Ireland is now officially out of recession and the Government says it will not borrow further until exiting the international bail-out at the end of the year. But are these signs of real progress, or merely indicators that the situation has stopped getting worse?
Although the economic statistics have apparently confirmed that Ireland has escaped from recession, there is little growth. While GDP grew by at a modest 0.4% rate in the second quarter, it actually fell by 1.1% over the year. In contrast, GNP rose by 0.4% over the year, while falling by 0.4% over the second quarter. Confused? You should be.
Contradictions are manifest across the economic figures. House prices are rising in Dublin, but are still falling across the rest of the country. There has been a rise in emigration, driven by the lack of job vacancies. Yet this has been balanced out by a rise in immigration.
Foreign direct investment rose, led by FDI growth from the Netherlands and Luxembourg. But FDI from the United States is down. The figures on domestic consumption are also bumping around, with some categories up and others down.
Economist Colm McCarthy of University College Dublin – who advised the Irish government on its austerity programme – believes that Ireland is essentially bumping along the bottom. The economy is performing little different today to where it was when the recession started to hit, in late 2007, he suggests. Nor should too much be ready into possibly optimistic economic statistics. “The short term figures are very volatile, subject to very large revisions and journalists always read far too much into them,” he says.
On the jobs front, the news is less ambiguous and more positive. The unemployment rate has fallen from 14.5% a year ago to 13.3% now – a reduction of more than 20,000 in the last 12 months.
Individual job announcements seem to have come thick and fast in recent weeks. Online accommodation booking agency Airbnb is looking for about a hundred staff for a new European HQ in Dublin, while holiday travel company TripAdvisor is seeking about 50 employees. A new financial services arm of Dell will generate about 300 jobs in Dublin. In addition, domestic companies Qualtrics and IT Alliance are creating 150 and 75 jobs respectively, both in Dublin.
Stewart Dunne, an audit partner at BDO in Dublin agrees that the signs for employment are broadly good. “While there are mixed signals in the market, we do see some positive movement from companies in export driven sectors, e.g. pharmaceutical; life-sciences; agri-food; and technology,” he says. “Also, the relatively steady in-flow of FDI backed companies often result in creating new jobs for qualified and part-qualified accountants.
“The trend for these companies to outsource their ‘back office’ requirements will often lead to those roles being created in the third party service providers instead. While these signs are positive, it is hugely important that Ireland continues to produce quality graduates and qualified accountants for which there are jobs here in Ireland and also that companies do not fall back into the excessive wage inflation cycle of the past decade. BDO are hiring 25 to 30 new graduates this autumn, which I believe is up on last year.”
Grant Thornton is also recruiting and aims to take on an extra 125 staff over the next two years. This maintains a longer term trend, with the firm having expanded in Ireland five fold – from 100 up to 500 people – over the last decade. The firm believes that things are now improving sufficiently to continue that expansion.
“The Irish economy has faced five tough years of fiscal adjustment as the country has had to bear the burden of multi-billion euro losses in the banking and property sector,” says Louise Kelly, head of operations at Grant Thornton. “Thankfully 2013 has been a year when signs of green shoots have started to emerge: the rate of unemployment has started to drop, property values are stabilizing and in some cases increasing, and companies are starting to move from survival mode into growth mode.
“For the accounting profession this has meant increasing demand for qualified accountants. Last month [September] Grant Thornton opened a new office in Cork where we are hiring 25 new staff, and the improved economic situation has helped give us the confidence to decide to grow our national footprint.
“There’s also been a noticeable shift in the mix of work firms like Grant Thornton are undertaking. In the austerity years there has been a huge focus on restructuring and recovery, whereas we are now much more focused on the opportunities in areas like corporate finance and transaction due diligence. We’re certainly not in a booming economy, but the worst phase of the bust is hopefully now in the past.”
Aidan Clifford says that generally the signs are bullish for the profession. “How quickly the market has turned, up to a few months ago there was not enough accounting jobs, now employers can’t fill positions,” he explains. “In the space of one week, ACCA has had contact from two mid tier [firms] with a number of graduate and part qualified opportunities and a pillar bank looking for a bunch of newly qualified for credit and restructuring roles.
“One institute of technology we spoke to reported 100% placement from their accounting degree and they will have to reconsider their full time final level ACCA tuition offering because all of their graduates are getting jobs directly from the degree. Many of the opportunities are on www.accacareers.ie.”
Despite this, there remain strident pessimistic voices. George W. Bush’s former economic advisor Dr Pippa Malmgren spoke recently to a conference in Dublin organised by Davy Stockbrokers. She argues that Ireland’s membership of the euro and the consequent lack of control of monetary policy mean that Ireland will have to get use to 20 years of a no growth economy, unless it abandons the euro. German anxiety about inflation will mean that the eurozone economy will continue to suffer, she concludes.
“Germany doesn’t want inflation,” Malmgren told the conference. “Everybody else needs it, that’s the heart of the problem.”
So is Ireland actually on the way up? The answer is that as yet we just do not know – even if there are perhaps more positive than negative indicators at present. The eurozone crisis is probably not over and that could trigger a return to economic crisis. In the mean time, at least there is a growing demand for accountants.