The well documented path of Ireland’s economic development, involving first a shift from agriculture to manufacturing and then from manufacturing to services, is one that is common to many developed countries. The decline of the agricultural sector is illustrated by its ever- shrinking share of Ireland’s GNP and employment. In the early 1980s, farming accounted for around 9 per cent of GNP and employed 209,000 people. By 2006, agriculture comprised less than 3 per cent of GNP and employment had fallen to 111,000.
Figure 4.9: Output and Employment in Agriculture
t. We forecast positive growth in value ver the period 2005 to d, average value added cent per annum. The trend of falling employment in the agricultural sector is forecast to continue over the medium term with employment contracting by an annual average of around 2.5 per cent for the remainder of the forecast period.
The recent buoyancy of world commodity prices has given rise to speculation of a possible revival in Ire
outlined, over the forecast horizon agriculture’s overall contribution to the Irish economy is expected to decline further, a trend that is unlikely to be reversed despite this recent increase in global food prices. Nonetheless, certain sectors remain well placed to take advantage of higher food prices. In particular, Ireland enjoys a comparative advantage in milk production arising from its grass-based system. The consolidation currently underway in the dairy sector, likely to be expedi ed by expected future reform of the The prospects for output and employment in the agricultural sector remain weak, though the increased attention to environmental policy could see some shift in the focus of outpu
Average Annual % Change
-1 0 1 2 3 4 -3 -2 -4 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025
Value Added Employment
added to resume in 2010, following a contraction o 2010.53 From 2010 to the end of the forecast perio
will grow very slowly at less than 1 per
land’s agricultural sector. However, as
t
53We are grateful to Teagasc for their assistance in preparing our forecasts. However, the
milk quota regime, should allow for the emergence of an efficient internationally competitive dairy industry in Ireland. The extent to which recent price developments are structu l rather than transitory in nature will de
Th
growth accompanied by rising is
t Plan (NDP). Capacity d labour shortages in the building sector resulted in excess apidly increasing prices. The price deflator for gross output in
down. Output growth will remain flat for the period 2010 to 2015 before r housing and investment in ra
termine whether there is a sustainable future for other sectors such as beef and grain, which after successive CAP reforms are increasingly exposed to the competitive world trading environment. Also the move towards growing energy crops could see some change in the pattern of output in the period to 2025. Higher output prices should see a continuation of the recent trend of lower output volumes but higher output in value terms over the forecast horizon.
In the medium term, income support will increasingly be linked towards the remuneration of farmers for the multifunctional benefits of agriculture. ese include the provision of public goods, such as the preservation of the countryside, the maintenance of rural communities, the preservation of biodiversity and the production of biomass and other sources of renewable energy. Diversification into these areas is likely to represent an important source of income for farmers in the years ahead.
BUILDING
Here we consider the growth in GDP arising in the building and construction sector. This differs significantly from the gross output of the sector which is frequently discussed in terms of its share in GNP. The difference, of course, lies in the large amount of inputs used in the sector many of which are sourced in Ireland. An outstanding feature of Ireland’s recent economic experience has been the exceptional growth in output and employment in the building sector. For the period 1995 to 2000, output in the sector grew by an annual average of almost 13 per cent. While output growth moderated significantly to 7.1 per cent during the period 2000 to 2005, this rate of growth still exceeded that recorded in many other sectors of the economy. A number of factors combined to fuel this rapid growth in
he building sector. Strong economic t
d posable income, in addition to a strong demographic profile and high levels of inward migration, caused the demand for new housing to soar. At the same time the expansion in the services and industrial sectors increased the demand for commercial and industrial properties.
Another contributory factor to the boom in the building sector was the high level of investment in roads and public transport undertaken by government under the National Developmen
constraints an demand and r
the building sector rose by an annual average of 10.7 per cent for the years 1995 to 2000 and by 7.5 per cent for 2000 to 2005.
We anticipate that as overall economic growth retreats from the high levels achieved in the last decade and as the level of house building returns to more sustainable levels, output growth in the building sector will ease over the forecast horizon. We forecast a small contraction in annual average output for the years 2005 to 2010 as the level of demand in the residential sector normalises and activity in the commercial market slows rising to an annual average of almost 2 per cent for the period 2015 to 2020 as a result of continued demand fo
70 MEDIUM-TERM REVIEW 2008-2015
infrastructure. Beyond 2020 the level of government capital investment is expected to fall with the completion of major projects under the NDP and Transport 21.
The labour intensive nature of the building sector has meant a strong correlation between output and employment trends in the sector. The exceptional output growth during the period 1995 to 2000 was translated into annual employment growth averaging over 14 per cent for the same eriod. By 2007, there were 278,000 people employed in the building sec
nge in the composition of the output of the sector towards non-housing construction where pro
ion of the commercial sector.
falling output growth, we expect a sharp reduction in the numbers p
tor, 181,000 more than in 1997. In line with the contraction in output forecast for the years 2005 to 2010, employment growth is also expected to remain flat, growing by 1.5 per cent per annum as the high rates of employment growth recorded in 2005 and 2006 is offset by weaker growth for the remainder of the decade. As discussed earlier in this chapter, productivity in the sector was negative over the period since 1995. This is likely to change in the post-2010 period with the cha
ductivity growth is higher.