Economy’s 1.6% GDP growth beats forecasts

THE economy grew by around 1.6% — in GDP terms — in the second quarter of this year, according to Central Statistics Office (CSO) data published yesterday.

This quarter-on-quarter growth comfortably beat the 0.25% forecasts, and marks the first back-to-back quarterly GDP rise in some time. However, the CSO was quick to dampen talk of this signalling ongoing growth in the economy.

“We’re trying to caution people in over-interpreting these results by putting the results in the context of the volatility overall in our seasonally adjusted estimates and not to read too much into them,” said Michael Connolly, a senior statistician at the CSO.

He added: “We’ve seen in the data the CSO has brought out in the past few weeks — covering industrial production and exports in particular — that they are not particularly encouraging numbers; it doesn’t suggest we could be certain that the trend will continue.”

Yesterday’s latest set of quarterly national accounts also showed a 1.1% quarter-by-quarter increase in GNP — seen by some as a better economic barometer as it excludes foreign multinational earnings.

On a year-on-year basis, second quarter GDP was up by 2.3%, while GNP was still up by 1.1%.

The CSO said that the second-quarter economic lift was mainly driven by net exports, which grew in value by 24% to €1.9bn.

Domestic demand, meanwhile, was down by 2.2% on the previous quarter.

Bloxham Stockbrokers’ chief economist, Alan McQuaid said the figures give further evidence of Ireland’s two-speed economy — of strong exports and weak domestic demand — but added that they should also encourage Government and international investors that Ireland is slowly but surely on the road to recovery.

“Clearly, key positive driving factors of growth in the first half of the year — strong exports and positive car sales — won’t be as influential in the second half of 2011. Nevertheless, GDP growth should be back in positive territory for the year as a whole, and the country, in our view, remains better placed than most to move forward once the world economy regains momentum,” he added.

Reetta Suonpera, senior economist at IBEC, said the Government must now focus on getting the economy right. “The immediate priority for the Government is to deliver a budget that will not harm our economic recovery. Although spending cuts and tax increases of €3.6bn will be necessary, they should be delivered in a way that will cause the least amount of damage to the domestic economy,” she said.

The CSO also recorded how Ireland’s ‘current account’ remained in the red in the second quarter, but reduced dramatically to a deficit of €488m; compared to one of €1.03bn in the first three months of 2011.