During recent times it has become fashionable in certain quarters to talk about the current economic circumstances in the South in a political context. Unionist politicians and commentators in particular tend to dismiss the Southern economy using terms such as; “Basket case, Bailout, Bankrupt and Broke”. Unsurprisingly their motivation is one of sectarian politicking rather than economic reality.
Let’s look at some facts.
Firstly, the Southern economy was not “bailed out”. It was advanced loans at better than the going market rates with stringent conditions attached. This involved a degree of loss of economic independence. These loans must be repaid. Indeed Jim Alistair of the TUV was, no doubt, discomfited to learn recently in reply to a parliamentary question, that the bilateral loan from the UK to the Irish government has been substantially paid off with interest.
All the current indications are that Ireland will exit the IMF/ EU programme before the end of the year. Indeed, Government bonds have already been issued and oversubscribed on the international open markets at favourable interest rates. The current interest rate for the benchmark 10 year bond is 4.4%. Down from 15% at the height of the crisis in July 2011. The Irish Government even managed to sell €1B worth of its holdings in an Irish bank last week at a €10M profit. Who would have believed that possible until recently.
What of the wider economy?
GDP increased by an average of 0.8% year on year in 2012. (Both the UK and the rest of the Eurozone are back in recession over the same period.
The trade surplus was €41 Billion last year for the first 11 months. (Exports minus Imports).
Consumer spending returned to positive growth in the 3rd and 4th quarters of 2012.
Unemployment, the biggest problem in my view, has finally started to reduce 14.9% down to 14.6% most recently. I am conscious that emigration is a major factor here but at least the figures are moving in the right direction. With increased employment comes increased consumer spending, less Govt spending and thus the entire domestic economy benefits.
Property prices, the trigger for the meltdown, are rising. 4% in Dublin, in a month.
The future prospects are what may be termed, somewhat brighter, than in recent years. The latest predictions are for 1.6% growth this year.
The big risk is another major economic shock. As an export driven economy, the exposure to international conditions is considerable. The southern export success is built upon a number of key factors. A benign tax and regulatory environment, a young, well educated and mobile workforce and well developed infrastructure and communications networks as well as easy access to the wider European market. The key industries are technology, pharmaceuticals and food related.
The south is extremely well positioned to ride out the storm and I look with optimism to the years ahead.
The north eastern six counties however….where do I start? I believe tourism is the great untapped cash cow. After the past few weeks events it is likely to remain so. Heavy industry is dead in the North. The only inward investment seems to be minimum wage businesses, retail and call centres mostly. How is it fixed? Look a few miles south! Encourage graduates to stay and develop their skills at home, specialize in something, invest in innovative new businesses, develop a mid to long term economic strategy. A corporation tax deal would help but it is only part of a package oh, and ask why the north has been completely left behind in the modern economic world. An insular, inward looking north obsessed with its own importance while existing only as an economic backwater will never develop, find its own place and pay its own way in the world. As part of a reinvigorated, re-energised Ireland it will. The only question to my mind is when.