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The latest Economic Eye Summer 2010 Forecast published by Ernst & Young reveals that although there are similarities between Ireland and the other European countries branded as the so-called 'PIIGS' (Portugal, Italy, Ireland, Greece, Spain) in the scale of fiscal deficits, bloated and now shrinking construction sectors (Spain and Ireland), and problems in the banking sector (Greece and Ireland), there are a range of factors in which the economies differ markedly.
Ireland has an extremely strong and large export sector, with a significant proportion of exports being high value added. Like the UK and the US, Ireland has a healthy service sector export base in addition to a significant pool of high-end production exports.
In addition the overall stock of government debt, built up over the long-term and not just recently, is much lower in ROI than in other fiscally challenged countries, when expressed as a share of national output. This matters for issues of solvency and investor confidence, as much, if not more, than recent annual fiscal deficit borrowing. Prices and wages have also been falling and correcting past excesses in Ireland, thus curbing costs and enhancing cost competitiveness.
This is much the same way the German economy developed since the Euro was introduced. With no option to devalue its currency, Irelandâ€™s export competitiveness relies heavily on its 'international cost'. Ireland also has a stronger and faster improving graduate skills base than other 'PIIGS' countries, and corporation tax remains highly competitive.
As a result of these competitiveness and structural fundamentals, the Ernst & Young Economic Eye Summer 2010 Forecast is for ROI to return to relatively strong rates of growth in the medium-term, above those in the UK and NI, and well above the growth expectation for Greece and Portugal.
While the recession has been extremely painful for Ireland, its internationalism and enviable list of corporates located within the country, across a range of high value added, high growth potential sectors, means that its prospects are more favourable than those of the countries which it is currently being branded alongside.