Society of Ireland

Downturn, 2001-2003

The Celtic Tiger's momentum slowed sharply in 2002, after seven years of high growth. The Irish economic downturn was in line with the worldwide downturn. The economy was impacted by a large reduction in investment in the worldwide information technology (IT) industry. The industry had over-expanded in the late 1990s, and its stock market equity declined sharply. Ireland was a major player in the IT industry: In 2002, it had exported US$10.4 billion worth of computer services, compared to $6.9 billion from the United States. Ireland accounted for approximately 50 percent of all mass-market packaged software sold in Europe in 2002 (OECD, 2002; OECD, 2004). Foot and mouth disease and the 11 September 2001 attacks damaged Ireland's tourism and agricultural sectors, deterring U.S. and British tourists. Several companies moved operations to Eastern Europe and the People's Republic of China because of a rise in Irish wage costs, insurance premiums, and a general reduction in Ireland's economic competitiveness.[44] The rising value of the Euro hit non-EMU exports, particularly those to the U.S. and the United Kingdom. At the same time, economies globally experienced a slowdown. The economy of the United States grew only 0.3% in April, May and June 2002 from a year earlier. The Federal Reserve made 11 rate cuts that year in an attempt to stimulate the U.S. economy. In Europe, the EU scarcely grew throughout the whole of 2002, and many governments (notably Germany and France) lost control of public finances, causing large deficits that broke the terms of the EMU Stability and Growth Pact. The economic downturn in Ireland was not a recession but a slowdown in the rate of economic expansion. Signs of a recovery became evident in late 2003 as U.S. investment levels increased once again. Many senior economists have heavily criticised[45] the Government and the economic imbalance in favour of the construction industry and the prospect of sustaining economic growth in the future.



ESHSI, Department of Modern History, Trinity College, Dublin, Republic of Ireland Contact: Membership Secretary