Republic Of Ireland'S Economy Over The Past Three Years

Introduction				Presently, the levels are still near that figure but
The Republic of Ireland's economy has been				have increased slightly to about four point five
synonymous to a rollercoaster ride over the past				percentage. The reason for this slight increase in
decade. In the 1980s Ireland was known as one				percentages could be because of the accession of
of the poorest countries in Europe. However, In				some Eastern European countries into the Ireland
the 90s until 2001, the economy rapidly gained				economy. Initially, this was something beneficial to
mileage and became one of the most successful				the country because there were many
economies. At that time, it experienced an				employment gaps. (O'Hearn, 2007)
economic boom called the ‘Celtic Tiger'. Most				However, with time, some of these immigrants
people claim that this was brought about by their				have dominated certain industries such as
free markets through corporate taxation, EU				construction and manufacturing sectors where
membership, restraint in government spending,				there is a greet need for unskilled labour.
low cost labour markets and investments in higher				Consequently, natives have been left out of these
education. However, this economic boom started				arrangements. Those who had specialised in those
slowing down in 2001, two years later it resumed				areas dominated by immigrants are not left with
and then in 2006 it slowed down again. Efforts in				other alternatives. Eventually the overall effect
this essay will be directed towards the post				has manifested itself in the increased
‘Celtic tiger' years. (O'Kane, 2007)				unemployment rates. Another factor that could
Success of Ireland's government in running the				have caused greater levels of unemployment
economy over the past three years				between 2007 and 2008 could be the fcat that
Economic growth				there has been decreased foreign direct
Between the years 2005 and 2006, the				Investment. A long term, partner like the United
government was successful in maintaining				States is now looking at other viable markets
economic growth. However, after 2006 to 2008,				within the European Union. This situation is made
there was a reduction in the economy and there				worse by the fact that there are no working
are numerous factors that caused these increase				permits imposed on the new immigrant workers.
and reduction. Between 2005 and 2006, the				On top of that, the government of Ireland gives
economy hade resurgence because the				very generous amounts of unemployment
government dealt with some of the problems the				benefits. In the year 2007, unemployment
country had encountered before and this was				benefits were 181.80 Euros while the ones
aided by some external factors. At that time,				offered in the United Kingdom are seventy one
(2005-2006), the rate of economic growth in				euros. Consequently, those who are unemployed
Ireland was over four percent while other				may not feel obliged to seek jobs since they are
countries such as France, Germany and Italy in				already covered by their system. The
the European Union had economic growth rates of				government of Ireland also spends substantial
between one percent and three percent. Ireland				amounts on the payment of rent supplements for
had been struggling with Foot and Mouth Disease				their citizens on welfare. This means that much
at a certain point but this was dealt with				still has to be done to increase the morale for job
accordingly and by 2005 and 2006, the problem				seeking within this country. Besides these,
had been eradicated thus boosting sales in the				inequality levels within Ireland have increased from
primary sector. (Clinch et al, 2008)				2007 to 2008; consequently, unemployment levels
Another factor that contributed to this economic				will also be affected by those inequalities.
growth in the first year under analysis could be				There were also imbalances in the construction
because of increases in property values.				sector with the government concentrating more
Consequently, there was greater employment in				in that industry than in others. It has led to
the construction sector. But other external				greater output than demand in the past two
factors also contributed to the high economic				years. This means that most of the labour
growth rate. Information technology was affected				demand in that industry has also gone down.
by the global recovery since previously there had				Consequently, there is a need for placement of
been some decreases in technological demand				the excess labour into another sector. Since this
after the bursting of the technology bubble.				has not been done yet, there are still high cases
Ireland is responsible for a quarter of the				of unemployment compared to some of the
personalised computers manufactured in Europe. It				years in the Celtic Tiger period.
also produces Apple, IBM, and HP makes.				Balance of payment
Therefore technology is a crucial factor in Ireland's				This is representation of Ireland's Balance of
economy. Ireland was a strong economic partner				payments as indicated by the International
to the United States; therefore any factors				Monetary Fund in the year 2007
affecting its partnmers were likely to trickle down				Balance of Payment in Ireland
to the country. Four years ago, the US had				Current Account -1,043
experienced the September eleven attacks, but				Balance on goods 30,003
by 2005, this had reversed and led to US'				Balance on services -14,659
economic recovery.				Balance on income -16,865
The government also encouraged further				Current transfers 477
investments in industry, science and technology				Capital Account 598
between 2005 and 2006. This was seen by the				Financial Account 37
numerous international firms that have set up				Direct investment abroad -5,405
branches in Ireland. One such company is Google;				Direct investment in Ireland 9,865
others are Intel, Abbott Laboratories and Bell				Portfolio investment assets -108,535
Labs. In line with these developments, the Ireland				Portfolio investment liabilities 91,128
government decide to establish a body known as				Other investment assets -12,101
Science Foundation Ireland which was formed to				Other investment liabilities 25,033
assist science bodies in the Republic. The				Net Errors and Omissions 803
government had created an SSIA savings				Reserves and Related Items -395
scheme and funds had matured. Consumers had				Source; Encyclopedia of the nations; retrieved
been cushioned in their expenditure and this				from; Ireland Balance of Payments accessed on
boosted growth in the retail sector. (CIA, 2006)				22April 2008
But in the years 2006 and 2008, there has been				As it can be seen from the table above the
resurgence in economic growth. This could be as				amount of exports are not in surplus as they
a result of a recession in property values.				were in the Celtic Tiger years. Also, imports have
Because of availability of labour and growing				been high in the country and this could be the
demand for homes after the Celtic Tiger years,				reason why the balance of payment has reached
the Republic started building homes aggressively.				that amount. The reason for this is that most
By 2006, homes had reached 90, 000 which is				people in the Republic of Ireland increased their
almost half of what the UK has yet the ratio of				purchasing power. This led to greater demand for
populations between the UK and Ireland is 15:1.				luxury goods and services. But because Ireland
This means that by 2007 and 2008, there were				does not focus on most of these luxury goods
excess homes compared to the demand. Rent				and services, it had to import them. Therefore
declined and there was less income coming from				imports exceeded exports thus leading to higher
that sector. Another factor that led to this				balance of payments in 2007 than in the previous
decrease in economic growth was the expansion				year.
of the European Union. During 2007, Romania and				Within the same year, it was also reported that
Bulgaria entered the EU yet just three years ago,				the levels of exports were slightly higher than
some ten Eastern European countries entered the				they were in other years. This is indicative of the
union. Consequently, there was increased				fact that their trading partners were abit
competition in the Union. All these countries had				receptive. In the year 2004, the global economy
access to the same export markets that Ireland				was undergoing recession, however, two years
was trying to tap. That is why the economy did				later, it has improved and this has favoured
not do very well between 2007 and 2008. The				exporting activities for Ireland. Exports are much
economic pressures were felt mostly in the				less now in 2008 than they were in 2006.
industrial sector; there was an influx of immigrant				Demand and supply policies
workers into Ireland's labour market and they				The government has tried in the organisation of
caused saturation in the semi skilled and unskilled				good policies so as to influence demand and
sectors. Problems also arose when business was				supply in the Republic. First of all, it has created
being transferred to some of those new EU				amalgamated science bodies that will help in the
countries such as Poland. An accountancy firm like				innovation sector. This is quite instrumental in the
Phillips outsourced its activities to Poland and this				coordination of innovative services offered by the
denied the Irish a chance of harnessing hundreds				nation. On top of that, there is a need for greater
of jobs offered by the Company. From 2006 all				levels of government control in innovation
the way to 2008, there have been decreases in				endeavours rather than leaving the various
Foreign Direct Investment and the government				competitors to be influenced by market forces.
should do something to reverse this trend. (Burke,				Through the formation of Science Foundation
2008)				Ireland, the country has dealt with the demand
Some other external factors could also have				for greater productivity. (Peadar, 2008)
caused this decrease. For example, the country is				Demand in the labour market has also been met
a heavy dependent of foreign energy. It has				adequately through the introduction of a new
exhausted its own domestic supply of				green card policy. The purpose of this policy is to
hydroelectricity and peat for energy.				fill in the gaps that are currently present in the
Consequently, it is subject to the global market				skilled-workers sector. Most of the immigrant who
forces such as global warming and lack of				entered Ireland helped the country deal with its
security in the supply side. There is also a need				semiskilled areas but the skilled area had some
for the country's government to come up with a				gaps. The green card was designed for
strategy for producing their own energy suppliers.				non-European Union workers who may be highly
One particularly promising area is wind power;				qualified/ have high skills and who are interested in
already five percent of the country's domestic				working in Ireland. They are not subjected to
supply is covered by this form of energy.				similar waiting periods as other immigrants and this
The government is also spending substantial				has helped boost the labour market specifically in
amounts of its revenue on unemployment				terms of skills.
benefits. Ireland is reputed as the country with				The government has not given surpluses to the
the highest rates of jobseeker allowances. It pays				housing sector consequently; most of the housing
three times as much income to those jobseekers				prices have gone down over the past three
in comparison to other the United Kingdom and				years. This is part of the government's
other countries in the EU. Besides this, there are				demand-supply policy that should be improved. In
numerous gaps between the poor and rich in the				line with this, the government has not boosted a
Republic of Ireland. Wealth distribution needs to be				lot of competition in its markets. This could be
improved if the country wishes to change these				achieved through improvements in research and
economic decreases. (Feehan, 2007)				education.
Inflation rate in Ireland				Conclusion
By the end of the year 2006, inflation rates were				The Republic of Ireland had a boom before the
found to be four percent and this was an				past three years; it is now beginning to feel the
increase from the amounts found during the				pinch of some of the excesses it made during
previous year by two point five percent.				that boom such as housing and energy supplies.
Consequently, the other years also saw increases				This could be the reason why the economy has
in inflation rates in correspondence to the				not grown as much as it did before 2006. The
relatively low economic growth rate. In Ireland,				government has not been as effective as it was
Inflation is determined by CPI figures where CPI				before in sheltering the country from some of
denotes Consumer Price Index. Before inflation				these economic downturns. (O'Grada, 2006)
rates are determined in Ireland, a National Survey				Reference:
is carried out. This is done in order to determine				O'Kane, Brian (2007): Starting a business in Ireland;
which household items take greater precedence				Oak Tree Publishing
compared to other types. Then those items are				O'Grada, C. (2006): Rocky Road: Irish Economy
classified based on their weight. Afterwards, their				Since Independence - Manchester University Press
CPI is determined depending on what the prices				O'Hearn, D. (2007): The Atlantic Economy: Britain,
of that commodity were during the previous year.				the US and Ireland - Manchester University Press,
This is normally synonymous with wages. If the				2001. ISBN 0-7190-5974-7
wages received are not complementary to the				Burke, E. (2008): Enterprise and the Irish Economy
prices of commodities, then there will be higher				- Oak Tree Press in association with Graduate
chances of buying more commodities.				School of Business, University College Dublin
Consequently, there will be higher inflation if				CIA (2006): Ireland The World Fact book;
money looses purchasing power. This is what has				retrieved from accessed on 22 April 2008
been happening over the past two years due to				Feehan, J. (2007): The Atlas of the Irish Rural
the reasons mentioned above. It should however				Landscape; Cork University Press
be noted that inflation rate has not been that bad				Coleman, M. (2006): House Prices Hang over a
in comparison to what other countries in the				Sloping Hillside; Longman Publishers
European Union have.				Peadar, K. (2008): The Celtic Tiger In Distress:
Unemployment				Growth with Inequality in Ireland; Journal for
Unemployment in Ireland has always been				National University of Ireland
relatively low in this decade. During the years				Clinch, F.
2005 and 2006, the percentage was about 4.3.