The Media insist on only highlighting the bad news, and even spinning the Good News to make it seem bad.  The truth is that Ireland is doing well and the future looks very bright indeed.  For example, on October 7^th, Ireland’s Q2 GDP figures (April to June) were announced and Ireland recorded no fall in GDP (0.0%) coming 10^th in the EU (ahead of the UK, Holland, Spain, Denmark… also the USA), why wasn’t this announced?  Why wasn’t it headline news?  Why are we only being told the bad news?  Why only give airtime to those predicting our demise?

In September, Brightwater asked our clients (nearly 28,000 companies ranging from SMEs to large multinationals) the simple question; “When will Ireland get out of recession?” and the results were: encouraging.

October 1^st the ESRI predicted Ireland would be out of recession by Q1 2011, Davy’s stockbrokers predicted Q1 2010 and NCB predicted Q4 2009… I think I’ll go with NCB!!

Ireland’s economy can be simply divided into the external market (exports) and the internal market (spending).  The external is the country’s wealth-creator and the internal is where it’s spent – thus keeping the country (and exchequer) buoyant.

Exports

Ireland has continued to outperform the entire EU manufacturing and export wise.  From 2000 to July 2009 Ireland’s exports grew by 43.9% versus the EU15 average of under 10%, but what’s even more impressive is from July 2008 to July 2009 (recession) Ireland’s exports dropped just 2% versus the EU average drop of 25%.  Our Manufacturing and Service sectors have massively outperformed our competition.  This is seriously great news and should be highlighted!

Ireland’s problems are internal, where the stats are not good.  The nub of the problem is property… which has led to banking problems and beyond.

Property

In Ireland, home ownership is about 85% where in most European countries it is nowhere near this e.g. France, Italy and Germany where home ownership is about 40%.  Then, since the early 1990s Ireland’s population aged 20-40 has gone up by over 50% (due to higher birth rate, returning Irish and immigration), while, in the EU as a whole, the population aged 20-40 has fallen by almost 10% and, in some countries, such as Germany, has fallen by as much as 20%. The above points led to massive house building and supply & demand price inflation. Then the recession came… fear stopped people buying houses, the credit crunch made buying difficult and the global recession slowed everything. The effect on Ireland was devastating.  However, the effects are temporary and in the long run having a younger, growing, home-owning population will be of great benefit to the country.

Spending

Confidence has been eroded by the above points, and by the media’s constant negativity.  For example, The Irish Times chooses to headline the ESRI’s gloomy predictions above Davy’s or NCB’s – and that has led people to save, save, save!  BOI & AIB are awash with money, but little investment.  In 2007 Ireland, the US and UK populations saved about 2% of their annual income.  Recessionary fears have led the US and UK populations to save about 5.5% of their income, but Ireland’s people are now saving about 12% of their income.  This is too high.  There’s no money-go-round, no buying, investment or development.  The country has frozen and must be unfrozen. The fear and negativity must stop now… tell people the Good News… tell them THE TRUTH and explain the effects the stats like the ones outlined below will have on them directly!

Employment

Another example (and close to my heart) is employment and I have two points.  The first point is, let’s be clear, the rate of unemployment has dropped every month from a loss of 31,400 in January, to a gain of 16,500 in September.  The media may explain the September fall as seasonal, but so was the increase in July and that wasn’t mentioned.  The media may explain it as mass emigration, but again that’s not true.  September 22^nd the CSO reported that of ½ million non-nationals living here the net outflow was just 7,200 people (not 100,000 as has been reported!) and there has been zero net Irish emigration (as many Irish have returned as have left). Either way, the employment outlook is getting better and better. It is too soon to know if September marks the end of rising unemployment. Most economic forecasters think it will rise a bit more over the winter. But, almost all of them have now revised down their forecasts for peak unemployment next year from around 17.5% to around 13.5%.

The second point is known, but not well publicised. It is well reported that in Ireland there are about 430,000 on the live register. In Ireland we count every person on the live register as ‘unemployed’, so this includes casual workers, people working part time, on maternity leave pay, sick leave pay, disability, now on ‘3 day weeks’, and this is about 180,000 people, leaving around 250,000 as fully unemployed. In most other countries, including the US and the UK, they do not count the 180,000. In their measurements Ireland has around 250,000 unemployed (7.3%), not 430,000. It has

been estimated that if the US calculated unemployment in the same way as the live register in Ireland, the unemployment rate there would be almost 17%. Things are getting better!  Indeed, at Brightwater we’ve just had our best month of the year thank goodness, I see some light at the end of the tunnel!

Gross Domestic Product

GDP is another statistic often bandied about and we all know how all the predictions were of Ireland being the worst affected in the EU (some media channels were actually trumpeting that Ireland would record the largest fall in GDP ever recorded).  Frankly, this is rubbish!  Predictions of a 12% – 15% fall in GDP have recently been updated to 8% – 10%.

However, the truth is still that our GDP has slumped, but why?  One reason is property where there is little building going on – and because of our young, home-owning population the GDP slump is exacerbated.  Germany and others didn’t have the same building growth so never got the reverse swing either!  But of course, when the economy returns, our GDP growth will also grow disproportionately to everyone else’s.  Secondly, confidence in Ireland is eroded by 24/7 bad news reporting (don’t you sometimes feel “get me outta here”)?!  Retail sales are an important indicator of confidence and while they have fallen off remarkably since 2007, since January 2009 the indices have risen by the month from 84.3 to 93.3 by June.

Finally, and most importantly Ireland is part of the global economy which is why all the major parties called for a ratification of the Lisbon Treaty.  In Ireland, a remarkable 90% of our GDP comes from exports versus an average 40% for the EU as a whole.  As such, when there is a global crisis, Ireland’s production is hit hard, but when the global economy rebounds, we rebound further and faster.

The Facts

Ireland suffered during 2008 because of housing, but we are again outperforming our competition:

EU GPD Q1 2009 and Q2 2009

When will we get out of recession?

To paraphrase Henry Ford:  If we believe we’ll get out of recession next quarter, then we’re probably right; and if we believe we’ll get out of recession in 18 months, then we’re probably right again!  After all, the housing-related problems will eventually go.  Sooner or later the global credit crunch will end, mortgages will become more widely available and house prices will stop falling.  In the long-run, it will be the performance of the manufacturing and service exports that will have a far more decisive effect on the economy than temporary housing-related problems.

The Future

The future looks even brighter.  Davy’s predict GDP growth of 4% in 2010 and the ESRI predict Ireland’s growth to be 4%-5% from 2011 to 2020 – far above the EU average of 2%.

Conclusion

Ireland has a dynamic and internationally woven economy that has suffered exponentially as part of a global recession.  We also have a young, home-owning population that are not currently buying and finally, we are gripped by a negative media that delights in eye-catching, misleading headlines about the demise of the country, giving us confidence problems. For my part, I call on the media to help boost confidence with more balanced and positive reporting of the economy.  For example, if everyone was properly informed about how well our exports have performed in comparison to other EU countries, then they’d realise that, notwithstanding temporary housing-related problems, the long-term outlook for the economy is fantastic… and far better than what we’re being told!

This entry was posted on Thursday, October 22nd, 2009 at 12:02 pm and is filed under Economy, Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.