Behind the rosy headlines, Ireland still trails behind its peers in the EU

If you just read the headline numbers it looks as though the Celtic Tiger is roaring back, economic growth is surging, wages are taking off as unemployment levels head back to pre-crisis levels and Finance Minister Paschal Donohoe’s coffers are bulging as the State heads for a balanced budget.

Underneath it all, however, Ireland’s economy shows many of its historical weaknesses. While productivity among the foreign multinationals here is well above EU averages, the domestic-owned economy lags and an investment regime based on low levels of corporation tax has failed to feed into improvements in the wider economy, according to the Nevin Economic Research Institute.

Development is skewed towards a handful of cities while the rest of the economy has barely felt the effects of surging foreign investment. Even though productivity – measured by gross value added per worker – is well in excess of EU average, most of the measures are flattered by the distorting effects of tax planning – the booking of items like intellectual property here as a result of Ireland’s low corporate tax levels, the union-backed think tank said in its latest quarterly report on the economy.

The corollary of a low-tax economy is one that is failing to invest enough in education and research and development. “Overall, the Republic of Ireland will remain a low-tax economy and low-spend economy with the second-lowest level of per capita spending amongst the group of 11 high-income EU countries,” the report said.

If things are not as rosy as they look in the State, they are dire for Northern Ireland, where Brexit risks further damaging an economy that has underperformed its southern neighbour.

“The scale of foreign direct investment into the Republic of Ireland has dramatically altered measures of economic output and opened a chasm between the two economies in terms of output per capita,” it added.

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