The Irish economy has really transformed in the recent years from an agricultural point of view to a modern knowledge economy. In addition, there has been a higher concentrating on services and high tech industries as well as dependent on trade, industry and investment. Concerning the issue of GDP per capita, the Irish economy has been ranked as one of the wealthiest country in the OFD along with EU-27. On the other hand, Irish GNP per capita, which is taken as a better measure of national income, the Irish economy is ranked bellow the OECD average, despite of reasonable economic growth in the recent past. In Ireland, GDP which is considered as a national out put is reasonably greater as compared to GNP, which is a national income. This has been attributed to the repatriation of profits along with royalty payments by multinational firms based in Ireland. According to the study carried out by economists, Ireland has been considered as having the best life quality in the world. The 1995 to 2000 period of high economic growth led many to call the country the Celtic Tiger. One of the keys to this economic growth was a low corporation tax.
The countrys high economic growth came at a very higher level, during the highest levels of inflation, especially in Dublin. This was because, the prices were considerably higher than elsewhere in the country, and this was particularly in the property market. On the other hand, property prices fell rapidly following the recent downturn in the world economy. In Ireland, the financial crisis that happened in 2008 is still affecting its economy severely. For instance, compounding domestic economic problems led to the collapse of the Irish property bubble. Studies have indicated that, Ireland was the first country in the EU group to officially face recession effects. However, it was predicted that, the Ireland economic recovery might not take place till 2011. As a result, this essay critically assesses the prospects for the Irish economy in terms of key economic objectives of growth, full employment along with price stability.
Distinction between GNP and GDP
Both GDP and GND are terms that have gained much usage in economic terms. However, the two terms mean different things. While GDP entails the market value of everything that has been produced within a certain country, GNP on the other hand entails the value of all items produced by countrys residents, regardless of their living location. Moreover, GDP is "the total market value of goods and services produced within the borders of a country, regardless of the nationality of those who produce them. GNP (gross national product) is the total market value of goods and services produced by the residents of a country, even if theyre living abroad. So if an Irish resident earns money from an investment overseas, that value would be included in GNP but not GDP. And the value of goods produced by foreign-owned businesses on Irish land would be part of GDP, but not the other measure. In simple terms, the distinction GNP and GDP is that, the latter represents the products actually produced in a certain country, while 6the former, represents products produced by the resources owned by citizens of such a country no matter the production location.
Nevertheless, amongst the two, GDP has been considered as being the primary measure of economic growth, according U.S. Department of commerces Bureau of Economic Analysis. Their explanation has been based on the fact that, GDP explains the production taking place in Ireland. As a result, the best measure for short term monitoring, as well as analysis of a countrys economy. Earlier than 1991, GNP was being used as a primary measure of economic growth. However, this changed due to the fact that, most countries had changed to GDP as a primary measure. As a result, Ireland also changed its measure with the aim of enhancing easy comparisons. In addition, GDP is consistent with other economic factors like employment in Ireland.
In Ireland, GDP is substantially higher as compared to GNP. This has been attributed to the presence of transnational corporations in the country. This is considered not in line with other EU member countries and U.S, where both GNP and GDP are fairly close. The higher number of transactional corporations has ended up making the amount of belonging owned by foreigners to exceed the amount received from overseas. This is majorly due to higher profits of foreign owned companies.
According to the economists, the GDP of Ireland in 2010 contracted to 1.6. Looking at it from the previous years, it has been shown that, the quarterly average GDP growth has been averaged at 0.73. However, the highest ever figure attained in Ireland was 5.47 percent in 2007, in contrast, the lowest degree was ever recorded was -4.47 percent in a round 2008. From 1995 to 2007, the average GDP growth was about 6 percent. However, the economic recession that occurred in 2008, led to a severe slowdown in both property and construction materials. However, the economic growth of Ireland is majorly dominated by transnational corporations.
It has been projected that, the countrys GDP is expected to grow from 2011 onwards this is based on the fact that, its economy has of late been transformed from being Agrarian as traditional manufacturing based, to the one that is hi-tech dependant.
Measure of Unemployment
Unemployment has been considered as a state of being without employment, while at the same time having a desire of being employed. The rate of unemployment is normally expressed as a percentage. In other words of those working or available for working. The reliable indicator of unemployment level in Ireland has proved much difficult in getting. This is because, Ireland has different measures, which are found in the Live Register, one is from labor force survey, while the other from the definition in the population consensus. The last two measures, relays majorly on individual on individuals certifying themselves as unemployed, rather than the Live Register measure, which is based on numbers signing on and receiving some kind of benefit. Full employment - normally defined as unemployment levels of less than 1 per cent., allowing for the effect of frictional unemployment - was an important strand of Government economic policy in the post-War period, although changing patterns of economic policy and conditions since the late 1970s have led to a rather different emphasis in recent years. Unemployment has traditionally been fairly high in Ireland, and in the past decade has risen to around one-fifth of the workforce.
However, in the recent times, Ireland has changed its method of calculating the live register figures, on the number of those unemployed. As a result, this has ended up removing around 5,200 individuals from the register figures. The reason for changing calculation rates of unemployment has been explained by the government as bringing Irish series in line with international criteria. Among these excluded from Live Register statistics are these who are systematically on short term working, that is, working one week, while being off the following week; and those individuals who are self-employed, in receipt of unemployment assistance. In most cases, a distinction has been made between short term unemployed and long term unemployment. Long-term unemployment has been considered as those having no work for a period of a minimum of 1 year. However, according to the Live Register, the number of long term unemployed individuals in Ireland has been decreasing. As an effect, this indicates that the problem of unemployment in Ireland is some how becoming better of.
It has been noted long term unemployment is falling due to the extinction long-term unemployment, to either employment of from labor market; or, another probable reason is that, in Ireland, short-term unemployment are being extinct before turning to long-term unemployment. However, basing this analysis on the live register, it can be concluded that, the decline in long-term unemployment has been brought out by both factors, to a reduction in the inflow to long-term unemployment and an increase in the exit rate. The reduction in the inflow to long-term unemployment is a function of both reduced inflow to short-term unemployment (i.e. declining numbers of short-term unemployed) and a steady reduction in the exit rate from short to long-term unemployment.
Though the number of long-term unemployment has drastically reduced, those becoming long-term, are still facing it much rough, as compared to short-term unemployment to either re-enter or enter employment systems. This has been brought up by the fact that, the rate of survival for long-term unemployed is still much higher, as compared to their counterparts in short-term unemployment. The rate of survival has been defined as the percentage of unemployed persons who remain unemployed throughout a given period (12 months in this case). Live Register data for 2000-2001 shows that the survival rate for the short-term unemployed was 15%, considerably less than the survival rates of 43% and 56% for those who had been unemployed for either 1-2 years or for more than 2 years respectively.
Measures of Inflation in Ireland
According to economists, inflation is a term that has been used to refer a general rise in price levels of goods and services in a given economy for a specified period of time. In situations that price levels go up, every unit of currency buys fewer goods and services. In addition, inflation indicates erosion of fin the money purchasing power; this is due to a loss of real value of in the medium of exchange along with the unit of account in the internal economy of a country.
In Ireland, inflation rate in March 2011 was reported at 3 percent, as compared to the average inflation rate of 5.49; since 1976 to 2010. However, the highest level ever reached in Ireland, was 23.15, which occurred in 21981. On the other hand, the lowest record ever reached is -6.56 in 2009. the most famous means of determining inflation in Ireland is called inflation rate, which has been defined as being, the annualized percentage change in a general price index over time, consumer price index has been taken due to the fact that, it measures consumer prices. In addition, it is also used as a GDP deflector which measures inflation in the entire domestic economic.
In Ireland, consumer price index has been designed in a manner that it measures the change in the average price levels that are paid for consumer products as well as services. By all private households along with foreign visitors who have visited Ireland. As a result, the official measure of inflation in Ireland is consumer price index. The responsibility of carrying out this kind of survey has been left to the Central Statistics Office. As a result, the responsibility of the office is to collect the prices of a fixed representative group of goods and services on an on going basis month after the other.
The collected prices are then compared to the prices from the same goods and services from the previous month and the price change calculated. The prices of these goods and services are then combined into a single index measuring the overall level of prices. The index is compiled in respect of the second Tuesday of each month, when consumer price index is being measured, it is not possible to treat all services and goods equally, or, in other words, not all goods and services will be awarded equal weight. This factor was reached upon after looking at scenario like for instance, Irish individuals purchases more chicken than caviar, hence the prices of chicken, though not as expensive as such, will end up having greater weight in the consumer price index calculation, as compared to the prices of caviar. The Central Statistic office has the mandate of deciding the kind of weight to apply to either a product or a service. This in most cases has been arrived upon by getting the average weekly average expenditure of an average household on the good or service. However, such data is collected from the results of the five-yearly household budget research.
In addition, not all goods and services are included in the basket of getting the consumer product index, the goods and services that taken from the basket, are usually determined from the survey conducted during house hold budgetary survey. It has been indicated that, The relative importance or weights of these goods and services are also decided by the CSO from information collected in the Household Budget survey. The main purpose of the Household Budget Survey is to determine in detail the current pattern of household expenditure in order to update the expenditure weighting of the CPI. The most recent survey encompassed 7,644 households, which was a representative random sample of all private households in the State. In addition, area weights are used to construct weighted National Average Prices for each item of expenditure.
Policies to tackle unemployment
One of the greatest challenges that have been facing the Irish government and stakeholders especially in 2010 was the creation of jobs and reduction of unemployment. However, in dealing with such a challenge, the government has empathized much in the development skills, with the aim of supporting competiveness of the Ireland as a whole. This process enhances competitiveness of firms established in Ireland, by up lifting their capabilities hence increasing their productivity. The government has also tried as much as it could to ensure that, the unemployed individuals are placed closer to the labor market, this has been done with the aim of reducing the drift to long-term unemployment. In doing so, the government has come up with different policies that will ensure maximum eradication of unemployment in Ireland. Some of those policies are:
Education and training; the policy targets at education and training funding with the aim of meeting future skills that will be much essential in the growth of different sectors of economy. There are for instance exporting skills, which the importation sector has found lacking. For instance, increased regulations have ended up resulting to the need of specialized compliance skills in especially medical technologies.
Another policy that the government has put in place is retaining funding for training those in employment. This is has been especially done to these having low skills, particularly in vulnerable sectors, or low productivity areas, but still much critical for the country. This has been implemented despite much pressure demanding more efforts to be focused on those having no jobs.
The government has also ensured appropriate labor market interventions. This has been particularly to to the new challenges as the skills development needs of the newly unemployed are more diverse than in the past (e.g. construction workers, professionals). While recent increases in the number of activation and training places are welcome, the nature and quality of the retraining options available remain an issue.
Another policy that the government of Ireland has been fostering innovations at all economic levels; in fulfilling this, the government has prioritized in funding research and development. Such strategies have stronger relevance along with participation and sustainability of Irelands good reputation for the quality of research.
In process of trying to stabilize prices of consumer goods, the government has tried as much as it can to reduce the costs of carrying out businesses in the country. The prices of land and other properties used in the production process in Ireland ought to be adjusted to a justifiable level. The treatment of tax especially of properties should also be altered with the aim of limiting future housing booms as well as burst cycles. This ought to be done through the introduction of annual value based property taxes. The falling prices of land do not in anyway reduce the significance of structural changes that are inline with land planning.
In addition, the high utility costs in Ireland are in one way or the other has been damaging the competitive advantage of significant exportation sectors such as ICT hardware along with engineering. recent energy prices have shown a good move, but it is still not enough, more actions are required, like phasing out price supports for renewable energy as the technology matures and deployment increases.