Economic Analysis
Ireland

Ireland

Population 5.0 million
GDP 80,504 US$
A4
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 9.3 5.9 1.9 4.7
Inflation (yearly average, %) 0.7 0.9 -0.5 0.3
Budget balance (% GDP) 0.1 0.5 -6.5 -5.5
Current account balance (% GDP) 6.0 -11.3 5.5 0.1
Public debt (% GDP) 63.0 57.4 62.6 65.1

(e): Estimate (f): Forecast

STRENGTHS

  • Flexible labour and goods markets
  • Favourable business environment, attractive taxation
  • Presence of multinational companies, particularly from the United States, which account for 22% of employment and 63% of value added in the non-financial business sector
  • Presence through multinationals in sectors with high value added, including pharmaceuticals, IT and medical equipment

WEAKNESSES

  • Dependent on the economic situation and tax regimes of the United States and Europe, particularly the United Kingdom
  • Vulnerable to changes in the strategies of foreign companies
  • Public and private debt levels still high
  • Banking sector still vulnerable to shocks

Risk assessment 

Activity set to resume, after resilience attributable to multinationals

The Irish economy is expected to record significant growth in 2021, after a year marked by the economic consequences of the pandemic. While, in 2020, the country was one of the few in the region not to see its activity decline, this was exclusively due to the strength of exports by multinationals in the pharmaceutical sector (31% of exports of goods in 2019, 52% including chemicals) and computer services (more than half of exports of services). While the activity of these firms will remain solid in 2021, the acceleration of the Irish economy will be driven by domestic activity, which was hit in 2020 by two lockdowns, first in the spring and then in the autumn. These measures, coupled with uncertainty, hampered household consumption and pushed households to increase their savings considerably, despite having their purchasing power boosted by support measures (short-time work arrangements, temporary reduction in VAT from 23% to 21% from September). Although the return to a normal VAT rate in March and the uncertainty surrounding the health situation should encourage some precautionary saving at the beginning of the year, household consumption should then rebound strongly. In a progressively more upbeat context, businesses should also step up their investments again, after a year marked by the pandemic and uncertainty about future trade relations with the United Kingdom (13% of Irish exports of goods and services). The signing of a trade agreement between London and the European Union in December 2020 is, in this respect, good news, especially for certain sectors that are highly dependent on Britain, such as agri-food (meat, dairy products, bakery).

 

Public accounts still deep in deficit to sustain activity

The public accounts deteriorated sharply in 2020 due to the support measures implemented to limit the consequences of the pandemic on households and businesses (direct aid to SMEs, state-guaranteed loans, reduction in income tax for self-employed people, VAT cut from 13.5% to 9% in the hotel and catering sector from November 2020 to the end of 2021), for a total amount over two years estimated at EUR 25 billion (7% of GDP). As the majority of these measures have been extended in the 2021 budget, the public deficit will remain significant, despite the increase in revenue in line with activity. The public debt is expected to continue to grow, after falling steadily between 2013 and 2019. The economic and budgetary situation could be severely affected over the next few years if discussions on the introduction of international corporate taxation are successful, given the country's dependence on the activity of multinationals: the share of corporate tax in tax revenues rose from 7% in 2014 to 20% in 2019.

The investment decisions of these firms also have a considerable effect on the external accounts and make the current account extremely volatile. While the balance of goods shows a large structural surplus (38% of GDP at the end of September 2020), the services deficit seesaws depending on R&D services imports (9% of GDP in the first three quarters of 2020, compared with 21% of GDP in 2019). At the same time, the repatriation of dividends by multinationals generates a chronic income deficit (24% of GDP at the end of September 2020). These substantial flows are attributable to the significant foreign direct investments made by these firms, which are, however, likely to vary. Excluding effects related to multinationals, the current account has been in surplus since 2015 (5% of gross national income in 2018).

 

Despite historic breakthrough, Sinn Féin cannot form government

After four years of negotiations following the vote to take the United Kingdom out of the European Union, the establishment of a physical border between Northern Ireland and the Republic of Ireland was ultimately avoided: customs duties will be levied in the Irish Sea (depending on the final destination of the product), thus complying with the 1998 peace treaty.

Domestically, the February 2020 general elections saw a historic breakthrough for the nationalist Sinn Féin party, which has a left-wing platform but is above all in favour of reunification with Northern Ireland. It came out on top with 24.5% of the votes, but won only 37 seats (out of 160) because it had not put forward enough candidates. However, because of its links with the IRA, a nationalist paramilitary organisation that ended its armed campaign in 2005, the other main parties had ruled out any coalition with Sinn Féin, making it almost impossible for it to come to power. After four months of negotiations, Fianna Fáil (22%, 38 seats) and Fine Gael (21%, 35 seats), the two rival centrist parties that have traded power back and forth for a century, agreed to form a coalition with the Greens (7%, 12 seats) to obtain a parliamentary majority. The new Taoiseach (Prime Minister), Micheál Martin, leader of Fianna Fáil, succeeded Leo Varadkar (Fine Gael) in June 2020. However, according to the rotating leadership agreement, Mr Varadkar will return to power in December 2022 and take charge of the second part of the term. While tensions cannot be ruled out, this agreement should ensure political stability, as in the previous term, where Fine Gael governed as a minority with the non-participating support of Fianna Fáil.

 

Last updated: February 2021

Payment

Cheques are still used for both domestic and international commercial transactions, however for international transactions, the use of bills of exchange is preferred, together with letters of credit. Bank transfers are common, with SWIFT transfers being utilised regularly. Direct Debits and standing orders are also becoming more recognised as an effective payment method, and are particularly useful for domestic transactions. Assignment of invoice is accepted both pre- and post-supply of goods and/or services.

Debt collection

Where there is no specific interest clause, the rate applicable to commercial contracts concluded after August 7, 2002 (Regulation number 388 of 2002) is the benchmark rate (the European Central Bank’s refinancing rate, in force before January 1 or July 1 of the relevant year) marked up by seven percentage points and applied to the contracts via a percentage calculated per day past due date. For claims exceeding €1,270, debtors may be threatened with a “statutory demand” for the winding-up (closure) of their business if they fail to make payment or come to acceptable terms within three weeks after they receive a statutory demand for payment (a “21-day notice”).

 

Amicable phase

The debt collection process usually begins with the debtor being sent a demand for payment, followed by a series of further written correspondence, telephone calls, personal visits, and debtor meetings. If the two parties are unable to reach an amicable settlement, the creditor may begin legal proceedings.

 

Legal proceedings

If a defendant fails to respond within the allotted time to a court summons (either a plenary or summary summons before the High Court, a civil bill before the Circuit Court, or a civil summons before the District Court), the creditor may obtain a judgement by default based on the submission of an affidavit of debt without a court hearing. An affidavit of debt is a sworn statement that substantiates the outstanding amount and cause of the claim. It bears a signature attested by a notary or an Irish consular office. The claim amount at stake will determine the competent court: the District Court, then the Circuit Court, and, for claims exceeding €38,092.14, the High Court in Dublin, which has unlimited jurisdiction to hear civil and criminal cases and to assess, in the first instance, the constitutionality of laws enacted by Parliament (Oireachtais).

 

Fast-track procedure 

In any of the three courts, if the debt is certain and undisputed, it is alternatively possible to request a fast-track summary judgment from the competent court.

 

District Court: amounts up to €6,348

For contested debts, a civil summons is served on the debtor, with the originating court proceedings setting out the claim and amount alleged owed. The debtor then files a Notice of Intention to Defend, indicating that he intends to contest the case, at which point the court fixes a hearing date. The case is heard before a judge, who decides whether to issue an order for judgment (a Decree).

 

Circuit Court: amounts from €6,349 to €38,092

In this case, a civil bill is served on the debtor, who, in turn, will enter an Appearance (a formal document indicating that the debtor intends to answer the claim). A notice for particulars is then also filed by the debtor, in which he seeks further information about the claim to which the creditor sends replies. The debtor must deliver a defence within a prescribed period. The creditor then serves the defendant with a formal notice advising of hearing date. Each side presents its case and the judge makes a decision.

 

High Court: amounts over €38,093

In front of the High Court, a summary summons is served on the debtor, who then files an Appearance. The creditor makes an application to the Master of the High Court for judgment by way of motion and grounded by sworn affidavit. The debtor can reply to the claim by sworn affidavit. If the Master is satisfied that the debt is due and owing, liberty to enter final judgment is granted. However, if the Master is satisfied that the debtor has a genuine dispute, the case is sent for a plenary hearing. During the plenary hearing, the merits of the case are heard either as oral evidence or affidavit. A High Court hears the case and makes a determination.

The commercial court – a special division of the High Court, created in 2004 – is competent to hear commercial disputes exceeding €1 million, included in a commercial list or cases concerning intellectual property, and is able to provide a suitable and rapid examination of the cases submitted. At the discretion of the commercial judge, proceedings may be adjourned for up to 28 days to enable the parties to refer to alternative dispute resolution practices, such as conciliation or mediation.

Normally, obtaining a decision may take a year. However, this timeframe may be doubled if compulsory enforcement is required. Appeal claims brought before the Supreme Court may take an additional three years.

Enforcement of a legal decision

A judgment is enforceable as soon as it becomes final. If the debtor fails to satisfy the judgment, the creditor can request the competent court to order execution by way of attachment and sale of the debtor’s assets by the Sheriff. There is also the possibility to obtain payment of a debt through a third party owing money to the debtor (garnishee order).

For foreign awards, enforcement depends on whether the decision is issued in an EU member state or a country outside the EU. For the former, Ireland has adopted enforcement mechanisms; such as the EU Payment Order, or the European Enforcement Order when the claim is undisputed.

Insolvency proceedings

Out-of-court proceedings

Informal negotiations may take place, and any agreement must be unanimously adopted by all creditors.

 

Examinership

Examinership is an Irish legal process whereby court protection is obtained to assist the survival of a company; The company may then restructure with the High Court’s approval. It provides a maximum 100 day period in which a court appointed official (the examiner) seeks to take control of the company and manage it so that the company may continue to trade. The procedure may be initiated by the company, its directors, or one of its creditors. Once the examiner has been appointed, no proceedings may be commenced against the company. Its functions are to examine the affairs of the company and to formulate proposals for its survival. The examiner must formulate proposals for a compromise or scheme of arrangement to facilitate the survival of the relevant body as a going concern. They can be accepted by the creditors but they must be validated by the court.

 

Receivership

The procedure arises in the context of secured creditors and provides a framework in which they may act so as to enforce their security interest. A receiver is appointed to a company by either a debenture holder or the court to take control of the assets of a company, with a view to ensure the repayment of the debt owed to the debenture holder, either through receiving income or realising the value of the charged asset.

 

Liquidation

The terminal process by which a company is wound up and dissolved, this process is conducted by a liquidator who takes possession of assets and distributes the proceeds from their sale in accordance with the priority of repayment. The liquidator is also required to investigate the conduct of the directors of the company and prepare a report for the Office of the Director of Corporate Enforcement (ODCE). Dependent of its view, the liquidator may also be required to bring restriction proceedings against one or more of the directors. The procedure can be started by a competent court (court liquidation), the creditors (creditors’ voluntary liquidation) or the debtors (members’ voluntary liquidation).

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