Economy set for surge in strength

THE prospect of the Irish economy entering another strong growth period is underpinned by two key sets of economic data just published.

The economy surged in the final three months of last year according to new Central Statistic Office figures while the Central Bank credit figures continue to set new records.

Economic growth hit 3.3% last year well up on the dismal 0.1% stagnation figure achieved in 2002 while an increase of over €900 million in mortgage lending pushed the annual growth rate to 26.1%, the highest figure since the statistics began in late 1996. The rate was 25.8% in January.

Overall the annual rate of private sector credit growth moved up to 19.3% in February from 18.8% in January while lending in the non mortgage sector ticked up to 15.2%.

Economists said the figures augur well for 2004, but warned global uncertainty was still a factor.

Growth will also be way below the peak of 10% achieved in GNP terms in 2000, they said.

Nevertheless the figures confirm that the economy which lost €23 billion last year to profit repatriation by multinationals is showing new signs of life.

The 3.3% figure is for gross national product, which strips out profits repatriated by multinational companies. That e23bn transfer is reflected in the poor GDP figure which fell to 1.4% last year.

A breakdown of the 2003 figures shows that consumer spending growth slowed to 1.9% last year, while industrial output grew by 2.3%. Capital investment fell by 2.9%, however, while exports were 5.8% lower.

Spending by national and local government on goods and services grew by just 2.1% last year, following rates of 11% and 9% in 2001 and 2002 respectively.

The outcome in the final quarter of 2003 picked up sharply projecting annual growth rates of 5.5% for GNP and 2.7% for GDP if the surge continues at the pace of the last quarter.

But economists say that is over optimistic for the year as a whole, but they do point to significant economic recovery economists said.

Austin Hughes, chief economist IIB Bank believes the growth figures confirm the picture of an economy not in any great danger.

Recent employment figures support the view the economy is doing reasonably well, he said. Other economists such as Alan McQuaid of Bloxham Stockbrokers and Davy Stockbrokers say the figures confirm a return to greater buoyancy in the economy, even if at more modest rates than when we generated 9% average GNP growth during the boom Celtic Tiger period up to the end of 2000.

On the credit issue this could be booster further if the European Central Bank cuts rates by 0.5% between now and the summer.

That has become a "distinct possibility" given the weakness in the Eurozone economy, said Mr McQuaid.