On this occasion there had been a gap of three years since my last visit. What a difference three years can make. I was struck by the considerable amount of new developments and changes in both infrastructure and lifestyle. Ireland is a booming economy.
How much it is booming is probably not sufficiently appreciated by many of those who might otherwise consider Ireland an investment opportunity. Last year the Irish economy grew by 6.75 per cent. This was actually slightly down on the previous year, while 1997 should deliver 6 per cent-plus growth, making this year the fourth in an impressive sequence of economic performance, all achieved against a background of inflation no higher than here in the UK. No wonder some commentators refer to Ireland as Europe's Tiger economy.
Much of the growth has been fuelled by overseas investment. This in turn owes much to the low wage costs that were available following a period of serious economic mismanagement during the 1980s. This sad period at least culminated in a number of national wage agreements being achieved. High unemployment levels have also acted to keep wage demands down.
These events painted a picture that allowed Ireland to catch up, in economic terms, while European Union cash was attracted steadily - a further bonus to the country. The resultant boom delivered higher tax receipts to the Government, which in turn allowed it to operate a more generous fiscal policy than might otherwise have been the case. Now the boom in Ireland is switching to the consumer and away from exports and foreign investment.
The danger here, of course, is that it will stimulate inflation - much the same sort of problem we have in the UK. To some extent this is inevitable, but it is worth remembering that the base from which any upturn starts is very low at 1.7 per cent. Dublin stockbrokers Goodbody, now part of Allied Irish Bank, are forecasting a rise to 2.7 per cent in 1998.
Of course, it is as well to put the investment opportunities likely to be created in perspective. Ireland has a population of just 3.5 million in a country not far different in size to England. There are just 75 companies with a full listing on the Irish Stock Exchange, although there are others listed on the more junior Exploration Securities Market, while a Developing Companies Market was started earlier this year, corresponding to our own AIM counter.
Until two years ago, the Irish Stock Exchange was part of the International Stock Exchange of the United Kingdom and the Republic of Ireland. Deregulation within the EU obliged it to split away, but much of the settlement and regulatory procedures and requirements are the same as in London. The market itself has boomed like the economy, with total market capitalisation rising twelve-fold over the past decade to around Irpounds 25bn.
There are plenty of familiar Irish names amongst the major stocks quoted in Dublin. Indeed, the top five Irish companies are all large enough to be included in the FTSE 100 index. Two of them are banks - Allied Irish Bank and the Bank of Ireland - but there are no surprises there. Building materials group CRH, the fourth largest company in Ireland, has also performed well recently, as has pharmaceutical company Elan. And then there is paper and packaging giant, Jefferson Smurfitt, one of the best known companies in Ireland.
Perhaps the time has come for some progressive investment management house to launch a high profile Irish fund.
Brian Tora is chairman of the investment strategy committee at Greig Middleton and can be contacted on 0171 655 4000.Reuse content