Long gone are the days when it seemed that the Irish economy could do no wrong, earning it the nickname of the Celtic Tiger. The Global Financial Crisis heralded the bursting of a property bubble in the Republic of Ireland which, in turn, nearly destroyed the banking sector. The government was forced to act to shore up the financial sector, but the cost of borrowing on the money markets became prohibitively high, requiring Ireland to ask for help from the EU, IMF and UK government. Ireland secured an EU/IMF bailout worth €85 billion in December 2010.
Ireland is still struggling with high unemployment of 13% and it is estimated that 17% of home owners face difficulties to meet their mortgage obligations. However, the nation has now emerged from recession. Q2 figures show that the economy grew by 0.4% which was roughly half of the figure that analysts had expected, reflecting the weakness and patchy nature of the recovery seen in many economies around the world – but at least it is growth. The government expects full-year growth to come in at 1.3% for 2013.
Export growth for Q2 came in at 4.3%, but consumer spending remained weak, increasing by just 0.7%. Domestic demand is the key driver of almost all economies, but against a backdrop of high unemployment and uncertainty, consumers will naturally be wary of spending their cash if they don’t have to.
There are signs that the housing market has bottomed out, at least in some districts of Dublin. The residential property index fell by 4.5% last year, its slowest rate of decline since 2008. The housing market experienced a change from an annual rise of about 12% to a decline of nearly 17% last year. However, in the boom years, property values rose by more than a factor of three between 1996 and 2006.