Main reasons of the “Irish miracle” After decades of poor economic performance, the Irish government adopted major changes in economic policy in 1987. While the about-turn in Ireland’s fiscal policy did not have an immediate impact, the key elements of the “Irish miracle” were in place from the start of the 1990 s and were to strengthen throughout the decade. 1. First, the economic situation was cleaned up. o The policy of fiscal tightening (spending cuts) to reduce the budget deficit o Commitment to stable exchange rate through supporting monetary policy (controlling inflation) 2. Second, government economic growth strategy put accent on encouragement of foreign direct investment through low tax rates and financial and logistical support provided by the Irish Industrial Development Agency (IDA): o an emphasis on an “open” economy (no trade barriers / openness ) o subsidies and tax breaks to attract multinationals (attractive business / investment climate) o strong educational and training programs (skilled, low-cost labour force) o modernized infrastructure from roads and transportation to port facilities o targeted public subsidies to promote favourable industry growth and trade.
3. Third, Ireland benefited from EU membership: o transfers of EU structural funds accelerated development of infrastructures and helped to improve the educational system o joining the common European market also released Ireland from its unilateral dependence on the UK As a result by the end of the 1990 s, Ireland’s real GDP growth rate of almost 10% per year exceeds that of all member nations of the European Union (EU).
The Term Paper on Growth Rate Indonesia Population Year
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Ireland gradually moved from a country characterized by low skills, low pay and low productivity to a high-skill, high-pay and high-productivity country. GDP per head increased strongly throughout the decade and even exceeded the EU average.
Threats and dangers Since the end of 2000, Irish growth has been flat. The downturn in the main partners’ economies caused a significant slowdown in exports. Productive investment has slowed markedly, that rose the issue of sustainability of the “Irish miracle” Sustainability of “Irish miracle” depends on two crucial points: 1. Dependence on foreign investors o The probable evolution of Ireland’s comparative competitiveness (higher life standards-higher labour costs) o Increasingly strained physical infrastructure o Dependence on the foreign economies (concentrated on three countries: the U. S. , Germany and the UK) makes Ireland particularly sensitive to changes in the economic situation in those countries.
Potential dangers include a crisis in the sectors in which Ireland’s economy is specialized, a change in taxation in one or more euro zone countries 2. Diminishing access to EU subsidies 3. Uneven regional and structural growth distribution (persistence of poverty and long-time unemployment in certain areas).
