After avoiding a decline in output in 2020 thanks to buoyant exports of Ireland-based multinationals, real GDP is projected to grow by 4.2% in 2021, despite stringent sanitary measures introduced early in the year. As vaccinations are rolled out and restrictions are gradually eased, domestic demand will strengthen, even though uncertainty will continue to weigh on firms’ investment decisions. Pent-up consumer spending, as households unwind pandemic-induced excess saving, is projected to lift growth to 5.1% in 2022.
Improving activation and training policies is a top policy priority, as the pandemic especially affected sectors where many with weaker labour market attachment work. This can also help meet firms’ demand for skills. Reforming the tax and welfare system to remove high effective tax rates will boost participation and employment.
©Shutterstock/Anton PetrusRead full country note
2021 Structural Reform Priorities
Ireland’s living standards remain high. Growth has been strong, despite bouts of volatility. The average real wage was on par with the OECD average in the mid-1990s, but now stands more than 15% above. Furthermore, a highly redistributive tax and transfer system has contained income inequality in disposable incomes. The population also benefits from a high level of wellbeing across other dimensions. Life satisfaction is high, according with the strong economy as well as other features such as low levels of pollution, strong community engagement and high perceived personal security. Performance in education depends less on socio-economic status than in most other OECD countries. The gender wage gap is also one of the lowest in the OECD, having declined markedly over recent decades. Ireland continues to be an attractive destination for foreign direct investment, with a stable political system, a relatively-young Englishspeaking population and a supportive regulatory and tax regime. Looking forward, the country is well positioned to take advantage of the opportunities presented by technological change, though there are various challenges that need to be carefully navigated.