While some countries are discouraging immigrants, Ireland says they are vital to maintain its economic growth. Meanwhile, the chance of a no deal Brexit is a big concern for the Irish jobs market.
Ireland economy is fastest growing in Europe
Ireland’s economy is booming, with Gross Domestic Product growth for 2018 now revised up by 1.5% to 8.2% - the best in Europe.
Irish economy eclipses UK’s
For the first three months of 2019, GDP is up 2.4% quarter-on-quarter and 6.4% year-on-year. And the momentum is continuing, says finance minister, Paschal Donohoe.
Compare that with the Brexit hit UK economy, which shrank 0.2% from April to June 2019, and you can see the difference.
Different attitudes to immigration
Another big difference is the attitudes of the two to immigrants. The UK is looking to attract “the brightest and best”, but is looking to limit numbers elsewhere.
Migrants fill up half of new jobs
Ireland recognises that migrants now fill up more than half of new jobs in key sectors and are vital to its continued economic growth.
In fact, net inward migration will be the most important source of new employees if the Irish economy continues to grow strongly, says the Central Bank of Ireland in a new report.
Immigration positive for property prices
As migrant numbers rise, there will be an additional need for housing, infrastructure and social services. The central bank report, Employment Growth: Where Do We Go From Here
?, says that immigration can have a positive effect on property prices of around 3.1% to prices and 0.8% on rentals.
Net migration in Ireland doubles
In the last economic downturn, many Irish citizens and migrants, particularly from Eastern Europe, left the country, with more people leaving than moving to Ireland.
However, now the trend has reversed, with net migration almost doubling from 19,800 in the year to April 2017 to 34,000 in the following 12 months – the highest since 2008, according to Ireland’s Central Statistical Office
Competing with migrants
However, net migration is unlikely to reach 2007’s total of 104,800 in the short to medium term. This is due in part to Ireland having to compete for migrants with other countries in Europe and beyond.
Previously, migrants in Ireland had been attracted to low wage jobs, but now they are likely to require higher wages, says the report.
Improvement in services needed
“This remarkable improvement in the labour market is welcome, but maintaining such favourable conditions will require action on the part of policymakers to avoid eroding competitiveness through wage and price pressures as the economy continues to grow. It also requires improvements in services.
“The policy actions available to authorities faced with an economy at full employment are constrained when it is small, highly open and part of a monetary union. However, it is important that government policy does not exacerbate competitiveness challenges, while maintaining supply-side supports to improve housing supply, transport networks and public services to support continued employment growth.”
University educated immigrants
Immigrants arriving in Ireland are today more likely to be university-educated, come from Western Europe or South America. According to Census 2016, there are 535,475 non-Irish nationals – around one in eight of the population. One in three holds a degree or higher qualification.
‘Remarkable’ job market growth
The Employment Growth paper, written by Stephen Byrne and Tara McIndoe-Calder, says the improvement in the Irish labour market since late 2012 has been remarkable.
“Unemployment has fallen towards five per cent, while the number of persons employed in the state has now surpassed it pre-crisis peak.”
Migration to Ireland vital to growth
However, falling unemployment and increased labour force participation will not be sufficient to support employment growth at current levels over the short to medium term, the authors say. “As such, strong net inward migration will be the most important source of employment growth if the economy continues to grow at the rates seen over the last number of years.”
Employment rises in July
Meanwhile, in July, employment rose by around 15,000, with the seasonally adjusted unemployment rate in Ireland at 4.6%, which is 1.2% less than a year ago. It is also almost three percentage points lower than the 7.5% Eurozone average.
No deal Brexit risk to economy
However, there are risks to the Irish economy, says the bank, led by a no deal Brexit
. That would bring an abrupt tightening in global financial conditions, and a re-emergence of sovereign debt sustainability concerns in the euro area, says the Central Bank of Ireland.
If no agreement can be reached between the UK and the European Union, the Irish economy is likely to take a 3.4 percentage points hit. It is estimated to grow by 4.1% in 2020 with an agreement and by just 0.7% under a no-deal scenario, says the bank.
External political and economic risks
In its 2019 Financial Stability Review, the bank says, “The main risks to domestic financial stability stem from external developments. As a small, highly-globalized economy, with a significant reliance on foreign-owned multinational enterprises, Ireland is always particularly exposed to risks stemming from abroad. External risks are particularly elevated at the moment, both due to cyclical developments – such as accommodative global financial conditions – and structural developments – such as the risk of a disorderly Brexit.”
The Central Bank has taken action to mitigate the most material and immediate risks to the disruption of financial services between the EU and the UK in a disorderly Brexit. “The main outstanding source of risk to financial stability and the wider economy is a larger-than-expected macroeconomic shock in a disorderly Brexit. This could arise if the expected negative impact of a disorderly Brexit through trade channels is compounded by a sharp increase in uncertainty and fall in confidence, with knock-on effects to Irish economic activity.”
No deal could risk 100,000 jobs in Ireland
A no deal Brexit – which looks increasingly likely at the moment, could also see Ireland lose 34,000 jobs in the short term and more than 100,000 in the medium term, the Central Bank of Ireland warns.
Employment is set to grow 2.4% in 2019 and 1.7% in 2020, but a disorderly Brexit would bring those figures down by 0.1% this year and by 1.3% next year to just 0.4%, says the bank.
Job vacancies down and hires delayed
No deal Brexit fears have already caused job vacancies to fall in Ireland by 4% in the last year, says the IrishJobs.ie Jobs Index. Construction and hotel and catering sector vacancies have held up, but accounting and finance, banking, financial services and insurance job openings are down by up to 15% year-on-year. Manufacturing companies in Ireland are delaying hires until more is known about the outcome of Brexit, according to recent reports.
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