Ireland

Ireland’s economic growth

Marta Pacilli and Abdulaziz Saleh F Saad

GBSB Global Business School Madrid
 
Economic overview of Ireland
 
Ireland is one of the countries with the greatest economic development in Europe. Having joined the
European Union in 1973 and having joined the Euro in 2002, Ireland has an economic model that is
almost an example for other countries. 
Within a few decades, Ireland has become the world's leading exporter of software and there are
many foreign multinationals that have their headquarters on the island thanks to the low tax costs
and the good degrees of specialization and professionalism of Irish workers. World leading
companies such as IBM, Dell, Intel, Apple have their offices in Ireland. 
In addition, economic and social policies have been in place for some decades aimed at equitable
distribution of the tax burden among citizens based on income brackets; this efficient system
therefore creates a balanced and serene social climate that facilitates development, allows for a
good quality of life and an economy oriented towards increasing consumption with general growth
above the European average and an average individual income which is steady increase. 
 
Ireland GDP and income per capita over the years
 
The Gross Domestic Product (GDP) represents "the final result of the production of goods and
services of the resident production units". It is the most important indicator used to measure a
country's level of economic well-being. Furthermore, the per capita GDP is also significant, which
measures the level of economic well-being of individuals residing in the territory of the state. 

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The graph above shows the Irish GDP values from 2005 to more recent times (2020). The same
shows the continuous variations in GDP over time. 
It is important to underline that the Irish financial crisis began in 2008, as we can see in the graph.
Since 1994, Ireland has gone through a period of strong economic expansion, mainly due to low
corporate taxes and low interest rates charged by the European Central Bank. Between the end of
the nineties and the beginning of the 2000s, the real estate sector underwent a tremendous
expansion, thanks to government incentives and few regulations. In essence, a real estate bubble
developed whose imminent collapse was there for all to see. Meanwhile, the real estate properties
built had exceeded market demand, prices had begun to fall and there were tens of thousands of
uninhabited homes. 
With the 2008 financial crisis, the bubble burst. The Irish banks had financed the real estate
operations by excessive debt on foreign markets, and they no longer found anyone willing to
finance them. House prices returned to the levels of ten years earlier, and an entire sector that had
hitherto driven a key chunk of the Irish economy imploded: the country went into recession. 
The solution found by the Irish government at the time meant that bank debt became government
debt, which went from 25% of GDP pre-crisis to 108% of GDP in 2012. Due to this situation, at the
end of the year. 2010 Ireland asked for help from the European Union and the International
Monetary Fund. 
In December 2013, Ireland was the first country to exit the aid plan, ensuring it could go back to
relying on its economy to finance its public spending. With the economic recovery, house prices
began to rise again. 
With the economic recovery, house prices began to rise again, but in the meantime the housing
situation had changed: the housing crisis had reduced the percentage of households owning a home
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from over 80% to less than 70%. The number of families willing to rent their own home, however,
doubled to 20%. 
Ireland's economy grew by 7.8% in 2015, accelerating to as much as 9% in the last quarter of the
year. For the second consecutive year (it had grown 7% in 2014), it was the strongest recovery in
Europe, surpassing even China and India. GDP had not grown at a similar rate since the 1990s,
when it hit 10% annually and the island was nicknamed the Celtic Tiger, by analogy with the
"Asian tigers", the emerging countries of the Far East. The Irish Tiger, therefore, was roaring
again. 
With the arrival of the Covid-19 pandemic in 2020, we observe that this does not stop the growth of
the country. Ireland was in fact the only country in the European Union to close 2020 with a
growing GDP (+ 3%), the only exception in the long list of minus signs published by Palazzo
Berlaymont. The annus horribilis of the pandemic therefore failed to stop Irish growth, which in the
previous three years has always recorded rates well above 5%. 
The island's success is supported by exports from multinational companies specializing in medical
equipment, pharmaceuticals and IT services. 
 
The statistic then shows gross domestic product (GDP) per capita in Ireland from 2005 to 2020.
Gross Domestic Product (GDP) per capita shows a country's GDP divided by its total population. In
2020, the GDP per capita in Ireland amounted to around 85,205.5 U.S. dollars. The main reason for
the particularly high Irish GDP growth rates lies in the fact that in recent years, attracted in large
part by low corporation tax rates, a number of large multinational corporations have relocated their
economic activities, and more specifically their underlying intellectual property, to Ireland. 

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 Personal consumption

Personal consumption constitutes about 25% of the GDP in Ireland, with an amount of 33.745 USD
bn in September 2021.
Personal consumption in Ireland increased until 2008, reaching 96,282 million euros, and then it
went down in the following year to 91546 million euros due to the repercussions of the global
financial crisis, and then went back to the year 2019 and reached the top of 111,054 million euros,
which is the highest in the country’s history. The following year it decreased to 99,504 million
euros because of people's fears of the Coronavirus. 

Private investment

Ireland has always been distinguished in private investment, and over the years, investment
opportunities are increasing in it due to the presence of a conducive environment and a high rate of
growth compared to the rest of the neighboring countries.
Ireland is the preferred place for foreign investors who want to expand in Europe. Due to the
favorable environment for foreign investment, there are more than a thousand multinational
companies headquartered in Ireland.
Ireland has the lowest corporate tax rate in Europe at 12.5%, making it the preferred country for
most foreign entrepreneurs.
The Irish government provides various assistance to private investment, which contributes to raising
the GDP in the long run. 

Government expenditure
 
We cite that the year 2021 is the year in which most spending was spent in Ireland during the last
ten years with €98.6 billion, especially with the health fluctuations due to covid-19, public schools
and universities have been closed, the closure of some businesses, and government spending for
workers unable to work due to health precautions. 
We cite that the year 2021 is the year in which most spending was spent in Ireland during the last
ten years with €98.6 billion, especially with the health fluctuations due to Covid-19; public schools,
universities and some businesses have been closed, and government spent lot of money for workers
unable to work due to health precautions. In 2020, 23.3 billion euros were spent on social

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protection, which is the highest percentage of government expenditure this year. Next comes
education, with €22.12 billion.
Compared to 2013, it was the lowest year in which government expenditures were made. In that
year, a total expenditure of 67.5 billion was spent. 20.25 billion was spent on social protection and
14.09 billion on health in 2013.  

Net exports (trade)

 
Ireland is ranked 3 in net goods exports after China and Germany with a net export of 129,700
million USD, 2017 est. 
The main products exported from Ireland are nitrogen compounds, which make up 20% of the
country's total exports. In second place we find packaged medicines, which represent 15% of total
exports, in consideration of the development of the pharmaceutical industry in recent years.
52% of Ireland exports go to Europe and 34% to the Americas. Ireland exported to The United
States alone $56.97B in 2020. 
Ireland managed to become the world's largest Nitrogen Heterocyclic Compounds exporter in
2017. 
 
Productivity

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Ireland focuses on productivity from multinational, which results in higher productivity compared
to other countries and it is constantly increasing in productivity. The productivity increase in Ireland
in the last ten years is about nearly 80%.
In 2012, the productivity rate was 80 points, and it increased over the years to 2021 and reached 140
points.
According to the Irish Times, the Irish worker is the most productive in the world if it is linked to
the GDP. An average of each worker adds approximately 92.4 euros per hour to the economy, and
this figure is the highest compared to the rest of the world. 

Comparison with Denmark

In 2005, Ireland's GDP was $211,798 billion, which is less than Denmark's, with a GDP of
$264,467 billion. Over the years, the two countries continued to rise in GDP, and Ireland was
affected in 2008 due to the repercussions of the global crisis more than Denmark.

In 2015, there was a significant decrease in the GDP of Denmark, which led to a shrink in the
difference between the two countries, and two years later, in 2017, the GDP of Ireland became
higher than Denmark and continued to rise in successive years, and in 2020 it became $425,889
compared to In Denmark $356,085

Ireland's per capita GDP is $73,200, which is higher than Denmark's $50,100 as 2017. 
 
Conclusions
 
The GDP data point that is produced annually help economists to predict and compare the economy
of a country, and It is mandatory to issue current macroeconomic statistics reports, including GDP
and GNP in accordance with international agreements issued.
Surveying and following up on the GDP is an important matter for any country because it helps to
know the country’s economy and its development over the past years also helping to visualize the
future.
From what was previously mentioned, we note that Ireland has a high growth rate, a strong
investment environment, and experiences of successful multinational companies. 

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