Ireland as a place to do business

November 2010

Ireland’s fiscal adjustment remains on track

Ireland is acknowledging upfront the costs of rescuing the banking sector.

With a worst-case scenario of €50 billion, the cost is high but manageable.

Though the debt-to-GDP ratio will reach about 110-115%, it is bearable and not exceptionally out of line internationally:– US projected to reach 110% by 2015; Italy close to

120%– Greece projected to reach 130% of GDP; Belgium

has had high debt burden for decades– Japan’s net liabilities are approaching 150%

Ireland’s fiscal adjustment remains on track

The Irish Exchequer has ample cash reserves and is fully funded through to the middle of 2011.

The Government’s plan from December 2009 is working. The deficit, excluding the banking costs, is falling and is

in line with projections. Both tax revenue and expenditure are on target. The economy in the first half of 2010 has performed in

line with Government forecasts. In October, the IMF revised its GDP forecast for Ireland

to -0.3% from -0.6% for this year and expects growth of 2.3% in 2011.

Resolute action on public finances

Adjustments in public finances to dateJuly 2008 – April 2009Budget 2010

€10.5 bn€4 bn

Adjustments planned – December 2009

Budget 2011Budget 2012 Budget 2013Budget 2014

€3 bn€2 bn€1.5 bn€1 bn

Though adjustments for 2011-2014 will be higher than previously anticipated, even in the worst-case scenario Ireland halfway through the process and has four years to complete the task.

Debt servicing costs up, but not as high as in the 1980s

Exports have rebounded strongly

A n n u a l % c h a n g eE x p o r ts o f g o o d s a n d s e r v ic e s

S o u rc e : R e u te rs E c o W in

Q 1 Q 3 Q 1 Q 3 Q 1 Q 3 Q 10 7 0 8 0 9 1 0

Perc

ent

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

1 0 .0

Ireland has critical mass in high-tech sectors

Thanks to clusters and networks of multinational companies, Ireland has achieved critical mass in a number of high-tech sectors.

8 of the top 10 global medical technology companies have manufacturing in Ireland - employment in the sector on a per capita basis is the highest in Europe.

8 of the top 10 pharmaceutical companies have operations in Ireland.

Many major software and hardware companies have significant operations in Ireland

The cluster of internet-based companies is growing because Ireland is the location of choice.

Business functions located in Ireland are shifting to higher value added activities and are cases becoming increasingly R&D-driven.

The base of indigenous companies is strong

Half of the medical technology companies are Irish There is a vibrant software sector exporting mainly to the

UK and the US. Ireland has a natural competitive advantage in the food

and drinks sector – in fact, Ireland is the largest exporter of beef in Europe and fourth largest in the world.

Indigenous manufacturers are becoming increasingly sophisticated.

Thanks to competitive adjustment achieved to date, Ireland is pricing itself back into international markets.

Labour market is flexible – wage costs are falling

-10.0 -5.0 0.0 5.0 10.0

IrelandSpain

FranceGermanyEuro area

EU-27Poland

United KingdomItaly

PortugalGreece

Unit labour costforecast % change 2008-2011

Source: European Commission forecasts, May 2010

Labour market is flexible – wage costs are falling

Employment and pay outlook – IBEC quarterly surveyBasic pay rates in 2009Change to pay billShare of firms that cut basic pay

-2.4%-9.8%25%

Outlook for 2010 Expected change in pay ratesChange to pay billShare of firms to cut basic pay

-1%-3%15%

Outlook for 2011Expected change in pay ratesChange to pay billShare of firms to increase basic pay

0.2%0.3%22%

Non-pay business costs are coming down

-20-10

010203040

2007 2008 2009

Energy price differential (%)Ireland vs EU-27 average

Electricity Gas

Source: Eurostat

Consumer prices are falling

In f la t io n - H a r m o n is e d In d e x o f C o n s u m e r P r ic e s

I r e la n d E u r o a r e a 1 2S o u rc e : R e u te rs E c o W in

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0

Perc

ent

- 4-3-2-1012345

Ireland’s fundamental strengths remain

0

10

20

30

40

50

Ireland Germany France Poland UK US OECD average

% with tertiary education (age 25-34)

Source: OECD

Ireland’s fundamental strengths remain

00.5

11.5

22.5

33.5

44.5

5

Ireland Netherlands France EU-27 UK Germany

Government capital investment( % of GDP in 2009)

Source: European Commission forecasts, May 2010