The major threat future economic growth materialising is the lack of housing for returning emigrants at affordable prices, writes Dermot O’Leary
The release last week of the latest population statistics for Ireland provides an opportunity to discuss one of the most interesting domestic economic topics.
“Interesting” is, of course, a relative term, but it is certainly difficult to argue against the view that Ireland has had, and continues to have, unique demographic features.
There are three key trends in the latest data that are worth highlighting.
Firstly, the population of Ireland continues to grow, and hit 4.635m people this year, the highest level since 1851. Despite the impact of the recession, the population has continued to grow each and every year; there are now around 300,000 more people living in Ireland than there were in 2007, equivalent to almost twice the population of Cork City.
The second point is that this population growth continues to be driven by a natural increase of births over deaths.
After peaking in 2010, the annual number of births has fallen each year since, but, at 67,000 in the year to April 2015, Ireland continues to have the highest birth rate in the EU.
Contrary to some beliefs, this is not down to increased idleness over recent years, but to the ‘echo’ effect of Ireland’s baby boomers of the late 1970s.
One would expect to see further falls in births, albeit from high levels, over the coming years.
As a driver of population growth, however, the baton may then be taken over by immigration, our third key takeaway.
Reflecting the effects of the recession years, there have been significant net outflows since 2010, but this now appears to be turning. In the 12 months to April, net outflows amounted to 12,000, down from 34,000 in 2012.
The fall in net migration over the past 12 months has primarily been driven by an increase in inward migrants; 69,000 people came into the country, up from 60,000 the year before.
Meanwhile, the number of people leaving Ireland was relatively constant at 81,000.
As a minor caveat, these annual estimates will be updated when the full 2016 census details become available.
Following the 2011 census, the CSO was forced to revise its population estimate upwards by about 100,000 people, mainly due to an underestimate of inward migration flows.
We would speculate that the same error is being made at this stage and that the country is already in a positive net inward migration situation. Time will tell on this one.
However, A return of the Irish diaspora is not the explanation of the recent rise in immigration flows. Rather, the inward flows can be explained by what one may describe as an ongoing influx of the ‘new Irish’, consisting of Eastern Europeans, Brazilians, and Chinese, among other nationalities.
Net outflows of Irish nationals in fact continued at a relatively high level, with net emigration of 23,000 last year.
An insightful study by University College Cork in 2013 entitled Irish Emigration in an Age of Austerity suggests that a significant proportion of Irish emigrants (70%) said that they were more likely to return if the Irish economy was to improve. This is where the next wave of net migration into the country could come from.
A cursory glance at past Irish migration trends suggests it is highly correlated with the state of the Irish labour market.
Therefore, if we believe the latest forecasts for ongoing strong economic growth, then one should expect significant net inflows over the coming years.
This, of course, should be seen as a good news story.
The major threat to this materialising is the lack of housing for these people in the correct location and at affordable prices.
Build it and they will come home.
Dermot O’Leary is chief economist with Goodbody Stockbrokers
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