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The Economy
When the modern Irish State was founded in 1922 the industrial sector was made up of a small number of manufacturers, 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 industry, 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 limited.

Ireland's industrial breakthrough had its roots in decisions taken in the 1950s to achieve economic expansion by stimulating export-based industrial development.

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 strong growth in exports. Exports of goods and services amounted to 37% of GNP in 1973; these rose to 56% in 1983 and to 90% in 1995.

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 that 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 national 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 for 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 private 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.

The Economy Today

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 EU average.

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 3.8% per annum between 1993- 1997. In 1997 Ireland had the highest level of job 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 1993.

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 10.2% 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 such 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 States. 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.

State Sponsored Bodies

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 development.


In 1997 Ireland's merchandise exports amounted to �35 billion. This was approximately 73% of GDP, a high proportion by international standards. The main areas of growth in Irish exports are the computers/electrical machinery and chemicals/pharmaceuticals industries.

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 trade surplus.

The industrial sector dominates the Irish economy, accounting for 39% of Gross Domestic Product, 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 quite a number of world-leading companies now located in Ireland. There has also been a considerable expansion of output in sectors such as pharmaceuticals 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. Forf�s provides overall policy co-ordindation. Enterprise Ireland 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.

Industrial Relations

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 national co-ordinating body for most of these. The Irish Business and Employers Confederation represents the interests of employers at national level.

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 disputes.


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 employment.

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 of gross agricultural output. The main crops are barley, wheat, sugar-beet, potatoes and mushrooms.