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Ireland Q1 GDP contracts 2.6%

Ireland Q1 GDP contracts 2.6%

DUBLIN: Ireland’s economy contracted for the first time in four quarters in the first three months of the year and the pace of decline was worse than economists had predicted, while the growth figure for the previous quarter was revised up sharply, preliminary data from the Central Statistics Office showed Friday. Gross domestic product fell a seasonally 2.6 percent sequentially in the first quarter, reversing a 5.8 percent rise in the fourth quarter of 2016, which was revised up from a 2.5 percent growth reported earlier. Economists had expected a 0.40 percent drop for the March quarter. The latest decline was the first since a 0.5 percent slump in the first quarter of 2016. In the third quarter of 2016, the rate of expansion was 3.0 percent.

On the expenditure side, household consumption grew 1.2 percent over the quarter and government expenditure rose by 0.3 percent. In contrast, gross domestic fixed capital formation registered a slump of 38.1 percent. Exports rose only 0.1 percent, while imports declined notably by 12.7 percent. On an annual basis, the economic growth eased to 6.1 percent in the first quarter from 9.9 percent in the December quarter, which was revised up from 7.2 percent. The growth figure for 2016 was revised down to 5.1 percent from 5.2 percent. This confirms that Ireland was the fastest growing economy in the European Union in 2016,” Irish Finance Minister Paschal Donohoe said. “These figures are mirrored in strong employment growth, as well as tax receipts to end-June which increased by 4 per cent over the same period last year,” Donohoe said, citing the first quarter annual growth figure.

“The still elevated levels of debt in the Irish economy and the increasingly uncertain external environment underlines the importance of sensible management of the public finances,” the finance minister said. In July 2016, the CSO had revised the growth rate for 2015 to 26.3 percent from 7.8 percent, attracting ridicule from economists, who dubbed it “leprechaun economics”. The 2015 growth rate was massively inflated after including the increase in the size of the capital stock due to corporate restructuring and balance sheet reclassification in the multinational sector as well as the growth in the aircraft leasing activity. On Friday, the CSO also released an alternative indicator of growth called the Modified Gross National Income, or GNI*, that strips out the effects of the profits of re-domiciled companies and the depreciation of intellectual property products and aircraft leasing companies. The GNI* was EUR 189.2 billion in 2016 and the GDP at current prices was EUR 275.6 billion. “GNI*is designed as a supplementary indicator of the level of the Irish economy for use in ratio analysis as an alternative to GDP,” CSO Assistant Director General Jennifer Banim said. In 2016, the government debt to GDP ratio stood at 73 percent, while the result for the equivalent debt to GNI* ratio was 106 percent. The GNI* is set to be fully phased in by the end of 2018. Separately, the statistical office revealed that the current account surplus of the country climbed to EUR 8.57 billion in the first quarter from EUR 2.36 billion in the fourth quarter.