It wasn’t too long ago that doing business in Ireland wasn’t flourishing like it is today. What prompted the economy and businesses in Ireland to rebound to make it the market that it is today? Let’s explore business in Ireland, the economy and trade markets to find out.
Important History Regarding Business In Ireland
While it ranks among the wealthiest countries in the world today in terms of GDP per capita, with the IMF measuring it at $45,688 in 2011. Ireland was one of the most impoverished countries in Europe while it was a part of the United Kingdom and for decades following independence. Economic protectionism was dismantled in the late 1950s and Ireland joined the European Economic Community in 1973. Economic liberalism from the late 1980s onwards resulted in rapid economic expansion, particularly from 1995 to 2007, which became known as the Celtic Tiger period. However, an unprecedented financial crisis beginning in 2008 ended this era of rapid economic growth. The population of the state was 4.58 million in 2011, according to the Irish government census. It is a constitutional republic governed as a parliamentary democracy, with an elected president serving as head of state. It is a member of the European Union. Ireland is a developed country with the seventh highest Human Development Index. The country is highly ranked for press freedom, economic freedom and democracy and political freedom. Ireland is also a member of the Council of Europe, the Organisation for Economic Co-operation and Development, the World Trade Organisation and the United Nations.The Irish economy has transformed since the 1980s from being predominantly agricultural to a modern knowledge economy focused on high technology industries and services. Ireland adopted the euro currency in 2002 along with eleven other EU member states. The country is heavily reliant on Foreign Direct Investment and has attracted several multinational corporations due to a highly educated workforce and a low corporate tax rate, according to the National Competitiveness Council. Exports play an important role in Ireland’s economic growth. A series of significant discoveries of base metal deposits have been made, including the giant ore deposit at Tara Mine. Ireland now ranks as the seventh largest producer of zinc concentrates in the world, and the twelfth largest producer of lead concentrates. The combined output from these mines make Ireland the largest zinc producer in Europe and the second largest producer of lead, according to the publication Irish Natural Resources. Ireland is the world’s most profitable country for US corporations, according to the US tax journal Tax Notes, due to a low corporate tax rate, currently at 12.5% standard rate. With a population of 4,581,269 as measured by the Irish government in a 2011 census and an economy of $204.261 billion as measured in nominal terms by the IMF in 2011; the Irish market is definitely of notable size. The country is also one of the largest exporters of pharmaceuticals and software-related goods and services in the world, as mentioned by the Der Spiegel. In its Globalization Index 2010 published in January 2011 Ernst and Young with the Economist Intelligence Unit ranked Ireland second after Hong Kong. The index ranks 60 countries according to their degree of globalization relative to their GDP. While the Irish economy has significant debt problems in 2011, exporting remains a success.
However, the Eurozone financial crises has thrown the Irish economic success story into one of the worst economic crises that Ireland has ever seen. The Financial Crisis of 2008 still affects the Irish economy severely, compounding domestic economic problems related the collapse of the Irish property bubble. Ireland was the first country in the EU to officially enter a recession as declared by the Central Statistics Office. The ESRI (Economic and Social Research Institute) recently predicted that the Irish economy will not significantly recover until 2011. Ireland now has the highest level of household debt relative to disposable income in the developed world at 190%, according to the Daily Telegraph. As a result of the economic climate, emigration from Ireland has significantly picked up according to BBC News. The global recession has significantly impacted the Irish economy. Economic growth was 4.7% in 2007, but -1.7% in 2008 and -7.1% in 2009. In mid 2010, Ireland looked like it was about to exit recession in 2010 following growth of 0.3% in Q4 of 2009 and 2.7% in Q1 of 2010. The country’s credit rating was downgraded to “AA-” by Standard & Poor’s ratings agency in August 2010 due to the cost of supporting the banks, which would weaken the Government’s financial flexibility over the medium term, according to RTE News. It transpired that the cost of recapitalising the banks was greater than expected at that time, and, in response to the mounting costs, the country’s credit rating was again downgraded by Standard & Poor’s to “A”.
Overall, the economic climate in Ireland does not look to favorable for domestic businesses let alone foreign ones. While the Irish Government has published the National Recovery plan, which aims to restore order to the public finances and to bring its deficit in line with the EU target of 3% of economic output by 2015, according to RTE News. The chances that the plan will work are uncertain at best. In addition, with rumors of a Eurozone break up; Ireland is sure to go through another round of gut-wrenching economic uncertainty.