NEW IDEAS CONFERENCE, LIMERICK.

Jim Power, Chief Economist, Friends First25th March 2009

The Irish Reality

• Economy in deep recession• Public finances deteriorating rapidly• Labour market deteriorating rapidly• Banking system still in a very uncertain place,

despite re-capitalisation & nationalisation• Confidence in leadership fragile• Lack of understanding of realities of EMU

membership - wages v fiscal policy• Confidence generally very poor across economy• Social Partnership model struggling to cope• Image of Ireland has been badly tarnished

Ireland - Unemployment

Sectoral Labour Market Changes

Sector Change Q4 07 to Q4 08Agriculture F&F -2,700Other Production -12,400Construction -45,900Wholesale & Retail Trade -18,200Hotels & Restaurants -10,500Transport, Storage etc +900Financial & Business Services -11,600Public Admin. & Defence +600Education +6,300Health +3,500Other services +3,100Total -86,900Source: CSO

Irish Economy in 2009

• Will be a very difficult year• Unemployment will rise a lot further• Public finances will get a lot worse• Consumer dynamics will be difficult• Housing correction has further to run• Prospects for recovery in 2010 contingent on

credit availability, international recovery, bottoming of housing market,

• Competitiveness has to be the focus• All risks on downside at the moment

Ireland Economic Forecast

Average 2008e 2009f 2010f

GDP -2.0% -4.5% -2.0%

GNP -2.5% -6.6% -2.0%

Consumption -2.0% -6.5% -3.0%

Investment -20.0% -25.0% -10.0%

Government 3.0% 0.0% 0.0%

Exports 2.0% -1.0% 1.5%

Imports -2.0% -5.0% -1.0%

Consumer Price Inflation 4.5% -3.0% -2.0%

Unemployment (average) 6.3% 12.5% 14.0%

e=estimate f=forecast

LIMERICK & THE MID-WEST

INDEX OF DISPOSABLE INCOME PER PERSON

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0• Limerick 0.3%

above national average

• Limerick -10.7% behind Dublin

• Limerick 1% ahead of Cork

INDEX OF DISPOSABLE INCOME PER PERSON

80

85

9095

100

105

110115

• Mid-West 3% behind national average

• Mid-West 0.6% ahead of South West

• Mid-West third highest region

60708090

100110120130140150

INDEX OF GROSS VALUE ADDED PER PERSON

• Mid-West 13% behind national average

• Mid-West 25.8% behind South-West

Live Register Trends

BMW +51,726 +86.3%

Dublin +37,953 +85.1%

Mid-West +14,617 +87.3%

South-West +22,988 +86.9%

South-East +20,648 +81.2%

State +164,952 +87.1%

Limerick +8,219 +91.3%

Employment by Sector

SECTOR MID-WEST NATIONAL AVERAGEAgriculture

F&F7.6% 5.5%

Manufacturing

17.5% 13.9%Construction 13.2% 13.2%Wholesale & Retail

15.1% 14.5%Hotels & Restaurants

5.8% 6.1%Transport etc 6.2% 5.7%Financial & Other Business Services

9.4% 13.8%

Public Admin. & Defence

4.4% 5.2%Education 6.7% 6.1%Health 8.8% 10.2%Other Services

5.3% 5.8%

Vulnerability of Mid-West

• 33.8% of Labour Force in Construction/Agriculture/Manufacturing

• 32.6% for economy as a whole• 3 sectors now under pressure• Lower level of Financial & Business Services• Planned construction activity positive for Limerick• Will need to be heavy focus on high-level

employment creation in Limerick region

Population Change

•Change in population a key social & economic indicator•Limerick City appears to be doing poorly, but•Boundary Division distorts the real picture

COUNTY/CITY

2002 2006 % CHANGEState 3,917,2

034,239,848

+8.2%Galway 209,077 231,670 +10.8%Cork 447,829 481,295 +7.5%Waterford

101,546

107,961

+6.3%Limerick City

54,023 52,539 -2.7%

Limerick County

121,281

131,516

+8.4%

Limerick

175,304 184,055 +5.0%

Average House Prices

•Supply has been limited so prices holding up relatively well•According to D.o.E New House Prices in Q3 2008 -5.0% in Limerick, -5.5% Whole Country, -15.8% Dublin, -3.6% Cork, 0.0% Galway -0.9% Waterford•According to D.o.E 2nd Hand House Prices in Q3 2008 -9.4% in Limerick, -10.3% Whole Country, -15.8% Dublin, -10.2% Cork, -15.7% Galway +5.9% Waterford

NEW Second HandNational €301,680 €335,762

Dublin €347,233 €412,152Cork €320,302 €334,663Galway €281,177 €310,865Waterford €290,357 €301,387Limerick €271,161 €263,793

Vision for Limerick City

• City in middle of a major regeneration programme that will totally transform face of city

• Lots of vision• EML Architects• The Atlantic Way• Limerick Docklands Initiative• Murray O’Laoire Architects

Public Initiatives for Limerick

• Transport 21• Limerick City Council Draft City Centre

Strategy – ‘ allow easy access to city centre by public and private transport, to park safely and conveniently and move safely and easily on foot through places of enhanced environmental quality’

• Regeneration Project – major economic & social plan

Private Sector Initiatives

• Considerable interest by private sector in developing Limerick City

• The Opera Centre €500 million development

• Arthur’s Quay €500 million project• These development will utterly transform

face of Limerick City

What has Limerick Going For it?

• Close proximity to international airport• High quality educational offering• Affordable housing market• Strong offering in Arts & Culture• City Council that is open for business• Transport 21 is opening up city• Regeneration project• Shannon Development Agency• Strong Private & Public Sector commitment• Strong sporting offering

What Needs to be Done

• Heavy dependence on sectors under pressure, need for very pro-active employment policy

• Sort out Governance Structure to create shared vision

• Avoid pitfalls in regeneration• Official vision needs to be shared by all

stakeholders and realised• Improve tarnished image

THE ROAD TO NATIONAL RECOVERY!

Conditions for Recovery

• International economic cycle needs to improve

• Stabilisation of housing market• Solution to banking crisis• Exchange rate improvement• Fiscal certainty• Competitiveness

Competitiveness

• Cost base of economy needs to fall• Focus on outputs rather than inputs in public spending• Lower cost of housing• Lower fuel & energy costs• Lower local authority charges• Focus on quality of labour force• IT capability• Broader tax base, low marginal rates• Proper regulatory framework• Functioning banking system• External image of Ireland

Strategic Vision

• Small Open Economy - never forget it!• Focus on Quality rather than Quantity• Pick sectoral winners• FDI• Agri-Food• Tourism• Service exports• R&D• IT as a solution provider• Labour market flexibility• Effective anti-corruption laws & enforcement• Effective regulatory institutions• The Washington Consensus

Final Thoughts

• Strategic vision required• A new vision for capitalism - ‘Entrepreneurial

Capitalism’ significant role played by small innovative firms

• Strong effective leadership• Promotion of entrepreneurial culture• High quality economic growth the only way to solve

fiscal and labour market crisis!• Quality of labour force key• No silver bullet - but we have to make it happen

rather than wait for it to happen