As the year comes to a close, a few standout events and trends show the Irish economy is on a profoundly different growth track to that of our European neighbours. From Manchester to Munich, European countries are dealing with the problems of failure – slow growth, low tax revenues and economic inertia. Ireland, in contrast, is dealing with the problems of success – too much growth, soaring revenues and too much money sloshing about, pushing up prices.
The reason for this dichotomy is that Ireland is closer to Boston than Berlin, as Mary Harney said in 2000. We benefit from the deviation between the growth rates and dynamism of the US and the listless performance of the European economy.
Since 2000, the European economy has slipped back so much that Americans are now 25 per cent richer than Europeans. At the beginning of the century, Americans and Europeans had about the same income. That has changed. Over the past 25 years, the US has pulled away and Ireland – with one foot in the US and one foot in the EU – has profited from the American surge.
This trend is likely to continue. And though the Trump commitment to tariffs and isolationism might change things, corporate America has had a great “globalisation” – as has Ireland. The boardrooms of the US might not be so quick to jeopardise their international bottom line by embracing some of the more extreme manifestations of the Maga movement. Let’s see what happens. For now, let’s look at the big trends or moments of 2024.
Surge in corporation tax
Reflecting this US bias, Ireland’s corporation tax revenues surged in 2024, with receipts projected to be about €25 billion for the year. In November alone, corporate tax receipts rose by 117 per cent compared with the same month in the previous year, but that’s with the infamous Apple tax receipts hitting the account. Obviously there is a huge element of fragility as Washington’s new Treasury secretary wants his money back, or at least wants to reduce the amount of US money that flows into Merrion Street.
The key battleground will be the pharma sector because the Irish/American pharma sector re-exports lots of drugs back to the US. This is where tariffs will begin to squeeze Irish production. Why would a company make drugs bound for the American market in Ireland and not Idaho?
Pharma differs from other multinational sectors precisely because the other multinationals are exporting from Ireland to the EU and the profits coming back here are largely based on their European sales. However, pharma is selling drugs back to the Americans – and that’s a weakness in a Maga world.
Apple tax decision
Did you hear the one about the government that didn’t want a free €13 billion? This is one of the most bizarre stories in global economics and finance for 2024. While the rest of the world looked on in amazement, the Irish Government argued that it didn’t want the Apple windfall, precisely because accepting the cash was tantamount to admitting that we’d been cooking the books.
The decision confirmed a little arrangement whereby Ireland gave Apple unlawful tax benefits between 2003 and 2014, allowing the company to significantly reduce its tax liabilities. Caught out, the Government tried to seem virtuous by stressing that the loot would not be spent on day-to-day expenditure and would be allocated to a strategic reserve fund. They are fooling no one; the Apple decision – made by the highest court in Europe – refocused both European and US attention on the Irish tax shenanigans.
[ Apple and Ireland: A tale of two tax sweetheartsOpens in new window ]
However, we should remind ourselves that a country has every right to manipulate its own tax system for its own ends – it’s called sovereignty. But in typical Irish fashion, we’d prefer not to get snared, particularly in the era of Trump coupled with increasing economic nationalism in Europe.
Growing economy
Away from the courtrooms, Ireland’s economy continued to motor on, best exemplified by total tax revenues reaching €105 billion, marking a 20 per cent year-on-year increase, leading to a budget surplus.
For years this column has been arguing for a sovereign wealth fund, like the Norwegian one, treating some of the corporate tax revenues as being akin to revenue coming from an oil find. However, Ireland’s underlying requirements for infrastructure and, in particular, housing, means we have to spend a bigger amount right now than the Norwegians.
Prudence is only responsible in a static economy. When the people need to be housed, prudence is a form of cowardice, typical of the Civil Service. Putting money away when it should be spent today to fix important things is a dangerous choice.
House prices
Nowhere is Ireland’s surging demand more evident that in housing. Prices increased by 10.1 per cent in the 12 months to August 2024, with Dublin’s property prices rising by 10.8 per cent and prices outside the city rising by 9.6 per cent. The median price of a house is now €345,000.
The cheapest place in Ireland is Longford, at €175,000, while the most expensive area is Dún Laoghaire-Rathdown, where the median house price is €635,000. Things are not improving: for example, in March 2024 the number of homes on the market in the State was 10,500, representing a 24 per cent year-on-year decrease and the lowest number since January 2007, just as the housing market began to tank.
Return of the centre in Irish elections
When the electorate was asked to judge the Government on November 29th, the response was an emphatic … we’re grand. The centre didn’t just hold – it grew. Fianna Fáil is the biggest party and has 48 seats with 21.9 per cent of first-preference votes. Fine Gael, despite expectations, obtained just 38 seats with 20.8 per cent of first-preference votes.
Sinn Féin, after all the noise of the previous four years, nabbed 39 seats with 19 per cent of first-preference votes. While the Labour Party and the younger version of Labour, the Social Democrats, did well, the election was a victory for Centrist Dads. Ireland was asked to embrace change and it shrugged.
Impact of Taylor Swift on the Irish economy
If the election result marked stability, safety and conservatism, the biggest musical gig of the year underscored that very same middlebrow innocuousness. Taylor Swift’s Eras Tour had a notable economic impact on Ireland in 2024. Her three sold-out concerts at Dublin’s Croke Park attracted some 160,000 fans and generated around €20 million in ticket sales.
The influx of concertgoers spurred significant spending on travel, accommodation, and dining. Hotels reported occupancy rates of 98 per cent during the event period, with average room prices surging to €350 per night. The Bank of Ireland found that spending among 13- to-17-year-olds soared by 63 per cent over the previous weekend. Among 18- to-25-year-olds, spending went up by 25 per cent, while it surged 30 per cent among those between 26 and 35.
Who would have thought the economic phenomenon of 2024 would be Swiftonomics?