Ireland’s exceptional demographic profile could remain in place

New demographic projections suggest solid population growth in coming 15 years.

• Irish demographic outlook remains exceptional in Europe.

• Prospective growth in working age population at odds with declines across most of Europe.

• Encouraging data reflect strong ‘natural’ population increase and relatively young population structure at present.

• Strong population projections imply positive Irish economic growth potential.

New population projections published today by the Central Statistics Office suggest that Ireland’s exceptional demographic profile could remain in place for some considerable time. Inevitably, these projections encompass a range of assumptions about fertility rates and migration that will have a significant bearing on the size and shape of the population fifteen years hence. For this reason, the CSO sets out a wide range of scenarios encompassing different assumptions. The most optimistic scenario suggests Ireland’s population will increase by 16% (+734k) by 2025 whereas the most pessimistic envisages an increase of 6% (+217k). The average increase across six scenarios outlined by the CSO is for an increase of 11% (502k).

A population increase of around 10% to 11% in the next 15 years would mark Ireland as exceptional by European standards. Over the 15 year period 2010-2025, the most recent Eurostat projections put population growth at 3.5% in the EU27 (and 3.6% in the 17 members of the Euro area). Ireland’s projected population growth is the fastest of the 27 EU countries over the next fifteen years.

Of at least equal importance, Ireland’s projected population growth is qualitatively different to that in most other European countries in that it reflects a strong increase in the working age population whereas in many other countries, the working age population is expected to shrink. Again, different assumptions about migration produce different estimates but the average across the six scenarios presented by the CSO is for an increase in Ireland’s working age population of 7.6% between now and 2026. In stark contrast, the working age population of the European Union is set to decline by 2.7% by the middle of the next decade (the Euro area working age population is expected to decline by 2.0%). Only eight of the 27 EU countries are expected to post increases in their working age population over the next 15 years. Of these, only Luxembourg (+15%) is seen experiencing a larger increase in its working age population than Ireland over this time period.

Today’s new demographic projections suggest the Irish economy has the potential to out-perform most other European economies in the next 10 to 15 years but of course translating this potential into a reality will require a combination of appropriate domestic polices and a supportive external backdrop. In terms of near term policy change, a particularly sharp increase in the number of school-aged children in the next fifteen years emphasises the key task education policy will have in shaping Irish economic outcomes. At the margin, this also suggests that education would be a particularly appropriate area to emphasise in terms of any scope for fiscal stimulus or an easing in the scale of further adjustment in the next year or two.

Today’s relatively strong Irish demographic projections reflect a number of virtually unique characteristics of the current Irish demographic landscape. Among the most important of these are a comparatively young population and an exceptional pace of ‘natural’ increase that significantly offset the impact of net emigration at present.

• The natural increase (births less deaths) in Ireland’s population is the highest in the EU at 10.1 per 1,000, compared to an EU average of 1 per 1,000. In turn, this is driven by an exceptional combination of a comparatively high birth rate of 16 per 1,000 (EU average 10 per 1,000) and a relatively low death rate of 6 per 1,000 (EU average 9 per 1,000).

The current strong ‘natural’ increase is closely related to a relatively low median age of 35 in Ireland, the lowest in the EU (EU average 41.5) and a somewhat slower pace of increase in this  median age in the past 10 years (Ireland +2 years, EU average +2.6 years).