Increase of Investment and Economic Growth in Ireland

THE EXTENT TO WHICH AN INCREASE IN INVESTMENT IS THE MAIN DRIVER OF ECONOMIC GROWTH IN IRELAND
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The Extent to Which an Increase in Investment is the Main Driver of Economic Growth in Ireland
In a 1994 investment report for Morgan Stanley on Ireland’s economy, Gardiner described Ireland as the Celtic Tiger because of the country’s surge in economic growth between 1987 and 2007. Between 1995 and 2000, the country’s annual growth rate averaged 9.4%, and between 1987 and 2007, the GDP grew by an astonishing 229% and thus, earning the name Celtic Tiger (Donovan & Murphy, 2013). Today, the Celtic Tiger still lives on with a growth of 15.2% in 2021 (OECD, 2022). Based on this phenomenal growth, there is a need to understand the role of investment. “Investment is the buying of a financial asset with the prospect that the asset will result in income in the future” (Gillespie, 2019). In ideal conditions, investment is supposed to influence the economic growth of a nation. According to Peterson (2017), economic growth "…is the increase in quantities of services and goods per head of the population within a given timeframe, measured in GDP. Based on these terms, the current paper focuses on investment to determine whether it is the primary driver of economic growth in the Republic of Ireland.
The Keynesian Theory of Investment
Depending on economic opportunities, personal investor interests, or emerging business niches, investors can choose different investment forms, including R&D, traditional investment in physical capital, and improvements in process and productivity. In Ireland, sectors experiencing consistent growth include life sciences, information & communications technology, consumer & industrial products, and financial services. For instance, in the information and technology sector, reports show that the tech funding in 2021 reached a record high of €1.6 billion, with over 292 organizations raising investment (IBEC, 2021). The pandemic did not deter investment in this sector, with over 12 companies raising at least €30 million each in 2021 compared to 2019, when only three organizations raised the same amount or more (Paiva, 2022). The sector's growth that attracted these funds illustrates the sector's importance to the economy and the investment of efforts of organizations and individuals.
In the Technology & Communication industry, funds went to different investment firms. According to KPMG (2022), Research and Development, for instance, received over 25% of the share, an increase of 32% since 2019 before the pandemic. Areas like improvement of processes & productivity, especially in the financial sector, also experienced a surge in investments, mainly through regtech. Regtech is the management or regulatory processes in the financial sector by leveraging technology (Becker et al., 2020). Figure 1 below shows an increase in regtech investment, only deterred by the pandemic in 2019, followed by a quick positive response from 2020 onwards. Other areas that have received significant investment in education and technologic...