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Saturday, 20th April 2024 |
| So Where is all this Growth Coming From? |
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| Mary Doyle examines the sectoral basis of this year's growth |
The Irish economy continues to exceed expectations. Output growth has averaged 9% per annum for the period 1994 - 1998. The outlook for 1999 is no different - continued strong growth. But where is this growth coming from? The current boom has benefited almost all sectors of the economy, with increased output, employment and sales spread across most segments of Irish life.
Construction continues to be one of the strongest performers with output again expected to grow in excess of 10% in 1999. One indicator is that employment in building and construction had risen by almost 8% in the year to April. No wonder FAS are seeking to recruit workers to the industry from the UK and Continental Europe. Up to 8,000 additional skilled and semi-skilled workers will be required before the end of the year according to the CIF.
All aspects of construction are performing well. Planning permissions granted in the first quarter of 1999 were up almost 18% on the same period in 1998, which will translate into a higher level of on-going activity. A further record in house building was set last year with over 42,500 new dwellings built. This figure is likely to be surpassed in 1999 with some projections suggesting up to 50,000 new dwellings.
Other aspects of construction are equally active - commercial, industrial and retail. Public sector infrastructural investment is budgeted to increase by over 30% in value in 1999 - in areas such as roads, public transport, water and sewage services. This investment will go some way towards addressing the bottlenecks affecting the Irish transport and housing markets. So expect more road works and diversions which will eventually result in by-passes, motorways and serviced housing estates. Such investment will continue beyond the current year and well into the next decade, partly in the form of Public Private Partnerships, to resolve some of the infrastructural shortages that have arisen from five years of unexpectedly rapid growth.
Another buoyant area is tourism, with tourist numbers having grown by over 10% p.a. for the past five years - witness the stream of visitors into all airports and ports, the number of new hotels in city and rural areas and continuing staff shortages in the industry. The French tourist is more likely to feel at home here not just because of the fixed exchange rate, but also because of the French chef, waitress or teleworker they may meet along the way. Bord Failte expects a further 6% growth this year in tourist numbers, especially from the strong currency economies of the US and UK but also Continental Europe. As well as foreign tourists, strong domestic tourism reflects the healthy economy, with more short breaks, business incentive schemes and conferences.
Low interest rates, higher disposable income and increased numbers in employment are all leading to an expansion of Ireland's new national past time - shopping. Retail sales rose by close to 9% in 1998 and are up a further 6% in the first quarter of this year compared with the last quarter of 1998. Demand is spread across most sectors but has been particularly strong for electrical goods, department stores, footwear and clothing so far this year. Growing tourist numbers will add to sales later in the year. But the real star is car sales, where new car sales rose to 145,000 last year and signs so far for 1999 suggest a further 10% increase or 160,000 new car sales as motorists replace vehicles in advance of the new testing regime for older vehicles.
Compared to other sectors manufacturing generally is somewhat quiet with the latest statistics showing seasonally adjusted growth up 2% in the period December-February on the previous three months. Projections for 1999 suggest a 10%+ increase. Certain segments are showing particularly strong activity. The most apparent ones would be in the computer/engineering sector. Many Irish businesses who service the multi-nationals are also benefiting - such as the transport and logistics suppliers or those involved in sub assembly of computer products. And of course the Irish software industry is building steadily on the strength of its products and personnel - in numerous fields including education, internet services, financial packages and e-commerce generally.
Other manufacturing businesses which benefit from the economic buoyancy are obviously those providing building materials to the construction industry - such as timber, tiling, cabling.
Suppliers of business services have seen strong growth which should last as long as the economy remains buoyant. These range from engineering or architectural services to the construction industry to general services for business, including legal, financial, recruitment and especially information technology. We are about to see the second Irish recruitment agency listed on the stock market and recently saw the first estate agency quoted there. This reflects the growing diversity of the Irish stock market away from the more traditional sectors such as finance, construction, food and drink. It also signifies the on-going transformation of the Irish economy from an agricultural and manufacturing base to a service economy.
In contrast to the above, the agricultural sector is somewhat immune to the general economic growth. CAP and GATT constraints control it more than demand or price issues. Last year's concerns about CAP reform have not fully materialised or have been postponed for some years. However output is curtailed and this is not a growth industry in terms of basic output. Value added and product innovation are the only opportunities for expansion in agriculture.
With the latest ESRI predictions of 7.5% growth in GDP in 1999, there are few sectors of the economy that will not benefit. |
Mary Doyle is group economist with ICC Bank and a prominent member of Network Dublin
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| Article appeared in the June 1999 issue.
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