Ireland in the last decade has transformed from one of Europe’s poorer countries to one of its wealthiest. Ireland’s economic boom began in mid 1990 and lasted up to the global economic downturn of 2001. During this period, the economy grew at an impressive rate of between 6 and 11% hence earning itself the term Celtic Tiger (MacSharry, 2000). However with the global financial meltdown of 2001, the economic growth slowed down and grew at a rate of 2% between 2001 and 2002. In the period between 2003 and 2006, the economy made a come back and recorded an annual average growth rate of 4.5%. In 2008, the economy for the first time since 1983 recorded a negative growth of -0.7%.
Economists have attributed Ireland’s economic growth to several factors. The favorable corporate taxation rate of between 10-12.5% has encouraged both local and international investors to put their money in the Irish economy. The European Union has also been generous with financial aid which the government has used to enhance the infrastructure and invest more in education. The government’s efforts in attracting foreign direct investment has paid off with large multinational companies such as Microsoft, Dell and Google establishing operations in Ireland. In fact, 93% of Ireland’s exports are attributed to foreign investors. The government has also established various bodies which provide advisory services in addition to providing capital to companies in Ireland (Dorgan S, 2006). These among other measures have set the economy on a path of growth and stability over the years.
However, with the significant reverse in the growth of the economy in 2008 questions are being raised about the viability of the Celtic Tiger. The government has largely blamed this on the global financial crisis. Ireland over the years has established close economic ties with the U.S. and therefore the financial crisis in the United States has had far reaching effects on the Irish economy. However, in other circles, the slow down of the economy is being blamed entirely on the government.
Economists believe that the government’s inability to curb the rate of inflation as well as the interest rates has contributed to the collapse of the property markets. The government has also allowed the laissez faire operation of the money markets and has mainly relied on the European Currency Board-ECB for its monetary policies (Dorgan S, 2006). The government has been accused of not enforcing sufficient regulatory measures in the financial sector. This has led to the eventual collapse of key financial institutions including the Anglo Irish Bank. The government is faced with a great challenge of reviving the economy and investor confidence. It must therefore act promptly failure to which the gains made in yesteryears will all go down the drain.
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Powell B. Markets Created a Pot of Gold in Ireland. 2003. Retrieved February 14, 2009 from http://www.cato.org
Independent.ie. Low-tax policies created the Tiger. 2004. Retrieved February 14, 2009 from http://www.independent.ie
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