Economics CA1

Steven Doran
Student Number- 21305066

Part A

1)
1. Inflation Rate
2. Unemployment
3. Economic Output (GDP)
4. Foreign Direct Investment
5. Healthcare

1- Inflation Rate

 The inflation rate of a country gives an extremely valuable insight into the recent
performance of its economy. Simply put, the inflation rate is a measure of how the
purchasing power of changes over time. It has an effect on everything in an economy
and because of this it is one of the most widely discussed economic indicators.
 Usually, a low inflation rate signals that the demand for goods and services in a
country is lower than it ideally should be, which tends to slow down economic
growth and can often be seen as a weakness in an economy.
 A high inflation rate is usually associated with a heated, fast growing economy and is
often seen as unstable. It means that the cost of goods and services are steadily
rising. The most obvious example of this being The Celtic Tiger Era.

2- Unemployment

 The unemployment rate in a country is used as an indicator of a country’s economic

status as it is simple, easy to understand and most of the time is very relevant to
economic performance.
 The unemployment rate refers to individuals who are employable and actively
seeking a job but do not have one. This number is then divided by the total number
of people in the workforce.

3- Economic Output

 In economics, output means the quantity of services or goods which are produced
across a given time period by a country.
 This is a valuable indicator as it provides information on all sectors. However it can
be challenging to include in reports due to the difficulty in avoiding double counting.
 I will measure the economic output of an using Gross Domestic Product (GDP) which
adds investment, consumption, net exports and government spending.

4-Foreign Direct Investment

 Foreign Direct Investment (FDI) is defined as investment into a company from a

business or individual based in another country in the form of a controlling
ownership.
 Foreign Direct Investment usually involves a transfer of expertise, transfer of
technology, joint venture or management.
 This is a very useful measure to assess an economy as it illustrates how attractive a
country is to outside companies due to a number of factors including infrastructure,
incentives and availability of a strong workforce.

5- Healthcare

 While healthcare is not a traditional economic variable, it can provide an invaluable

insight to the performance, development and stability of an economy, which is
becoming increasingly relevant in recent times.
 While healthcare has always been relevant, it will be very useful to help assess an
economies response to the ongoing SARS-CoV-2 (Covid-19) pandemic.
 For the purpose of this assignment, I will be measuring an economies healthcare
output as spending per capita.
2)

My chosen economies to compare against Ireland are Brazil and Germany as they are
sufficiently diverse in terms of size, stage of development, trade block membership and
geographical location.

Inflation Rate

Figure 1:
Inflation Rate Brazil, Germany and Ireland 2016-2020
Table 1 shows inflation rates for all three countries form 2016 to 2020, obtained from
Macrotrends 2021 . Figure 1 shows inflation rate data, based on Table 1

Inflation Rate
10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2016 2017 2018 2019 2020

-2.00%

Ireland Germany Brazil

Table 1
Year Ireland Germany Brazil
2016 0.01% 0.49% 8.74%
2017 0.34% 1.51% 3.45%
2018 0.49% 1.73% 3.66%
2019 0.94% 1.45% 3.73%
2020 -0.33% 0.51% 3.21%
Unemployment Rate

Figure 2:
Unemployment Rate Brazil, Germany and Ireland 2016-2020
Table 2 shows unemployment rates for all three countries from 2016 to 2020, obtained
from Macrotrends 2021 . Figure 2 shows unemployment rate data, based on Table 2.

Unemployment Rate
16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2016 2017 2018 2019 2020

Ireland Germany Brazil

Table 2
Year Ireland Germany Brazil
2016 8.37% 4.12% 11.60%
2017 6.71% 3.75% 12.82%
2018 5.74% 3.38% 12.33%
2019 4.95% 3.14% 11.93%
2020 5.92% 4.31% 13.67%
(Macrotrends 2021)
Economic Output (GDP)

Figure 3:
Economic Output in Brazil, Germany and Ireland 2016-2020
Table 3 shows economic output data sets (which is measured as GDP per capita) for all three
countries from 2016 to 2020, obtained from Macrotrends 2021 . Figure 3 shows
unemployment rate data based on Table 3.

Economic Output (GDP) per capita in $

$90,000

$80,000

$70,000

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

$0
2016 2017 2018 2019 2020

Ireland Germany Brazil

Table 3
Year Ireland Germany Brazil
2016 $63,037.00 $42,136.00 $8,710.00
2017 $70,587.00 $44,533.00 $9,929.00
2018 $79,336.00 $47,811.00 $9,151.00
2019 $80,779.00 $46,468.00 $8,897.00
2020 $83,813.00 $45,724.00 $6,797.00

(Macrotrends 2021)
Foreign Direct Investment (FDI)
Figure 4:
Foreign Direct Investment in Brazil, Germany and Ireland 2016-2020
Table 4 shows foreign direct investment in Billions of $ for all three countries form 2015 to
2019, obtained from Macrotrends 2021 . Figure 4 shows foreign direct investment data,
based on Table 4.

FDI Inflows in Billions of $

300

250

200

150

100

50

0
2015 2016 2017 2018 2019

-50

-100

Ireland Germany Brazil

Table 4
Year Ireland Germany Brazil
2015 237.06 62.42 64.74
2016 102.92 64.71 74.29
2017 58.3 109.51 68.89
2018 67.36 158.52 78.16
2019 -46.63 67.62 69.17

(Macrotrends 2021)
Healthcare (Spending)
Figure 5:
Healthcare Spending in Brazil, Germany and Ireland 2014- 2020
Table 5 shows healthcare spending amounts in $ per capita for all three countries from
2014 to 2018, obtained from Macrotrends 2021 . Figure 5 shows healthcare spending based
on Table 5.

Healthcare Spending $ per capita

6,000

5,000

4,000

3,000

2,000

1,000

0
2014 2015 2016 2017 2018

Ireland Germany Brazil

Table 5
Year Ireland Germany Brazil
2014 5,400 5,304 1,017
2015 4,562 4,622 782
2016 4,718 4,742 801
2017 5,020 5,053 935
2018 5,489 5,472 848

(Macrotrends 2021)

3)
Comparison of the Economic Performance of Ireland, Germany and
Brazil

Inflation Rate

Figure 1 shows the inflation rate of Ireland Germany and Brazil from 2016 to 2020. IAs can
be clearly seen there is significant correlation between the rates in Ireland and Germany.
Brazil on the other hand trends towards major changes in inflation rate and much higher
rates overall. Indeed if one considers this 5 year period, the average annual inflation rate in
Ireland is 0.29%, in Germany 1.1% and in Brazil 4.5%.

The fact that Ireland and Germany are part of both the political and monetary union means
that European fiscal policy drives the correlative inflation trends and maintains overall good
control on prices. This is conducive to economic growth as it provides certainty. This is in
contrast to the volatility in the Brazilian inflation rate.

It is also noteworthy that Ireland as a small open economy, maintains inflationary control in
line with Germany , a global economic powerhouse. In addition the stability of the Eurozone
and the EU means that variations in inflation are moderate. This is in stark contrast to Brazil,
which can be seen to have a very volatile inflationary trend, with the rate varying from 8.7%
to 3.2% in this 5 year period alone.

Unemployment Rate

Figure 2 shows the unemployment rate of Ireland, Germany and Brazil from 2016 to 2020.
There is a significant correlation between the rates of unemployment in all three of Ireland,
Germany and Brazil, albeit at extremely different levels. This may partly be due to the
ongoing Coronavirus pandemic as a steady rise in the levels of unemployment through 2020
and onwards can be seen.

It is clear that both Ireland and Germany as more developed economies have lower overall
unemployment rates (6.34% and 3.74% respectively over the last 5 years) in comparison to
Brazil , a still developing economy with a much higher average unemployment rate across
the last 5 years of 12.47%.

Brazil is still recovering from their devastating recession from late 2014 to early 2016 and
this is seen in the relatively steady, but high levels of unemployment. Due to its geographical
location and lack of membership of significant international bodies Brazil has struggled to
deal with the ongoing pandemic.

Economic Output (GDP)

Figure 3 displays the economic output or gross domestic product (GDP) of Ireland, Germany
and Brazil from 2016 to 2020.

From this graph, it is evident that from 2016 to 2018 both Germany and Ireland have a
steady rise in economic output. However both economies stagnate slightly, with Germany
even suffering a drop in GDP in both 2019 and 2020. In contrast to this, Ireland continues to
perform very well, once again rising from 2019 to 2020. This may be due to the
attractiveness of Ireland to both multinational companies (MNCs) and young professionals
from abroad.

In stark contrast is Brazil with economic output at a very low level, at some points being less
than 10% of Ireland’s. This is a testament to the lack of opportunities in Brazil for young
professionals who will often choose to leave the country in search of more lucrative
opportunities.

Foreign Direct Investment (FDI)

Figure 4 shows the amounts of foreign direct investment inflows (FDI) into Ireland, Germany
and Brazil from 2015 to 2019.

It is clear that in recent years, there have been wildly varying changes in the amounts of
foreign direct investment. For example, Ireland has taken a hit in the amounts of FDI in
recent years, suffering a 56.69% decline from 2015 to 2016 and another 43.35% decline
from 2016 to 2017 and then even going so far as to have a negative balance of investment in
2019 with an overall negative inflow of -46.63 Billion dollars . In contrast to this, Germany
had a large influx of foreign direct investment from 2016 to 2018 and then a similarly steep
drop of 57.34% in 2019.

Here is one of the clearest examples as of yet as to why Brazil has a very poor performing
economy. Despite the stable amounts of foreign direct investment from 2015 to 2019 the
amounts are very low. While Brazil has a population of over 200 million people, both
Germany (83 million people) and Ireland (4.9 million people) have higher FDI.

Healthcare (Spending)

Figure 5 outlines the amount of healthcare spending in Ireland, Germany and Brazil from
2014 to 2018.

At first glance there is a striking correlation between Ireland and Germany and then a
massive difference to Brazil. There are a number of reasons for this but the most prominent
being that Ireland and Germany both have well performing, developed economies and are
both members of the Eurozone and EMA. On the other hand, Brazil is still a poor,
infrastructurally underdeveloped economy with a lack of any significant memberships to
relevant international bodies.
Pairing this with the lack of any FDI into the country it is not difficult to see why there are
such low levels of healthcare spending per capita . While countries which are later in their
economic development will place more of an emphasis on high level activities such as
healthcare, education and R&D , in Brazil it can be seen that this is simply not a priority for
them as of yet.

Ireland and Germany both have very high and stable levels of healthcare spending per
capita, this speaks to the successful economies present there. There is also a significant
amount of research carried out in Ireland and Germany. With the Irish government having a
budget for research and development of 869.2 million euro in 2020 alone (Government
Budget Allocations 2020) and Germany with a budget of 3.6 billion euro in 2020 (Worldbank
2021).

Part B
1)

Ireland

Despite already having a very strong, well educated workforce, the Irish government has
recently placed more emphasis on continued development and training through the
introduction of NRRP policies. These will focus on providing support for people when they
return to work and to prepare for the challenges of the future.

Most notably, the EU supported SOLAS Recovery Skills Response Program will see an
injection of €114 million into the development and roll out of additional training and
educational programmes. This will do a great deal to bridge the divide between the
wealthier and poorer areas of the country where there are still significant differences in
education.

In October of 2021 Ireland was a part of the 136 countries that reached an agreement for a
new approach to international tax reform. This policy adopted by a large number of the
world’s largest economies will see the global minimum effective tax rate rise to 15%. For
Ireland and companies residing here the most prominent change will be that of Corporation
tax. The previous rate in Ireland was 12.5% which was the lowest in the European Union
which made moving to Ireland very attractive for MNCs. However despite this change the
rate of tax for large companies is still relatively low and attractive. Importantly, this will only
affect larger businesses as it has been confirmed that this rate of tax will only change for
businesses with a turnover of €750 million and above.

Germany
One of the most significant policies upheld in Germany in recent years is that of “retaining
their various supportive fiscal policies until there is clear evidence of a sustained recovery
while also using the fiscal space to lift potential growth over the medium term” (IMF 2020).
In a very strategic manner to ensure stability of the economy, Germany has extended a
number of their various measures which were originally introduced in 2020 and intended to
combat COVID-19 to 2021 and beyond as is necessary. These include various grants, the
extension of their short term work subsidy.

To further stimulate consumer demand in the next few years, the government in Germany
will boost disposable income by maintaining reduced VAT rates, and providing an extra
payment of €150 for every child that is eligible to receive child benefit. Along with this, a
one-time child bonus of €300 was paid in 2020 and tax relief for single parents was increased
significantly from €1,908 to €4,008 (German Stability Programme 2021).

The Future-proof Hospitals Act has also been enacted by the German government to provide
hospitals with an additional €3 Billion in funding to invest in IT security and improve digital
technology.

Brazil
As a longer term policy, Brazil have committed to “enhance outcomes and equity in
education and professional training” (OECD 2021). Brazil believe that this will be the key to
lower poverty and inequality amongst its citizens. Although access to education in Brazil has
improved in recent decades the standard of higher education still varies massively amongst
different schools and areas.

In order to increase competition and regulation across Brazil, Brazil signed major trade
agreements with both the European Union and a number of EFTA (European Free Trade
Association) countries, which includes Switzerland and Liechtenstein. These Agreements
will provide valuable links as Brazil seeks to develop healthcare, infrastructure and high
level technology.

Brazil has made huge advances when it comes to structural and fiscal reforms in recent years.
In 2019 they passed a new policy to reform pensions in the country and have committed to
further reform social protection benefits for the citizens of the country who need it the most.
Similarly, in 2020 Brazil completed their reformation of financing for basic education
(OECD 2021) which will bolster levels of education and attract more multinational
companies to invest directly in Brazil.

2)
Ireland
As can already be seen in the statistics of recent years and is evident in figure 6, Ireland has
had a steady rise in the rates of the total population with a third level education, rising from
42% to 45% from 2017 to 2020. Not only is this a strong performance on its own, it is clear
that while the EU22 average has stayed the same, the UK has suffered a decline from 58% to
55% in recent years.

However when it comes to Ireland the recent educational and fiscal policies introduced have
been extremely successful in not only maintaining but boosting our numbers of citizens with
a third level education. These positive effects will only increase further in the coming years
as the SOLAS Recovery program is implemented fully.

While international tax reform has not entirely came into effect in Ireland as of yet, we can
project what the result of this will be. Importantly, small business in Ireland will not suffer
from this whatsoever and it will only be large companies with a large turnover (€750 million
and above) and this will serve the increase the amount of money held by the Irish
government to further improve education, infrastructure and other areas.

Figure 6:
% of citizens with a third level education 2017-2020 Ireland, UK and EU22
Country average
Table 6 shows third level education data sets (which is measured as % per total population)
for all three countries from 2017 to 2020, obtained from CSO 2020. Figure 6 shows
education data , based on Table 6.

% of citizens with a third level education

70%

60%

50%

40%

30%

20%

10%

0%
2017 2018 2019 2020

Ireland UK EU22 Average

Table 6
Year Ireland UK EU22 Average
2017 42% 54% 40%
2018 42% 58% 40%
2019 43% 56% 44%
2020 45% 55% 40%

Germany

One of Germany’s most prominent recent policies was that of “retaining their various
supportive fiscal policies until there is clear evidence of a sustained recovery while also
using the fiscal space to lift potential growth over the medium term” (IMF 2020). For the
German people this has been excellent, with a wide variety of different supports for all
people but focusing extra expenditure on the people who need it the most. It was extremely
well received and has placed a large amount of favour on the government from the German
people.

Figure 7:
Consumer Spending 2017-2020 Germany, Ireland and Russia consumer
spending averages per capita
Data shown in table 7 are actual consumer spending data sets (which is represented as €per
capita) for all three countries from 2017 to 2020. This data was obtained from Macrotrends
2021. Figure 7 shows consumer spending data represented as line graphs, based on Table 7.

Consumer Spending (€ per capita)

30,000

25,000

20,000

15,000

10,000

5,000

0
2017 2018 2019 2020

Germany Ireland Russia

Table 7
Year Germany Ireland Russia
2017 25,193 24,365 6,023
2018 25,501 24,692 6,278
2019 25,841 25,132 6,478
2020 24,229 22,582 5,936

From figure 7 above, it is evident that while each country suffered a drop in consumer
spending in recent years, Germany has had the lowest decrease with a decrease of -6.07% in
2020 whereas Ireland had a decrease of -9.05% and Russia had a decrease of -8.53% in the
same time period. While this is not ideal for Germany, it shows how much of strong
performance was caused by their recent fiscal policies in comparison to Ireland and Russia,
who are generally strong economies as well.

Brazil
In contrast to Ireland and Germany having relatively successfully macroeconomic policies
introduced recently, Brazil has not. Their commitment to further social welfare and social
protection reform has been dead in the water since it was promised. There has also been no
real progress made in terms of their education reforms.

On the other hand, their recent trade agreements with both the European Union and the
EFTA have proved lucrative as the evidence of this significant new knowledge base is talked
about widely by members of congress in Brazil and I believe that this will only improve their
economic state.

In terms of foreign direct investment, there is no evidence of any significant extra

investment of capital in recent years despite the advocation from the Brazilian public to
focus on this. Overall, Brazil has had the least significant policies of all three countries and
while there has been some limited success in some areas, there is a lack of stable, reliable
investment into the country from either foreign or domestic sources.

3)

Ireland

For Ireland, I believe a change to the SOLAS recovery program which would see the efforts
focused more into poorer areas of the country would be an improvement as at the minute
they are struggling to find allocations for the grant in certain areas. Without a doubt using
data from someone such as the Central Statistics office would help the government to see
where the capital is needed most.

Similarly, some more information around their NRRP policies to help people who are
returning to work would be greatly appreciated by the general public and would act to make
the implementation much more efficient as it is hard to support something when there is a
lack of clarity.

Germany

Germany have introduced some excellent policies in recent years and this is evidenced by
the fact that there are very few obvious recommendations to be made. However, one
change that I believe would be successful is to fast track the Future proof hospitals act so as
to pre-empt the possible need for infrastructural development should the Omicron variant
of coronavirus strike in Germany.

The German government may also do well to take another look at the temporarily reduced
VAT rates as these have seen limited success and have not been proven to be a strong
enough incentive as of yet.

Brazil
For Brazil I believe that to improve the success of their policies they need to turn to other
countries for advice on guidance. Historically, this has never been the most widely done
thing but with representatives of the European Union and members of the EFTA already
involved in trade agreements with Brazil this may prove beneficial.

As Brazil have always focused on primary economic activities. The production of cotton,
sugar and steel makes up a large amount of their economy, trying to find links into these
areas in Europe would allow additional exports of these products. Through doing so,
infrastructural developments would in turn be implemented across the country to enhance
productivity in these sectors.

Bibliography

Macrotrends. 2021. Inflation Rate Data- [ONLINE] Available at:

https://www.macrotrends.net/countries/DEU/germany/inflation-rate-cpi. [Accessed 6
December 2021].

Macrotrends. 2021. Unemployment Rate Data. [ONLINE] Available at:

https://www.macrotrends.net/countries/IRL/ireland/unemployment-rate. [Accessed 6
December 2021].

Macrotrends. 2021. GDP Data. [ONLINE] Available at:

https://www.macrotrends.net/countries/BRA/brazil/gdp-per-capita. [Accessed 6 December
2021].
Macrotrends. 2021. Foreign Direct Investment Data. [ONLINE] Available at:
https://www.macrotrends.net/countries/IRL/ireland/foreign-direct-investment. [Accessed 6
December 2021].

Macrotrends. 2021. Healthcare Spend Data. [ONLINE] Available at:

https://www.macrotrends.net/countries/DEU/germany/healthcare-spending. [Accessed 6
December 2021].

Enterprise.gov. 2020. Ireland Government R&D Budget. [ONLINE] Available at:

https://enterprise.gov.ie/en/Publications/Publication-files/The-R-D-Budget-2019-2020.pdf.
[Accessed 7 December 2021].

World Bank. 2021. Research and development expenditure- Germany. [ONLINE] Available
at: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=DE. [Accessed 7
December 2021].

International Monetary Fund. 2021. German Economic Policy. [ONLINE] Available at:
https://www.imf.org/en/News/Articles/2021/07/13/na071521-beyond-the-pandemic-five-
charts-on-germanys-economic-recovery-plan. [Accessed 7 December 2021].

OECD. 2021. Brazilian Economic Policy Reforms. [ONLINE] Available at:

https://www.oecd.org/economy/growth/Brazil-country-note-going-for-growth-2021.pdf.
[Accessed 7 December 2021].

OECD. 2021. Brazilian Economic Policy Reforms. [ONLINE] Available at:

https://www.oecd.org/economy/growth/Brazil-country-note-going-for-growth-2021.pdf.
[Accessed 7 December 2021].

Central Statistics Office. 2020. Educational Attainment Thematic Report. [ONLINE] Available
at:
https://www.cso.ie/en/releasesandpublications/er/eda/
educationalattainmentthematicreport2019/. [Accessed 8 December 2021].

Macrotrends. 2021. Russia Consumer Spending. [ONLINE] Available at:

https://www.macrotrends.net/countries/RUS/russia/consumer-spending. [Accessed 8
December 2021].