The global economic downturn is having a profound impact on the Irish economy. In February, unemployment rates rose to 10.4%, the highest level since October 1997 – a forecast Exchequer deficit of €17.8bn (£16.2bn), or 11.8% of gross domestic product (GDP), and a fall in real gross national product (GNP) of 4.1% are reported. All of this is in stark contrast to the position 15 months ago when unemployment stood at 4.6%, there was an Exchequer deficit of €1.3bn (£1.18bn), or 1% of GDP, and GNP grew by 4.1%.
Although not exposed to the US sub-prime market, many of Ireland’s troubles stem from over-reliance on property and construction. The Irish fascination with property and the availability of easy credit fuelled demand for property investment and, in turn, unsustainable property valuations. The Irish economy became over-reliant on the property market as a source of employment and tax revenue.
