The COVID-19 crisis had a massive impact on Ireland’s economy and its effects will continue in 2022. The Irish government implemented varying degrees of lockdown measures in response to the COVID-19 pandemic from the onset in March 2020, including restrictions to close non-essential businesses and services for extended periods of time. Unemployment (including COVID-19 related temporary unemployment) peaked at 28.1 percent in April 2020. Ireland’s official unemployment rate remained around 5 percent (currently at 5.2 percent as of February 2022) due to the unprecedented pandemic related government assistance programs to businesses and workers furloughed due to COVID-19. Over the past two years, the government sustained a level of unprecedented deficit spending to combat the pandemic. Despite the prolonged difficulties caused by COVID-19, Ireland’s economy performed extremely well with GDP growth of 13.5 percent recorded in 2021 following growth of 5.9 percent in 2020. Most of this growth can be attributed to export focused industries (technology, pharmaceutical, and other large multinational companies headquartered in Ireland) while the domestic economy struggled with temporary business closures due to the restrictions. Russia’s invasion of Ukraine exasperated Ireland’s growing inflation concerns with fuel and gas price rises leading to price increases across all sectors, which could dampen consumer spending and confidence and could result in lower-than-expected growth for 2022.
The Irish government actively promotes foreign direct investment (FDI) and has had considerable success in attracting investment, particularly from the United States. There are over 950 U.S. subsidiaries in Ireland operating primarily in the following sectors: chemicals, biosciences, pharmaceutical and medical devices; computer hardware and software; internet and digital media; electronics, and financial services.
One of Ireland’s many attractive features as an FDI destination is its favorable 12.5 percent corporate tax (in place since 2003), the second lowest in the European Union (EU). Ireland signed the OECD Inclusive Framework Agreement, which institutes minimum corporate tax rate of 15 percent when implemented. Firms routinely note that they come to Ireland primarily for the high quality and flexibility of the English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators. Additional positive features include a transparent judicial system; transportation links; proximity to the United States and Europe; and Ireland’s geographic location making it well placed in time zones to support investment in Asia and the Americas. Ireland benefits from its membership of the EU and a barrier-free access to a market of almost 500 million consumers. In addition, the clustering of existing successful industries has created an ecosystem attractive to new firms. The United Kingdom’s (UK) departure from the EU, or Brexit, on January 1, 2021, leaves Ireland as the only remaining English-speaking country in the EU and may make Ireland even more attractive as a destination for FDI.
The Irish government treats all firms incorporated in Ireland on an equal basis. Ireland’s judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. Conversely, Ireland’s ability to attract investment are often marred by relatively high labor and operating costs (such as for energy); skilled-labor shortages; licensing and permitting challenges (e.g., for zoning, rezoning, project permissions, etc.) Eurozone-risk; infrastructure in need of investment (such as in transportation, affordable housing, energy and broadband internet); high income tax rates; uncertainty in EU policies on some regulatory matters; and absolute price levels among the highest in Europe.
New data centers must meet new requirements regarding location, energy consumption and energy storage as Ireland’s electricity system struggles to meet demand for energy.
A formal national security screening process for foreign investment in line with the EU framework is expected to be in place by late 2022, though the original date was 2020 but delayed due to the pandemic. At present, investors looking to receive government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria.
Ireland uses the euro as its national currency and enjoys full current and capital account liberalization.
The government recognizes and enforces secured interests in property, both chattel and real estate. Ireland is a member of the World Intellectual Property Organization (WIPO) and a party to the International Convention for the Protection of Intellectual Property.
Several state-owned enterprises (SOEs) operate in Ireland in the energy, broadcasting, and transportation sectors. All of Ireland’s SOEs are open to competition for market share.
While Ireland has no bilateral investment treaties, the United States and Ireland have shared a Friendship, Commerce, and Navigation Treaty since 1950 that provides for national treatment of U.S. investors. The two countries have also shared a Tax Treaty since 1998, supplemented in December 2012 with an agreement to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).
|TI Corruption Perception Index||2021||13 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||19 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||$390,274||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$65,620||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|