The National Competitiveness Council says it is “sounding a competitiveness alarm” even though the economy continued expanding in 2017 and into 2018, as pressures on competitiveness are increasing. 

As well as the headline measure of economic growth, the labour market and public finances continued to improve. Export sectors performed strongly in 2017 and the “taxation regime, highly-skilled young workforce, and business environment remain, for the most part, relatively competitive”.

However, the council's Competitiveness Scorecard 2018 says that cost pressures and constraints on capacity are weakening competitiveness, while the economy is over-reliant on a narrow export base.

Chairman Prof Peter Clinch said: “Global economic uncertainty, particularly in trade policy and international tax policy developments pose a threat to growth. Brexit remains the single biggest, and most immediate, threat to Ireland’s medium-term prosperity. 

“Domestically, while the headline measures of economic growth are positive, it is worrying that Ireland’s debt per capita is the highest in the EU, which places us in a very vulnerable position should an external economic shock occur. 

In Association with

“A significant concern is that the sustainability of Irish growth is threatened by the reliance of the economy on a small number of exporting companies and export markets and a narrow range of exported products and services. 

“And we are beginning to see a return to domestic policies that threaten the sustainability of the economy — rapid house-price inflation, transport congestion, failure to meet our climate obligations, and failure to invest sufficiently in R&D and to address the funding crisis in higher education.” 

Fiscal Discipline 

The council wants the government to continue its efforts to reduce debt and avoid any narrowing of the tax base. “Any loosening of the fiscal discipline at this stage would undo much of the progress achieved to date, and would have potentially significant negative implications for future competitiveness. Improving Ireland’s relative tax competitiveness to create a supportive environment for SMEs and investment, and to promote a more entrepreneurial culture, is crucial,” it says.

Clinch concluded: “The council is sounding a competitiveness alarm. The near-perfect competitiveness conditions Ireland has enjoyed are over. The risks to Ireland’s prosperity at this point are increasing and the process of reform and improvement must be intensified if Ireland is to avoid the kind of trajectory that we experienced in the lead up to the last economic crisis.”

In terms of international competitiveness, the 2017/2018 WEF Global Competitiveness Report shows Ireland is now ranked 24th most competitive economy, down one place in the year. Using the IMD measure of competitiveness, Ireland is now ranked 12th, a fall from 6th place in 2017. The World Bank’s 2017 Ease of Doing Business report places Ireland 17th out of 190 economies, an improvement of one place on the previous year.