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- GDP (PPP):
- $226.8 billion
- 4.8% growth
- 1.4% 5-year compound annual growth
- $49,195 per capita
- Inflation (CPI):
- FDI Inflow:
The Irish economy has made impressive progress over the past three years. Undertaking politically difficult reform measures, including sharp cuts in public-sector wages and restructuring of the banking sector, Ireland has regained its fiscal health and become the first country to exit a European Union bailout. Its economy is now one of the fastest-growing in the eurozone.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 77.3 (up 0.7 point)
- Economic Freedom Status: Mostly Free
- Global Ranking: 8th
- Regional Ranking: 2nd in Europe
- Notable Successes: Rule of Law, Open Markets, and Regulatory Efficiency
- Concerns: Management of Public Finance
- Overall Score Change Since 2012: +0.4
Prime Minister Enda Kenny’s Fine Gael government was elected in February 2011. Ireland’s modern, highly industrialized economy performed extraordinarily well throughout the 1990s and most of the 2000s, encouraged by free-market policies that attracted investment capital, but a speculative housing bubble burst in 2008, generating a financial crisis. The 2010 National Recovery Plan was implemented after the government nationalized several banks, and Ireland accepted a $90 billion European Union–International Monetary Fund rescue package. In February 2013, Ireland reached agreement with the European Central Bank to restructure loans and ease the debt burden incurred when the Anglo Irish Bank was nationalized in 2009. Growth is high by European standards, but the ratio of public debt to GDP also remains very high despite some recent improvement.
Corruption, including cronyism, political patronage, and illegal donations, is a modest but recurring problem that affects all levels of politics. Nevertheless, contracts are secure, and expropriation is rare. Ireland’s legal system is based on common law, and the judiciary is independent. In October 2014, a new court of appeals was established to ease the backlog of cases faced by the Supreme Court. Property rights are well protected.
The top personal income tax rate is 41 percent, and the top corporate tax rate is 12.5 percent. Other taxes include a value-added tax and a capital gains tax. The total tax burden equals 28.3 percent of total domestic income. Government spending amounts to 40.7 percent of GDP. Despite ongoing austerity measures and reduced budget deficits, public debt still equals over 100 percent of total domestic output.
The efficient regulatory framework supports business formation, and no minimum capital is required to establish a business. The labor market remains relatively flexible, and labor costs are moderate. In the midst of a robust economic recovery in 2015, the coalition government slowed the pace of post-crisis reforms by (among other actions) postponing an unpopular plan to end a long-standing nationwide subsidy on tap water.
EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. Foreign and domestic investors are generally treated equally under the law. Recapitalization and restructuring have taken place to restore the soundness of the banking sector. The state still retains its ownership in banks, but some divestment has occurred.