When the modern Irish State was founded in
1922 the industrial sector was made up of a small number of
largely in traditional sectors - food, drink, textiles - producing almost
exclusively for the home market.
Protectionist measures were
introduced in the 1930s to encourage the expansion of indigenous
but by the 1950s these measures were clearly not contributing to economic
development. Industry was stagnating and the opportunities for expanding
employment through dependence on the home market had become
breakthrough had its roots in decisions taken in the 1950s to achieve
economic expansion by stimulating export-based industrial
In 1952 An C�ras Tr�cht�la, the
Irish Export Board, was established to promote exports and in the same
year the first capital incentive schemes were introduced to encourage the
establishment of new industry in underdeveloped areas. In 1958 the first
tax incentives were introduced to encourage the expansion of industrial
exports. The Industrial Development Authority (IDA) was given the role of
promoting industry with a mandate to assist the indigenous sector and to
encourage foreign firms to set up new industries.
The Anglo-Irish Free Trade
Agreement in 1965 contributed to the opening-up of the Irish economy.
Accession to the EEC in 1973 brought tariff-free access to the markets of
the Community for Irish goods. In the early 1970s the IDA encouraged industry in export-oriented growth
sectors such as electronics, engineering and pharmaceuticals to set up in
Ireland. These developments fostered a much more open economy and a
growth in exports. Exports of goods and services amounted to 37% of GNP
1973; these rose to 56% in 1983 and to 90% in
The increased pace of
economic development since the 1960s has been accompanied by significant
changes in the composition of output and employment. In 1995 industry
(including construction) accounted for about 28% of total employment
compared to 21% in 1949, while agriculture represented 11% of total
employment, compared to 43% in 1949. As in other countries, the share of
the agricultural sector in employment has been falling steadily while
of services has been rising. The services sector accounts for slightly
over half of GDP and for almost 61% of employment.
In the mid-1980s the economy
faced a number of serious difficulties, the most important of which were
declining employment, substantial emigration and a rapidly rising
debt. To deal with these problems, the Government, employers and trade
unions agreed in 1987 on a three-year Programme for National Recovery.
This emphasised fiscal and monetary stabilisation, tax reform, pay
moderation and sectoral development on the basis of consensus. The
programme proved successful and was followed by two others: the Programme
for Economic and Social Progress (1991 to 1993) and the Programme for
Competitiveness and Work which began in 1994. The most recent of these is
Partnership 2000 which covers the period 1997 to 2000 and builds on its
predecessors the Programme for Competitiveness and Work, the Programme
Economic and Social Progress and the Programme for National Recovery.
Over the period of these
programmes economic growth was over twice the EU average, inflation had
fallen to one of the lowest rates in the EU, and employment in the
non-agricultural sector had shown an annual average growth of about 2.5%.
Budgetary consolidation measures linked to the programmes have given
Ireland one of the lowest Government deficits in the EU.
Ireland has one of the best
performing economies in the industrialised world. Between 1993 and 1997
the economy expanded by approximately 40 per cent an unprecedented
achievement for Ireland. ln 1997 alone the economy grew by 9.5%, the
fastest growth rate in the OECD area for the third successive year.
Between 1998-2000 the annual rate of growth is projected at between 6 and
7 per cent.
As recently as 1987 Irish
living standards as indicated by private consumption per capita were 65%
of the EU average. By 1997, Irish living standards had reached 90% of the
The unprecedented strong
rate of growth is attributable to a range of factors including prudent
fiscal and monetary management, social consensus on pay policy which
allowed wage moderation, foreign direct investment, EU Structural Funds,
an expanding well-qualified labour force, buoyant high-technology and
strong growth in domestic demand.
Employment has responded
strongly to this output growth. Employment growth in Ireland averaged
per annum between 1993- 1997. In 1997 Ireland had the highest level of
creation in the industrialised world.
During the period of rapid
growth, inflation has remained relatively low: the consumer price index
has grown, on average, at less than 2% per annum between 1993-1997.
The public finances in
Ireland are in a healthy position. In 1997 balance between Government
revenues and expenditures was in surplus by 0.9% of GDP. There has been
considerable buoyancy in tax receipts. The ratio of general government
debt to GDP in 1997 was approximately 66%, a reduction from 95.7% in
The main economic problem is
the level of unemployment but there has been considerable improvement in
recent years. The unemployment rate has fallen from 15.7% in 1993 to
in 1997, a figure just under the EU average.
There is general agreement
among the main political parties on the broad direction of economic and
social policy. Tripartite programmes involving the Government, trade
unions and employers have successfully operated in recent years to bring
about economic and social improvement.
In May 1998, Ireland, having
satisfied entry criteria covering public finances, the exchange rate, the
interest rate and inflation, qualified as one of the first round of
participants in the new EU currency, the Euro. Along with 10 other EU
member states Ireland participates in Economic and Monetary Union. As
the Irish currency is now the Euro , although for practical purposes the
currency in circulation is the Irish Pound (punt). The irrevocable Irish
Pound -Euro exchange rate is IEP 0.787564 = 1 Euro.
On 1 June 1998, the European
System of Central Banks (ESCB) came into being. The ESCB consists of the
European Central Bank (ECB) and the central banks of the EU Member
Since 1 January 1999, the ESCB has conducted a single monetary policy
across the Euro area. Decisions on monetary policy, including interest
rates, are made by the Governing Council of the ECB. The Governor of the
Central Bank of Ireland is a member of this Council.
The Central Bank of Ireland
continues to be the licensing and supervisory authority for credit
institutions, in which capacity it supervises the activities of the
commercial banks and acts as a banker to them. The Bank oversees the
operation of the payments system, in particular for the clearance of
cheques. It manages the Government's accounts and stock and holds and
manages the official external reserves.
There are about 100
State-sponsored bodies in Ireland employing over 60,000 people. They are
engaged in a wide variety of activities including transport,
telecommunications and the promotion of tourism, trade and industrial
In 1997 Ireland's
merchandise exports amounted to �35 billion. This was approximately 73%
GDP, a high proportion by international standards. The main areas of
growth in Irish exports are the computers/electrical machinery and
The principal destinations
for exports are UK: 24.3%, Germany 12.S%, France 7.9%, Netherlands 6.8%,
Belgium and Luxembourg 5.0%, Italy 3.3%, other EU Countries 6.8%, United
States 11.4% and Japan 3.2%.
In 1997 Ireland's
merchandise imports were valued at �25.9 billion, approximately 54% of
GDP. The principal sources of imports were UK 33.9% Germany 6.0%, France
4.7%, Netherlands 3.2%, Belgium and Luxembourg 1.1% Italy 1.8%, other EU
Countries 4.6%, United States 15.0% and Japan 6.9%.
In 1997 there was a surplus
of [�1,362m] on the current account of the balance of payments. This was
equivalent to almost 3% of GDP and was primarily due to the merchandise
The industrial sector
dominates the Irish economy, accounting for 39% of Gross Domestic
around 90% of exports and 29% of total employment. The highest growth
rates in Irish industry over recent years have been achieved in the
high-technology sectors of manufacturing, where overseas investment has
been attracted by combination of tax and grant incentives, as well as
Ireland's location within the European Single Market and the availability
of a highly-skilled-labour pool. Within this high
technology grouping, the
most impressive growth has been achieved in the computer sector,with
a number of world-leading companies now located in Ireland. There has
been a considerable expansion of output in sectors such as
and engineering. Even in non-high-technology industries, performance has
been quite impressive by comparison with other EU countries. The World
Competitiveness Report, which ranks the competitiveness of 46
industrialised countries, puts Ireland in eleventh place.
Three agencies deal with
industrial development in Ireland.
provides overall policy
helps develop Irish based
enterprise with the potential to trade internationally and the
Industrial Development Agency
(IDA Ireland) attracts overseas
companies and helps develop their operations in Ireland.
There are over 1,100
overseas-owned manufacturing/international services companies in Ireland
including over 450 from the US, 175 from Germany and 160 from the UK.
Overseas-owned companies employ about 108,000 people and account for some
70% of total manufactured exports.
The IDA focuses particularly on electronics, health care/pharamaceuticals,
sofeware, data processing, telemarketing and financial services.
About 50% of the employee
labour force are organised in trade unions of which there are 50 in
the Republic of Ireland. The Irish Congress of Trade Unions is the
co-ordinating body for most of these. The Irish Business and Employers
Confederation represents the interests of employers at national
The Labour Relations
Commission, the Labour Court and the Rights Commissioner Service are the
principal mediation bodies. Their role is to assist in the settlement of
Agriculture is a very
important sector of the Irish economy. It accounts for around 7% of gross
domestic product (GDP), 7.2% of total exports and 10.3% of total
Of the total land area of
approximately 7 million hectares (17 million acres), 5 million hectares
(12.32 million acres) are utilised for agricultural purposes (including
forestry). Cattle raising and dairying are by far the most important
sectors of the agricultural industry and livestock (mainly cattle) and
livestock products (principally milk) account for over 85% of the value
gross agricultural output. The main crops are barley, wheat, sugar-beet,
potatoes and mushrooms.