Economical overview
The economy underwent a rapid transformation
after the crisis year of the 1980s. With the help of
foreign investment, the country built up a strong
high-tech industry. At the same time, tourism and the
service sector grew, while previously important
agriculture lost importance. In 2007, Ireland had the
second highest gross domestic product (GDP) per
inhabitant of the EU, but a year later the economy began
to deteriorate and Ireland was forced in 2010 to take
large crisis loans (see Modern History and Foreign
Policy and Defense). Since then, the economy has started
to grow again at a rapid pace.
The services sector now accounts for almost
two-thirds of GDP. Despite the crisis, Dublin has been
able to maintain its role as a hub for financial
transactions. Multinational companies such as IBM and
Microsoft have long had their Europe base in Ireland,
but in recent years Google, Facebook, Twitter, Airbnb
and a host of other US companies, not least in the
pharmaceutical industry, have their headquarters for
Europe, Africa and the Middle East in Ireland.. Aircraft
leasing is another growing niche. In 2015, there were
over 700 US companies that had about 130,000 employees
in Ireland at that time.
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Countryaah.com:
Major imports by Ireland, covering a full list of top products imported by the country and trade value for each product category.
In the 1990s, Ireland began to be called the Celtic
Tiger, an allusion to high-growth Asian "tiger
economies". Up to 2000, it was mainly increased
industrial exports that boosted the economy, and then it
was domestic consumption that made the wheels spin.
Low corporate taxes (12.5 percent), economic
deregulation and good access to educated, and English
speaking, labor contributed to the success. The benefits
that Ireland received through EC / EU membership also
played an important role. The opportunity to gain a
foothold in the EU's common market caused the US and to
some extent the Japanese large companies to move to
Ireland. The Irish themselves have gladly pointed out
that also domestic entrepreneurs, such as Michael
O'Leary who created the low cost airline Ryanair, have
played an important role.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including IRL which represents the country of Ireland.
Another factor was the social contracts concluded by
the government with employers and trade unions from
1987. The government lowered the income tax in exchange
for the employees accepting moderate wage increases and
having a certain influence on economic policy. This
created a stable labor market with few strikes, which,
together with increased productivity, strengthened the
country's competitiveness. The government was able to
pay off the central government debt, which in 2005
corresponded to 27 percent of GDP.
Economic crisis
From 2006 there were signs that the air was running
out of economy. The shortage of labor led to wage
increases which reduced the competitiveness of the
industry. Property prices fell after rising at record
speed for many years. Weaker economic conditions in the
US and the UK meant that exports declined. From the
second half of 2008, the economy deteriorated
drastically.
When the government promised to guarantee all funds
deposited in six Irish banks and financial institutions,
the aim was to create market stability, but the banks
had hidden how big the problems actually were. The large
sums borrowed by the Irish state to save the banks came
to burden the state budget. In January 2009, the state
took over the crisis bank Anglo Irish Bank and later
three more banks were nationalized in order not to
overturn. A new authority, Nama, was created so that the
state could take over bad property loans from the banks.
Despite all cuts, Ireland broke the eurozone rule
that the budget deficit should not exceed 3 percent of
GDP. In 2009 it was over 14 percent. The following year,
it was almost as large and, taking into account the
costs of the banking crisis, it corresponded to almost a
third of GDP. In 2008-2010, GDP fell on average by just
over 4 percent a year, while the multinational IT
companies continued to perform well.
At the end of 2010, Ireland was forced to apply for a
€ 85 billion crisis loan. The money came from the EU,
the IMF, the UK, Sweden and Denmark, but to get the
loans Ireland needs to tighten its finances further and
raise taxes. Ireland also has to contribute over € 17
billion, money to be raised from state reserves and the
National Pension Fund.
The economy is growing again
From 2013, the economy began to grow again. From the
end of that year, Ireland was able to borrow money in
the open market at a lower interest rate. The budget
deficit was gradually reduced to more manageable levels,
and at a faster rate than the so-called troika had
demanded. Ireland benefited from low oil prices as well
as exports becoming cheaper when the euro lost value
against other currencies.
The ability of multinational companies to establish
themselves in Ireland to avoid paying taxes brought bad
blood both in other EU countries and in the US, where
corporate taxes were higher. The Irish government
promised in 2014 to close the loophole in tax
legislation that is usually called Double Irish and
means that multinational companies can transfer income
from other EU countries to the low-tax country of
Ireland, and then legally divert a large portion of the
profits to a tax haven. The new rules apply from 2015
and cover all new companies that established themselves
in the country, while those already in Ireland were
given a five-year deadline.
The EU Commission's demand that Apple 2016 pay large
sums to the Irish government in the absence of tax also
put pressure on the government (the entire sum, just
over EUR 13 billion plus a little over EUR 1 billion in
interest had been paid up to September 2018 and was
committed to a special account pending Ireland's appeal
against the decision). At the same time, the low-tax
policy attracted new foreign major companies to Ireland.
A number of companies moved their head offices and
patents to the country after buying up or merging with
smaller Irish registered companies. At the same time,
the rules had been amended to include investments in GDP
statistics. This meant that the profits that these
companies made in other parts of the world are now
included in Ireland's GDP, although the companies did
not have very large operations there. The share capital
in the country rose from 700 billion in 2014 to 1,000
billion a year later. Exports also increased sharply,
even though a large part of the goods included had not
even crossed Ireland.
The Irish statistical authority CSO therefore had to
adjust the growth figure for 2015, from an estimated
just under 8 percent to 26 percent. The new figures
meant that government debt fell to just under 80 per
cent in 2015, instead of the 94 percent calculated by
the government. This also meant that the budget deficit
was below 2 percent of GDP. At the same time, Central
Bank Governor Patrick Honohan, among others, pointed out
that this hardly gave a correct picture of the Irish
economy. A more reliable measure was that employment had
risen by 2-3 percent, and domestic consumption had
risen by 4.5 percent. Ireland continued to grow
strongly for the following three years, although it was
warned that the figures for 2017 were also considered to
be inflated (see Calendar).
The election of Donald Trump as US President in
November 2016 created a major cloud of concern for the
Irish economy. During the election campaign, Trump had
promised, among other things, to reduce the corporate
tax rate to 15 percent and to ensure that American
companies move their business home to the United States.
FACTS - FINANCE
GDP per person
US $ 78,806 (2018)
Total GDP
US $ 382 487 M (2018)
GDP growth
8.2 percent (2018)
Agriculture's share of GDP
0.9 percent (2018)
Manufacturing industry's share of GDP
32.4 percent (2018)
The service sector's share of GDP
55.8 percent (2018)
Inflation
1.2 percent (2019)
Government debt's share of GDP
63.7 percent (2018)
Currency
euro 1
Merchandise exports
US $ 255,252 million (2018)
Imports
US $ 121,717 million (2018)
Current account
US $ 40,901 million (2018)
Commodity trade's share of GDP
71 percent (2018)
Main export goods
chemicals, pharmaceuticals, computers, software and
transport equipment
Largest trading partner
USA, UK, Belgium, Germany, Netherlands and other EU
countries
- 1 euro = 100 cents
2008
September
The government intervenes to save banks
The Irish banks face major problems and their stock prices fall rapidly. The
government intervenes and issues guarantees to replace debts and deposits in six
banks. Large sums are deposited into the banking system, but it later turns out
that the banks have withheld important information.
June
Voters vote no to the Lisbon Treaty
June 12
Ireland referendum as the only EU country on the Lisbon Treaty (see Modern
History). Just over 53 percent of the Irish vote no. According to some
analysts, the result is because many voters have relied on the power language
used by the domestic political establishment and leading EU representatives to
persuade the Irish to approve the treaty. Many also vote against concerns that
too much power should be concentrated in Brussels, that the EU should be able to
demand that abortion be legal in Ireland and that its neutrality may be
threatened. The fact that the treaty text is so elaborately worded is also
considered to have been recorded. From a number of points it is emphasized that
a majority of Irish people are still positive about EU co-operation in general.
May
Ahern leaves
Bertie Ahern resigns as prime minister and party leader due to controversy
surrounding his private economy (see Modern History). One reason for his
departure is that the leadership of his party, Fianna Fáil, is worried that the
referendum on the EU's Lisbon Treaty will be affected by Ahern's business.
Finance Minister Brian Cowen takes over as party leader and prime minister.
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