Market monitor: Ireland

With upticks in exports and domestic spending, Ireland outpaces many eurozone peers.

Economic overview

Ireland, one of Europe’s smaller economies, is enjoying a period of strong economic growth. It was hit hard by the financial crisis, which pushed it into a three-year recession. But Ireland emerged stronger than European Union peers like Greece, which has an economy about the same size.

The country’s growth continues to be fueled by sales to expanding markets elsewhere and domestic spending. Declining unemployment is boosting Irish consumers’ confidence, and the service sector is the strongest it’s been in nine years. Home construction also is reaching record highs. Economists forecast gross domestic product growth of 6% in 2015 and further improvement in 2016—above growth for the eurozone as a whole.

Business travel industry insight

Almost 10 million international travelers visited Ireland in 2014—close to half arriving from the United Kingdom. Ireland is enjoying a second consecutive year of strong corporate travel spending growth. Oxford Economics forecasts growth of 9% in 2015 but predicts a decline in growth in subsequent years.

Most international hotel chains focus on Dublin, but market leaders Best Western, Carlson Rezidor and Choice Hotels also offer properties in secondary locations like Cork, Galway, Limerick and Sligo. With little new supply in the pipeline, travelers will face rising rates and limited availability in 2016.

Dublin is Ireland’s primary air travel market, and airport traffic grew 15% in the first half of this year. Low-cost carriers Ryanair and Aer Lingus dominate supply, together accounting for 75% of departures. International Airlines Group’s recent takeover of Aer Lingus may see it exploit the airport’s U.S. pre-clearance facility, to develop Dublin further as an alternative to London for connections between Europe and North America.

Opportunities

  • Ireland’s low corporate tax rate and flexible labor market helps it attract investment from the finance, pharmaceuticals and information technology sectors.
  • The weak euro is helping Irish firms secure new export business, particularly to the U.K. and U.S.
  • As households make progress paying off debts—particularly mortgages—their increased spending power sets the stage for more business investment in production.

Challenges

  • Ireland remains an expensive place to do business. As economic conditions improve, wages are rising, and this could hurt the country’s ability to attract new business investment. Ireland moved up just one place in the latest World Economic Forum competitiveness index, edging ahead of Saudi Arabia to 24th place.
  • The country’s banking sector has yet to fully recover from the financial crash, and this limits the availability of credit.
  • With around 17% of exports destined for the U.K., the prospect of a U.K. exit from the European Union is creating some nervousness among investors.

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