Modest optimism over economy

THE Irish economy performed better than expected in the second quarter, boosted by strong export sales in the multinational sector, mainly in pharmaceuticals and chemicals.

Figures from the Central Statistics Office (CSO) show that gross national product (GNP) shrank 0.5% in the second three months of 2009, its smallest drop since the first quarter of 2008.

The GNP measure excludes profits from the multinational sector and is regarded as a better measure of economic performance.

Quarter on quarter, gross domestic product (GDP) was flat having been expected to show a fall of 1.5%.

On an annual basis, GDP was down 7.4% by the end of second quarter while GNP had fallen by 11.6%, reflecting the depth of the slowdown that makes us the worst performer of any advanced economy, including Britain and the US.

Economists said the figures give grounds for modest optimism while the CSO statistics still show demand in the economy continues at a low ebb.

Consumer spending, a key barometer of economic activity, was 6.8% lower in the quarter than a year earlier.

Capital investment was off by more than 24% with industrial production down 11.3% in the quarter.

Construction activity fell 30.8%, putting it back to levels not seen since 1999, while the numbers working in the sector reverted to levels not seen since the start of the millennium.

Finance Minister Brian Lenihan said while the key economic indicators are still bad, they represented a “a relative improvement” on the first quarter.

The figures were in line with the Government’s April budget projections for a 7.75% decline in GDP this year, Mr Lenihan said.

Alan McQuaid, chief economist with Bloxham Stockbrokers, said the figures remain pretty grim.

Activity remains extremely weak, he said: “That’s the bottom line, but we are becoming less pessimistic on the outturn for the year as a whole.”

He says the economy will have a slightly better year than he previously forecast.

GDP will be down by between 7.5% and 8% which is ahead of the Central Bank’s forecast of an 8.3% decline.

His GNP forecast of a decline of 10.5% is however, almost 1% higher than the Central Bank’s forecast.

Brian Devine of NCB said the figures showed “a cyclical recovery is under way”.

The removal of the threat of tax increases will also “improve the outlook for the Irish economy,” he said.

Issues remain including the collapsed property market, rising unemployment, the heavy debt burden.

“Ireland is climbing out of the depths but it is still some way to the summit.”


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