Recovery in domestic sector remains elusive

Any growth in the Irish economy over the past couple of years has come from the export side.

On the other hand, domestic demand, which is comprised of business investment spending and consumer spending, has been extremely weak and has made a significant negative contribution to growth.

For a small open economy like Ireland, having a competitive and vibrant export sector is obviously very desirable, but it needs to be complemented by domestic demand. The problem is that export growth is being driven by productivity improvements rather than increased employment, and it is not generating much tax revenue buoyancy.