The Celtic Tiger

Firstly before I begin to examine whether the growth performance in Ireland during the Celtic tiger years was due to good luck or good management, I will first describe what the Celtic tiger was. The Celtic tiger is a term referring to the economy of the Republic of Ireland from the mid-1990s to the mid-2000s,which was a period of rapid economic growth.Ireland was the great rags‐to‐riches story over the period 1994 – 2006 where during this period Ireland went from one of Western Europe's poorest countries into one of its wealthiest.During this period Ireland had an Average annual economic growth rate of approximately 7 % , achieved full employment at about 4% in 2000 ,saw large increases in standards of living and a population increase of

This underperformance was credited to a mixture of poor policy choices and inefficient institutions. During this period inappropriate fiscal policies held Ireland back. In the 1950s , also referred to as the lost decade, Ireland underachieved quite badly while everyone else in Europe was on the up and this was due to an increase in emigration , a low participation rate of women in paid employment and a huge dependence on the agricultural sector. During the 1950’s most western European economies began to thrive after the damage World War II caused and grew even more rapidly than before the war. Between the year’s 1950-1958 Ireland’s growth record was the worst in western Europe, during which GDP rose by less than 1% per year, employment fell by 12 %, the unemployment rate rose steadily and over half a million people emigrated. The only country to have a lower rate of growth other than Ireland during this period was the UK,who were Ireland’s largest trading and financial partner .Then in the 1960’s the Irish economy began to catch up , but convergence with the leading economies of Europe was still far in the future. This pick up in performance of the Irish economy was partly down to the fact that the then Irish government started to encourage inward Foreign direct investment (FDI) by way of offering overseas companies grant incentives , a profit tax exemption

They sought to counter the sharp global recession brought about by the huge increase in the price of oil(which went from $3 to $12 per barrel) ,that resulted from the first oil crisis in 1973, by implementing an aggressive fiscal expansion policy which resulted in increasing budgetary deficits year on year and taking on an unsustainable amount of national debt .For example the ratio of government debt to GDP rose from 52% in 1973 to 129% by 1987,which was the highest in the EU.Hence Ireland lacked the ingredient’s necessary for continued steady economic growth. These negative conditions continued right up until the late