Ireland is the biggest success story in Europe right now. According to an October 7th report from FactSet Insight, since exiting a financial assistance program at the end of 2013, the Emerald Isle has enjoyed steady positive GDP growth and is currently the fastest growing economy in the EU. In fact, real GDP in Ireland was up by 6.7% year-over-year in the second quarter of 2015 and up by 1.9% compared to the first quarter.
Sara Potter, VP, Markets Analysis for FactSet, explains that the Irish miracle has come about through a combination of fiscal austerity, its low corporate tax rate attracting new businesses, and a strong rebound in the old sod’s export-driven economy.
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For Ireland, the future’s so bright, you gotta wear shades
Potter highlights that the future also looks rosy for Ireland, with analyst surveys anticipating 5.5% annual growth for 2015 and 3.5% growth for 2016. Economic growth and robust fiscal austerity measures allowed the country to cut its government debt from 125.7% of GDP in the first quarter of 2013 to just 109.7% of GDP at the end of last year.
That figure is higher than the Eurozone average of 94.5% of GDP at year end 2014, but it is notably lower than the ratios in Portugal and Greece. The Irish economic miracle has also led to a reduction in the number of jobless. The unemployment rate has dropped from its peak of 15.2% in January 2012 and is currently a mere 9.4%.
The fact set report also points out that a return to economic growth in the UK and the U.S., Ireland’s primary trading partners, has also helped increase exports, which were up by 12.1% in 2014. Eurozone growth has been weaker overall, but analyst consensus projects EZ growth will pick up to 1.5% in 2015 and 1.7% in 2016, which should be a boon for Irish exports.
In concluding, Potter warns that despite its robust growth, Ireland is highly exposed to global economic events as an export economy. She suggests potential risks to the success story in Ireland include deflation in Europe, economic slumps among trading partners or the wildcard of the United Kingdom voting to leave the EU.