
7 percentin thefiveyearsto 1986. Inflationfell sharply;thecurrentexternal deficit
narrowed substantially; and unemployment roseto almost 20per centofthe labour
