The Economist magazine's survey of Ireland predicts growth rates for the country of between 4-5% this year and next. The survey categorises Ireland after the Celtic Tiger as more resembling Britain than the US or continental Europe.
The Economist last produced a survey on Ireland in 1988 and concluded that the country was heading for catastrophe. This latest survey chronicles the huge improvements in the Irish economy and society since then and also examines the challenges the Irish economy faces in the future.
The survey says the figures recording Ireland's transition from Europe's worst to its best performing economy are 'remarkable'. It says that in 1987, Irish GDP per person was 69% of the EU average, by 2003 it had reached 136%. Unemployment fell from 17% in 1987 to 4% in 2003 and Government debt shrank from 112% of GDP to 33%.
The Economist says the key elements of the Celtic Tiger were fiscal and monetary consolidation, new social partnership, the European Single Market, Ireland's Foreign Direct Investment boom, education, low personal taxes and European Union subsidies.
In every area where Ireland has seen social changes - secularisation, the growth of public health and welfare systems, trends in crime, drug and alcohol abuse, changing family patterns, increased migration - the shift has brought it closer to Europe than America, the magazine says. It adds that in many ways, the place that Ireland most resembles now is not America but Britain - but with a pro-European stance.
The magazine also lists the challenges the country faces in the future. It says that low interest rates have helped to cause a property frenzy, especially in the Dublin area. It says the country may be 'peculiarly vulnerable' to a property crash, because as a member of the euro area it can not raise interest rates to calm the market down.
It concludes that a potential property crash is the most threatening problem on the horizon for the country.
This property threat also means that the Irish banking system is heavily exposed and a property crash would badly hit the balance sheets of the two big Irish banks, AIB and Bank of Ireland.
The dominance of Dublin is another risk factor. The city and its region contain almost a third of the country's population. It says that Dublin in a surprisingly spread-out city with big parks and almost no high-rise buildings. This leads to 'giddy' house prices and long commutes for those who can not afford to pay these prices.
The Economist also warns that it may prove increasing hard to keep the lid on Government spending, while higher inflation than in rival countries means that Irish competitiveness is being eroded. It warns that further strengthening of the euro against the dollar and sterling would hurt Irish exports.
'It is vital that the Irish Government, despite current political pressures, remains strongly pro-business. Extravagant public spending hurt the economy in the past and it is vital that the days of higher taxes and higher spending do not return,' the magazine warns.
