How has the Irish economy changed over the last decade?

ireland-economy

During the years of economic crisis (2008-2013), Ireland was hit by a deep financial crisis and the country went into recession for the first time since the 1980s, recording a GDP of -5%. As a result, many businesses closed, unemployment rose and many people expressed their unease with protests in the streets of Dublin. 

Ireland was the first country in the euro zone to go into recession and the second, after Greece, to ask for the bailout. But the government decided to put an end to this situation and took a series of drastic measures very unpopular but truly efficient:

  • Strong internal devaluation, with lower prices and costs.
  • Higher taxes (except VAT for those sectors that generated more employment).
  • Reduced pensions and social cuts.
  • Sale of public assets.

However, Ireland has something that attracts large companies from all over the world and makes them establish their tax headquarters there: it has the lowest corporate taxes in the world (12.5%). As a result, GDP is growing by leaps and bounds, but it remains a real mystery how it was able to record a GDP growth rate of 26.3% in 2015.

This is a record figure which, according to analysts and economists, came about as a result of the operations of large transnational companies that are merged with companies domiciled in Ireland to benefit from the low corporate tax.

According to U.S. Chamber of Commerce figures, there are about 700 U.S. companies operating in Ireland, including Intel, Dell, Google, Hewlett Packard, Facebook, Apple, Johnson and Johnson and Pfizer.

The best way to justify the large increase in GDP is to compare it to the Gross National Product (GNP), because GNP does not bear the profits of foreign companies in mind. This is where the difference is seen, because in 2015 GNP had increased by 18.7% (almost 8 points below GDP).

The most notable advantage of the increase in GDP is the reduction in the country’s fiscal deficit and debt (calculated as a % of GDP). However, it also brings some problems such as the increase in contributions to the EU budget which are also determined by GDP.

Whatever the reason, the truth is that Ireland’s economy is booming and, according to the Human Development Index (HDI) produced by the United Nations Development Programme, Irish people are among those with the best quality of life. In addition, the unemployment rate recorded in August 2019 was 5.2%, with only 0.3% difference between men and women.

 

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