Ireland » Introduction

Basic Economic Facts

GDP composition by Sector

Ireland had a struggling economy, for many years. High growth rates (up to 10%) reversed the trends of high unemployment and mass emigration. The key factors behind this boom included multinational investment, low corporate tax rates, a stable relationship between employers and unions (Social Partnership) and a highly educated workforce. The EU Single Market also prompted Ireland to move to a more open and free-market based economy. Although the benefits of the Single Market took some time to become apparent, Ireland now enjoys strong trading links with the rest of the EU.

The economy began to slow in 2001 and GDP growth began to level out between 2.5-5% (still above the EU average). The government cut public spending and also launched the Special Savings Incentive Account (SSIA) in an effort to encourage consumers to save more. For every €4 saved the government topped up the account with an extra €1. These accounts will mature throughout 2006-7. The Irish economy has continued to expand at a steady 3-6% per annum, from 2003 to date. Construction in particular has experienced phenomenal growth in recent years with house prices in parts of Dublin regularly going up by 25% year-on-year. The recent influx of migrant workers has helped provide a ready workforce for the construction sector. It has also boosted the residential property market, as more people need homes.

Ireland’s wage rates are high and rising quicker than the EU average however migrant workers occupying jobs in the construction and services sector have helped to temper this wage growth. Ireland’s overall competitiveness faces other challenges as it updates its infrastructure – particularly in transport and telecommunications. Some concerns have also been expressed about the economy’s reliance upon construction for growth. Throughout 2006/7 there are clear signals that the housing market had begun to slow. It is too early to assess the long-term impact that this might have on the Irish economy.