Latest data adds to optimism on economy

CSO figures show positive trend as IMF chief criticises how banks were bailed out

IMF managing director Christine Lagardepaid tribute to the “steadfast policy implementation” of the Irish Government. Photograph: Peter Cavanagh

IMF managing director Christine Lagardepaid tribute to the “steadfast policy implementation” of the Irish Government. Photograph: Peter Cavanagh

Fri, Dec 20, 2013, 00:46

Economic growth this year may be even higher than the most optimistic forecasts to date, a senior economist said yesterday, after the Central Statistics Office released figures showing strong growth spurred by domestic demand.

The economy grew by 1.5 per cent in gross domestic product terms and 1.6 per cent in gross national product terms in the third quarter, according to the CSO’s Quarterly National Accounts.

In comparison with the third quarter of last year, the economy grew by 1.8 per cent in GDP terms and 3.9 per cent in GNP terms. The latter screens out the effects of multinational operations, such as the fall in pharmaceutical exports.

It is the first time in ages domestic demand was a strong contributor to GDP growth, said Michael Connolly, senior statistician with the CSO. Net exports were down 0.8 per cent, in part explained by the patent-cliff phenomenon.

While consumer spending registered a 0.9 per cent rise during the quarter, this was entirely due to car sales, boosted by a “132” registration factor.

There was a sharp 10.9 per cent rise in investment spending, up 8.3 per cent, and non-residential construction was up 21.2 per cent.

Research professor with the Economic and Social Research InstituteJohn FitzGerald said the figures were further grounds for optimism and he expected the institute would revise upwards its predictions for growth.

On Wednesday, the ESRI issued an upbeat assessment of Ireland’s prospects.

Chief economist with KBC Bank Austin Hughes said the economy is on an “improving trajectory”. Conall Mac Coille of Davy said the data showed GDP finally catching up with positive signals from the labour market and purchasing managers’ index surveys.

Meanwhile the International Monetary Fund’s former mission chief for Ireland, Ajai Chopra, said it was “unfair” to make taxpayers pay for bailing out banks while senior unguaranteed bondholders get paid. This was in an interview published by the IMF to mark the end of the bailout.

In its final review, the IMF said Ireland continues to face “significant economic challenges” and halved its GDP growth forecast for this year from 0.6 per cent to 0.3 per cent. For 2014, it expects growth of 1.7 per cent, with 2.5 per cent in 2015.

IMF managing director Christine Lagardepaid tribute to the “steadfast policy implementation” of the Government. “As a result, Ireland is now in a much stronger position than when its programme began,” Ms Lagarde said.