Ireland’s competitiveness is under threat

In its recently published Competitiveness Scorecard 2018 for Ireland, the National Competitiveness Council (NCC) finds that while the economic outlook for Ireland appears positive, Ireland’s competitiveness is under threat. The sustainability of growth is threatened by the reliance of the economy on a small number of highly productive exporting companies. The globalised nature of the economy makes Ireland susceptible to negative economic shocks, which are outside the influence of domestic policymakers. Global economic uncertainty, particularly in trade policy, has increased in 2018. Along with continued ambiguity regarding the outcome of Brexit, external factors as ever pose a serious risk.


Domestically, fast growth is beginning to manifest itself in cost pressures and capacity constraints and if not addressed, these deficiencies could become more acute in the short term. As the economy continues to grow, ensuring our economic model is competitive, balanced and resilient to shocks takes on even more significance. It is important that we do not loosen fiscal discipline (i.e. unsustainable current expenditure increases or shrinking tax ratios) at this stage as this would undo much of the progress achieved to date and would have potentially significant negative implications for future competitiveness. It is vital that a careful balance is struck between addressing weaknesses and deficiencies in infrastructure and implementing policy in a manner which does not contribute to overheating or unbalancing the economy.


Cost competitiveness is critical for an economy like Ireland’s. While cost and price pressure have been modest in recent years, Ireland remains a relatively expensive country in which to live and work. As the economy continues to grow, cost pressures are evident in key areas – particularly in relation to property, labour costs, credit and services prices, where Ireland performs below competitor countries. With the labour market likely to tighten further, upward pressures on labour costs can be expected in several sectors and across occupations. Measures to encourage labour force participation can help alleviate labour cost pressure. Increasing productivity, particularly in the SMEs sector, is also vital.


The full report can be downloaded here.

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