major macro economic indicators
|2020||2021||2022 (e)||2023 (f)|
|GDP growth (%)||6.2||13.6||12.2||3.4|
|Inflation (yearly average, %)||-0.5||2.4||7.8||5.9|
|Budget balance (% GDP)||-5.0||-1.7||0.3||1.0|
|Current account balance (% GDP)||-2.7||14.2||8.5||10.9|
|Public debt (% GDP)||58.4||55.4||44.5||41.1|
(e): Estimate (f): Forecast
- Flexible labour and goods markets
- Favourable business environment, attractive tax regime
- 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
- Persistently high public and private debt levels
- Banking sector still vulnerable to shocks
Solid growth despite a slowdown
Following two years of double-digit growth, the Irish economy is expected to slow in 2023 due to a myriad of factors that primarily stem from price rises experienced in 2022 which are expected to continue in 2023, albeit to a lesser degree. In spite of the economic slowdown, Ireland will still be one of the few European economies seeing growth rates above 1% in 2023, partly due to the activity of multinationals based in Ireland operating in less cyclical sectors, such as pharmaceuticals and IT.
It is anticipated that inflation will have peaked in 2022, but due to price stickiness – core inflation was around 6.9 % in May 2023 – a tight labour market, and higher wage expectations, it will still be above the ECB’s 2% target. Energy prices will remain high in 2023 from a historic perspective, with oil and natural gas being the largest energy sources in Ireland (78% of the energy composition in 2021).
Inflation will cause domestic consumption to slow in 2023 as households’ disposable income will be reduced, caused by a consecutive year of falling real income. Private consumption started coming down in Q1 2023. Adjusted for inflation, wages fell by 3.0% in Q1 2023. However, Irish households still have a high savings rate (18% in Q1 2023 against 11% in Q1 2019).
Despite continuous investments from multinationals and a healthy pipeline in the first half of 2023, capital investment will be affected by high operational costs, elevated costs for inputs and labour, and high interest rates that on top of global uncertainty will dim investments by companies.
Trade will also take a hit as Ireland’s main trading partners, the UK and EU, will experience a recession, or at least economic stagnation, in 2023. Exports are not the only sector to be affected; imports will ebb due to households’ depressed purchasing power. High energy prices will continue to cause an inflated value of imports.
Corporate insolvencies rose by 21% in Q1 2023 but still remain low compared to previous years (down 25% from Q1 2019). As companies continue to battle high costs at the same time as many government support initiatives were phased out, corporate insolvencies are expected to rise further in 2023.
Strong but vulnerable fiscal situation
The public accounts registered a surplus in 2022 with tax revenues growing substantially, partially due to a rise in corporation tax collected from multinationals on back of both solid profits in 2022 and some internal one-off activities. The public accounts are expected to show another surplus in 2023 with tax revenues expected to rise more than expenditures. The 2023 Budget included many cost-of-living measures (worth EUR 11 billion, 2% of GDP) such as energy rebates, an extended fuel allowance, reduced public transport fares, and increased social payments. It also included a rise in the bottom income tax band, resulting in a lower tax burden (EUR 1.1 billion). However, the government also announced that the lowered VAT rate on hospitality would end in February 2023 along with the end of energy support for companies.
The Minister of Finance stated that the International Tax Agreement, which Ireland signed in October 2021, will be implemented in December 2023 before the 1 January 2024 deadline. The Tax Agreement will increase the corporate tax rate from 12.5% to 15% for companies with a turnover of at least EUR 750 million. There is some uncertainty around how this will affect the activity of multinationals in Ireland, which currently is a major employer and tax contributor: multinationals’ share of corporation tax was 25% in 2021 and was as high as 50% in 2022 (due to one-off high taxes). The vulnerability of public finances is all the greater given that more than half of corporate tax revenues are attributable to just ten multinationals, and this reliance will be all the more glaring as the Tax Agreement comes into effect.
The current account balance is extraordinarily volatile as it is affected by multinationals and their investments. The balance of goods is structurally positive (40% of GDP in 2022), but the balance of services fluctuates widely – a deficit of between 20-30% of GDP in 2019-20 to roughly being on balance in 2021 and 2022. It essentially depends on imports of R&D services, such as transfers of intellectual property assets from foreign subsidiaries of multinationals to their Irish subsidiaries. At the same time, dividend repatriation by multinationals is resulting in a structural massive deficit in the income balance (30% of GDP). Excluding multinational-related effects, the current account has been in surplus since 2015 (around 3% of GDP in 2022).
Stable political situation but growing nationalist support
The current coalition government – comprised of three parties, Fianna Fail, Fine Gael and the Green Party, the former two being historic rivals – came into power in June 2020, after four months of negotiations. It was agreed that Micheál Martin, leader of Fianna Fáil (centre), should be Taoiseach (Prime Minister) for half the tenure, whereupon Leo Varadkar (Fine Gael, centre-right) would take office. The reshuffle was completed in December 2022 and the arrangement has generally been stable. Given that the current coalition has governed without a combined majority in polls over the past few years – Sinn Féin (with a left-wing agenda, but above all in favour of reunification with Northern Ireland) had a historically strong election score in 2020 winning 24.5% of the vote, and averaged around 33% through 2021 and 2022 – a general election is not expected to be called in 2023. The country must go to the polls in or before March 2025.
The Northern Ireland Protocol caused an election in Northern Ireland in 2022 – after the sitting First Minister (Paul Givan, Democratic Unionist Party) stepped down in protest over the Protocol – that resulted in the Northern Irish Sinn Féin securing 29% of the votes, giving them largest-party status for the first time in history. Sinn Féin is thereby the largest sitting party in both (the Republic of) Ireland and Northern Ireland. This along with Brexit and demographic changes is causing more frequent discussions around a potential referendum on Irish unification, however an actual vote is mainly seen as plausible in 5-10 years’ time, with the majority still against it in Northern Ireland.
The recent Windsor framework, announced in February 2023, has improved relations between Ireland and the UK, and will improve trade as well. However, the Stormont Assembly, the devolved legislature of Northern Ireland, is still suspended, highlighting that political tensions are still there.
Last updated: June 2023
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).