Major macro economic indicators
| | 2010 | 2011 | 2012(e) | 2013(f) |
|
GDP growth (%)
|
-0.8
|
1.4
|
0.4
|
1.1
|
|
Inflation (yearly average) (%)
|
-1.6
|
1.2
|
2
|
1.3
|
|
Budget balance (% GDP)
|
-30.9
|
-13.4
|
-8.4
|
-7.5
|
|
Current account balance (% GDP)
|
1.1
|
1.1
|
2.3
|
2.8
|
|
Public debt (% GDP)
|
92.2
|
106.4
|
117.6
|
122.5
|
| |
| (e) Estimate (f) Forecast |
- Flexible economy
- Business-friendly environment, favourable tax system
- Presence of multinational companies
- Specialisation in high value-added sectors (including pharmaceuticals and IT services)
- Dependence on European economy
- Over-indebted households
- Damaged banking sector
- Seriously worsened public finances
Risk assessment
Moderately buoyant external trade
Ireland - a very open economy with exports equivalent to GDP – saw growth slow in 2012, as a result of the European crisis. The acceleration expected in 2013 will be modest, although, admittedly, foreign trade will continue to contribute positively to activity. Many sectors have made productivity gains, which will boost their export performance. Pharmaceuticals, chemicals, IT and telecoms equipment are therefore expected to post satisfactory results. Agri-food is a key segment but margins are falling and the bankruptcies in 2012 point to the weakness of the industry. Services, in particular business and IT services, make up half of Irish exports. The United States, which will continue to grow in 2013, is a major investor which uses Ireland as an entry point to the EU and accounts for 21% of sales abroad. Nonetheless, despite the many advantages of Irish exports, 70% of sales of services are still absorbed by the European Union, of which 22% by the United Kingdom alone. Accordingly, weak activity in western Europe will act as a major curb on the expected recovery.
Deleveraging puts pressure on domestic demand
The sectors oriented towards domestic demand will continue to suffer from the repercussions of a crisis of extraordinary dimensions. Private and public consumption will contract, while unemployment will remain high and is expected to stay between 14 and 15% in 2013. Furthermore, the huge household debt level - 209% of disposable income at the end of 2012 – will fall only slowly. At its peak in Q3 2011, it amounted to 218% of disposable income. Consumer spending will, therefore, be very weak. As a consequence, construction – with prices apparently hitting a low in summer 2012 - and distribution – marked by several bankruptcies in 2012 – will continue to pose a high credit risk.
Light at the end of the tunnel?
Ireland has been undergoing its painful convalescence with EU and IMF help since November 2010. The necessary bank disengagement is putting pressure on the real economy by creating a shortage of funding for the private sector. The banking crisis also puts considerable pressure on the public debt, which will continue to rise in 2013. The government bailout of banks was particularly generous, as evidenced by the massive public guarantees on bank liabilities. In any event, the conditionality under the EU/IMF arrangement is running smoothly. The arrangement ends in late 2013 and Ireland is expected, at that point, to be able to finance itself independently over the long term on the markets. The tight fiscal policy and the banking reforms support the credibility of the sovereign borrower, but the country’s persistent weakness – accumulation of still high private and public debts – could delay this process of financial emancipation.
MEANS OF PAYMENT AND COLLECTION METHODS
Although the use of bills of exchange is uncommon in domestic commercial transactions between Irish companies, they are sometimes used in international trade.
The cheque, defined as “a bill of exchange drawn on a bank and payable on demand”, is more widely used for commercial transactions, but does not provide a foolproof guarantee as issuing an unfunded cheque is not a criminal offence.
On the other hand, SWIFT bank transfers, well established in Irish banking circles, are widely used as they are quick and efficient.
Payment orders issued via the website of the client’s bank are a rapidly growing instrument.
The collection process usually begins with the debtor being sent a final demand, or “seven-day” letter, by recorded delivery mail asking him to pay the principal along with any default interest contractually agreed by the parties.
Where there is no specific interest clause, the rate applicable to commercial contracts concluded after 7 August 2002 (Regulation number 388 of 2002) is the benchmark rate, i.e. the European Central Bank’s refinancing rate, in force before 1st January or 1st July of the relevant year, marked up by seven percentage points and applied to said contracts via a percentage calculated per day past due.
For claims exceeding 1,270 Euros, debtors may be threaten with a “statutory demand” for the winding up of their business if they fail to make payment or come to terms within three weeks after they receive a final demand for payment (a “21-day notice”).
Thereafter the debtor is regarded as insolvent (Companies Act 1963/2009, section 214, amended in 1990 and 2001).
Irish law and the Irish legal system are mainly founded on British “common law” inherited from the past, although separate national legislation has subsequently been developed.
In ordinary proceedings, creditors who hold material evidence of a claim (contractual documents, acknowledgement of debt, unpaid bills of exchange) which the debtor has no valid basis for contesting, may seek a “summary judgment” from the court and thereby obtain a writ of enforcement more quickly.
If a defendant fails to respond within the allotted time to a court summons (either a plenary or summary summons before the High Court, a civil bill before the Circuit Court, or a civil summons before the District Court), the creditor may obtain a judgement by default based on the submission of an affidavit of debt without a court hearing.
An affidavit of debt is a sworn statement that substantiates the outstanding amount and cause of the claim. It bears a signature attested by a notary or an Irish consular office.
The claim amount at stake will determine the competent court: the District Court, then the Circuit Court, and, for claims exceeding 38,092.14 Euros, the High Court in Dublin, which has unlimited jurisdiction to hear civil and criminal cases and to assess, in the first instance, the constitutionality of laws enacted by Parliament (Oireachtais).
The creation on 12 January 2004 of a commercial court – as a special High Court division – competent to hear commercial disputes exceeding one million Euros, included in a commercial list or cases concerning intellectual property, is intended to provide suitable and rapid examination of the cases submitted.
At the discretion of the commercial judge, the proceedings may be adjourned for up to 28 days to facilitate the parties to refer to alternative dispute resolution process, such as conciliation or mediation.
When a defendant answers a summons, asserts his rights, and refuses to make payment, relatively formal plenary proceedings are instituted wherein the court gives equal importance to the case documents submitted by the parties – with possible recourse to the discovery system for the submission of adequate evidence – barrister’s arguments, and oral testimonies presented at the main hearing.
Customarily, depending on the judge’s decision, court costs are borne by the losing party.
For claims brought before the District Courts (with under 6,348.69 Euros at stake), there is a simplified written procedure, but the accent is mainly on hearing respective litigants' witnesses.
