In the past three years Ireland’s economy surpassed growth expectations despite the onset of Brexit (the UK’s exit from the European Union); multiple lockdowns due to the COVID-19 pandemic; and the fuel and gas crisis caused by Russia’s invasion of Ukraine. During the COVID-19 pandemic, the Irish government implemented varying degrees of lockdown measures beginning 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 is now 4.3 percent (February 2023) while employment levels reached a record 2.57 million in 2022. Despite unprecedented government deficit spending to combat the pandemic, Ireland’s economy continued to perform as one of the best in the eurozone. Ireland recorded gross domestic product (GDP) growth of 13.5 percent in 2021 and GDP estimates increased by up to 12 percent in 2022. Most of Ireland’s economic growth can be attributed to export-focused industries (technology, pharmaceutical, and other large multinational companies headquartered in Ireland) with the domestic economy still struggling to bounce back from the effect of the COVID-19 lockdowns. Russia’s further invasion of Ukraine exacerbated Ireland’s growing inflation concerns with fuel and gas price rises leading to price increases across all sectors. This could dampen consumer spending and confidence and could result in lower-than-expected growth for 2023.
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 organization for Economic Cooperation and Development (OECD)’s Inclusive Framework Agreement, which institutes minimum corporate tax rate of 15 percent when implemented. Firms routinely note that they also come to Ireland 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; extensive 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. Brexit in 2021 left 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 is often marred by relatively high labor and operating costs (such as for energy); skilled-labor shortages; licensing and a slow and onerous planning permit system often stymied by NIMBY-ism (not in my backyard); 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. Ireland has a high dependence on imports of natural gas and fossils fuels for power generation. The effect on prices caused by Russia’s invasion of Ukraine combined with climate change targets has increased worries over the future security of energy supplies. New data centers, critical to the operations of many U.S. firms, must meet new requirements regarding location, energy consumption, and energy storage as Ireland’s electricity system struggles to meet demand for energy.
A national security screening process for foreign investment in line with the EU framework is expected to be in place by late 2023. 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 Perceptions Index||2022||10 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2022||23 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||$556,599 Mil||https://apps.bea.gov/international/factsheet|
|World Bank GNI per capita||2021||$76,110||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|