The ‘Celtic Tiger’ learns to purr

Ireland was the success story of the 1990s, ranking as the fastest growing economy in the European Union. This strong performance has brought Ireland from among the laggards to a star performer, with per capita income based on GDP catching up with and then significantly exceeding the EU average. Why was Ireland's catch-up so rapid? There were many factors, both long- and short-term, which prepared the Irish economy for this impressive economic turnaround at a time of international buoyancy. As a result, Ireland achieved a long overdue structural transformation, while the proportion of its population at work increased rapidly over the 1990s, mostly due to rapid inward investment, and productivity rose to the levels of other industrialised countries. More recently, the Irish economy has shown remarkable resilience and continued to grow at healthy rates. However, the extraordinary performance of the second half of the 1990s, mainly due to the favourable external environment and the sizeable pool of available labour at that time, is unlikely to be repeated. Economic policies therefore need to focus on facilitating the adjustment of the economy towards lower sustainable growth rates, while addressing structural bottlenecks resulting from the past massive catch-up, and safeguarding competitiveness by ensuring moderate wage increases.