major macro economic indicators
|2019||2020||2021 (e)||2022 (f)|
|GDP growth (%)||5.1||5.8||15.1||4.8|
|Inflation (yearly average, %)||0.9||-0.5||2.3||3.0|
|Budget balance (% GDP)||0.5||-4.9||-3.0||-1.8|
|Current account balance (% GDP)||-19.9||-2.7||14.0||9.0|
|Public debt (% GDP)||57.2||58.4||55.2||51.9|
(e): Estimate (f): Forecast
- 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
- 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
Domestic demand takes over from the momentum provided by multinationals
After being one of the few countries where activity did not shrink in 2020, Ireland recorded exceptional economic growth in 2021, thanks in part to the recovery in domestic demand following the lifting of restrictions, but especially to strong export performances by multinationals in the pharmaceutical sector (31% of goods exports in 2019, 52% including chemical products) and IT services (more than half of services exports). In 2022, activity is expected to return to growth rates similar to those seen in the pre-pandemic years. While exports by multinationals should remain solid, growth will also be driven by the consumption of households, whose savings rate was still substantial at the end of June 2021 (25% of gross disposable income, compared with 10% before the crisis). Household purchasing power will be additionally buoyed by the continued fall in the unemployment rate, which peaked at 8% in March 2021 before rapidly easing back to pre-crisis levels (5.2% six months later). Domestic demand will get a further boost from additional public investment (EUR 1.1 billion increase compared with 2021, or 0.3% of GDP, more than half of which will be in housing), as part of the National Development Plan (NDP), which will run until 2030. However, activity will be held back by the production capacity of companies, whose utilisation rate exceeded the pre-crisis level at the end of 2021, reaching 80.4%, the highest reading in four years. In a continuation from the second half of 2021, the recovery in industry and construction is likely to be hampered by hiring difficulties, which affect 30% and 60% of companies respectively, and, above all, by supply problems, which are reported as a hindrance by 70% of companies in both sectors. While the signing of the trade agreement between the UK (13% of Irish goods and services exports) and the EU in December 2020 was welcome news, the recurring tensions and threats that have plagued the relationship between the two parties since then are likely to generate uncertainty.
Moreover, due to high energy prices and production costs, inflation will continue to rise in the first half of 2022, before gradually easing.
International tax agreement: no effect in 2022, but considerable uncertainty thereafter
Public finances will continue to improve gradually in 2022. The reduction in the deficit will be driven mainly by the increase in tax revenues, which will be boosted by brisk activity and employment, as well as by the re-imposition of 13.5% VAT in the hotel and restaurant sector at the end of August 2022 (it was cut to 9% in November 2020). Concomitantly, despite the additional public investment under the NDP, expenditure will grow less rapidly, due to the phase-out of support measures. Public debt, which is relatively modest compared with the Eurozone average, should thus continue to decline. Having signed the international tax agreement in October 2021, Ireland is going to increase the corporate tax rate for companies generating turnover of EUR 750 million or more from 12.5% to 15%. The hike will happen in the medium-term, probably in 2023. The impact of this agreement on the attractiveness of the Irish economy is as uncertain as it is crucial, given how much tax revenues depend on the activity of multinationals, whose share of corporate tax in Ireland climbed from 7% in 2014 to 20% in 2019.
Beyond their effect on public finances, the investment decisions of these firms also have a considerable influence on the external accounts, which would suffer greatly if multinationals left the country. Reflecting this, Ireland’s current account is extremely volatile. While the goods balance shows a large structural surplus (39% of GDP in 2020), the balance of services seesaws (from a deficit of 17% of GDP in 2020 to a 4% surplus at the end of June 2021), depending on R&D services imports. At the same time, dividend repatriation by multinationals generates a structural income deficit (28% of GDP at the end of June 2021). Stripping out the effects related to multinationals, the current account has been in surplus since 2015 (EUR 24 billion in 2020).
Momentum still with Sinn Féin, the main opposition party
The February 2020 legislative elections led, after four months of negotiations, to a coalition between Fianna Fáil (FF, 22%, 38 seats out of 160) and Fine Gael (FG, 21%, 35 seats), the two rival centrist parties that have traded power back and forth for a century, plus the Greens (7%, 12 seats). Micheál Martin, leader of Fianna Fáil, thus succeeded Leo Varadkar (Fine Gael) as Taoiseach (Prime Minister). Under the rotating leadership agreement, Mr Varadkar will return to power in December 2022 for the second half of the term. But the elections also brought a historic breakthrough for nationalist party Sinn Féin, which came first with 24.5% of the vote. The party has a left-wing platform, but is above all in favour of reunification with Northern Ireland. A year and a half after the elections, polls continue to confirm Sinn Féin's momentum, as the party has 32% of voting intentions, more than ten points ahead of the FF and FG, whose popularity ratings have been steadily waning since the first wave of the pandemic. However, because of its links to the IRA, a nationalist paramilitary organisation that ended its armed campaign in 2005, Sinn Féin is politically isolated and the other main parties are unwilling to join it in a coalition, making it difficult for Sinn Féin to take power.
Last updated: February 2022
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.
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”).
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.
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).
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.
Informal negotiations may take place, and any agreement must be unanimously adopted by all creditors.
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.
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.
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).