GDP surge defies Brexit for 2017

By Eamon Quinn

Europe-beating growth in 2017 as the economy slewed off any major effect from Brexit is carrying through to this year, according to economists. CSO headline figures showed the economy boomed by 7.8%, trouncing the 2%-plus growth across the eurozone and EU as a whole.

These GDP figures, which are the first snapshot of 2017, were clean of most of the big accounting items, including intellectual property imports that are linked to multinationals’ tax arrangements and which had severely distorted Irish national accounts in the recent past.

The headline numbers still likely overstate the true expansion of the economy by a third, however. Figures which put a spotlight on the domestic parts of the economy suggest growth of around 5% last year, but a rate of expansion that was nonetheless still world-beating.

The figures marked “the end of the lost decade” and the drawing of some sort of line on the crash, said Dermot O’Leary, chief economist at Goodbody. A strong second half of 2017 will likely deliver GDP growth at a minimum of 5.4% this year, he said.

The worst fears for Irish exporters from the Brexit-driven 15% slide in the value of sterling were not realised, as the trade balance with the UK increased in 2017. Mr O’Leary said export growth to the UK had underperformed the performance to the rest of the world, but that Irish exports had tapped global growth.

The CSO said that industry, the largest part of the economy and the sector dominated by multinationals, grew the fastest in GDO terms, by almost 9%. Areas most exposed to the “real” domestic economy, which include education and health and hotels and restaurants, grew strongly too though by more subdued rates of expansion.

And so-called modified domestic demand, up 3.9%, was another indicator of the underlying performance of the economy that strips out the effects of the multinationals, the CSO said.

“Ireland’s strong GDP growth is not entirely a statistical mirage,” said Davy chief economist Conall Mac Coille. “Overall, we believe Ireland’s underlying GDP growth rate was close to 5% last year.”