GDP falls 1% but decline slows

THE Irish economy shrank for the third consecutive year in 2010, but new figures show that its rate of decline is slowing.

Latest Central Statistics Office (CSO) numbers show that Ireland’s GDP fell by 1% last year, while GNP (which excludes profits generated by US multinational companies based here) declined by 2.1%. Indeed, 2009’s figures showed a 7.6% decline in GDP and a 10.7% GNP drop.

The CSO said that while industry, excluding the building and construction sector, grew by 13.2% last year, this growth was insufficient “to counterbalance the declines that took place in the remaining sectors of the economy”. It added that the building and construction sector fell by 31.8% — similar to the decline seen in the industry in 2009.

Exports grew by 24.5% last year (along with imports) but that wasn’t strong enough to offset falls in other areas, according to the CSO. Consumer spending fell by 1.2% and government spending by 2.2%.

Employers’ representative body IBEC said that ongoing export recovery should drive economic recovery, but NCB Stockbrokers had less of a positive spin.

“The really important point from all these figures, for us, is the size of the economy,” said NCB’s chief economist, Brian Devine.

“The nominal level of GDP, at €154 billion, is €3.3bn less than Budget 2011 had been expecting. This has implications for tax take and the denominator in debt/deficit to GDP calculations. If Ireland is to go along the current path of huge capital injections into the banks, deleveraging and further fiscal austerity measures; then the EU/ECB is going to have to support Ireland for a prolonged period of time if they don’t want a euro area member to have a sovereign default.

“Help is probably too light a word, Ireland needs charity,” he added.

Earlier this week, Davy Stockbrokers, downgraded its own forecasts for Ireland’s economic growth this year — but still estimated GDP growth of 1.6% for 2011 (down from its previous forecast of 1.9% growth) and 2.4% for 2012. It also anticipates GNP growth of 0.6% this year and 1.7% next.

Davy also warned Irish export growth will slow this year, with consumer spending likely to contract by 1.4% (before picking up slowly during 2012) and the unemployment rate to remain above the 14% mark.