by Frank Schnittger
Mon Mar 30th, 2020 at 02:16:22 PM EST
Perhaps its time to focus on some relatively good news in the wake of the Covid-19 pandemic. The OECD estimates that the Irish economy will suffer the mildest shock of any OECD economy as a result of the crisis, a reduction of 15% in GDP. How anyone can make such estimates with any precision at this stage in the crisis is beyond me, but there is perhaps some logic behind that prediction.
The Irish economy is heavily invested in sectors where working from home is widely possible such as financial services and software development, and also in the pharmaceutical and medical devices sectors which may grow as a result of the crisis, and may actually make a major contribution towards combating it.
Medtronic, (based in Dublin and Galway) has just made the design specification and software of one of their ventilators public to enable it to be more widely produced by other companies, and a collective of medical equipment design engineers from a number of companies have just completed the design of a "battlefield" emergency ventilator which could be manufactured rapidly all over the world.
In case anyone doubts that a small country like Ireland could have the expertise to make such major contributions, it should be noted that Ireland currently hosts 9 of the world's top 10 pharmaceutical companies and 18 of the top 25 medtech companies, many of which have been located here for several decades. A total of 180 multinational and indigenous pharmaceutical and medTech companies are located in Ireland, many of which have major manufacturing or research facilities located here.
The pharmaceutical sector employs approximately 50,000 people in 120 companies in Ireland and is responsible for 55 billion euro of exports - about 50% of total Irish exports to the EU. An important aspect in the development of the sector has been its success in diversifying from the original bulk active ingredient plants to higher value activities. The MedTech sector employs nearly 25,000 people in over one hundred companies and generates 9.4 billion annually.
That said, much of Ireland success in attracting big pharma, MedTech, and software companies to Ireland is undoubtedly because of the relatively low rate of corporate taxes and some controversial and now discontinued schemes by which some corporates could reduce their tax costs still further. Medium term risks to the Irish economy include Brexit, international corporate tax reform, more in-market digital taxes, and the rise of economic nationalism particularly in the USA. Key to ongoing success has to be to further embed those companies in Ireland by further diversifying their activities here, and growing the indigenous sector as much as possible.
In the short term, however, these industries may help to cushion Ireland from a precipitous fall in activity during and immediately after the crisis and perhaps even make a valuable contribution towards lessoning its impact in other countries.