Economy shows sharp slump in Q1

ECONOMIC conditions deteriorated sharply in the first quarter of 2003, the quarterly national accounts disclose.

It shows that measured on a GDP basis, the economy slumped sharply in the first three months of 2003 and grew by just 0.5% compared with 6.9% for the previous year.

The latest Central Statistics Office figures confirm that economic conditions in the early part of this year worsened, reflecting the continuing global economic slump.

Weak global demand and a rising euro impacted on export sales, and the multi national sector in particular was badly hit.

Alan McQuaid, senior economist for Bloxham Stockbrokers, said the figures resulted in the economy “putting in its worst performance in years”.

Jim Power of Friends First was equally gloomy in his assessment.

But Austin Hughes, senior economist IIB Bank, said the economy had to come down of the highs achieved over the past seven or eight years.

While the figures were bad, the reality is that the economy continued to grow and the number of jobs increased though at a very modest pace.

Unemployment is also on the increase and the rising numbers in recent months were worrying, he said.

On balance, however, he thought with some modest improvement on the cards for the global economy, that those who have lost jobs stood a good chance of getting back into the workforce in the months ahead.

Mr McQuaid said the figures confirmed the economy has come up against it, a fact reflected in the sharp rise in the number of job losses in recent months.

During the first quarter, consumer spending was up by 1.8%, better than the 1.3% achieved in the fourth quarter of last year but well down on the 3.8% achieved in the same period last year.

When the boom was at its height the figure personal spending was rising by 10% per annum, he said.

One serious setback was the 12.4% decline in capital investment against an average increase of 1.7% in 2002.

Dan Mclaughlin, chief economist, Bank of Ireland Treasury & International, notes the increase in unemployment in the economy which has risen from 3.6% in early 2001 to 4.7% to the end of June.

In his assessment, Dr McLaughlin says the economy is doing well measured by international standards.

In his latest review he forecast a GDP of 2.5% for 2003 and 5% in 2004.

This year’s estimate is well down on earlier projection by the Bank of Ireland economist, who has been a strong believer in the resilience of the economy throughout the last few difficult years.

In his latest review for the economy, Dr McLaughlin says global recovery is underway and he is confident that there are better times ahead.