Fast-expanding economy regains growth rates

Ireland’s rapidly expanding economy has regained growth rates not seen since the Celtic Tiger era, with activity advancing faster than at any time since 2000.

Data showing the economy grew by 7.8 per cent in 2015 came as European Central Bank chief Mario Draghi cut its main interest rate to zero in a new intervention to spur growth and prices in the moribund euro zone economy.

Figures from the Central Statistics Office indicate that momentum picked up in the final quarter of 2015, with gross domestic product 9.2 per cent stronger than in the same quarter in 2014.

Outstripped

The growth rate last year outstripped official forecasts and was nearly five times the euro zone average. The CSO data shows that output increased in nearly all economic sectors, with a strong recovery in the domestic sector and buoyant exports taking the benefit from the weak valuation of the euro.

“Of course these numbers partly reflect the severity of the crisis that it follows but today’s data emphasise how far the Irish economy has come,” said economist Austin Hughes at KBC Bank. “In the final quarter of 2015, Irish GDP was 10.9 per cent above its pre-crisis peak whereas for the Euro areas as a whole GDP has just reached its pre-crisis level in spite of a markedly smaller decline through the crisis.”

The weak state of the wider euro zone economy was underscored by the ECB’s latest move to stimulate activity by printing more money to buy bonds and saying it will pay commercial banks to lend to households and firms.

Marginal

While the cut in the ECB’s main interest rate will benefit tens of thousands of tracker mortgage customers, the gain is marginal due to the small scale of the reduction to zero from 0.05 per cent. Mortgage broker Karl Deeter said monthly repayments on a 25-year €200,000 loan would drop by €5.

The refusal of Irish banks to pass a succession of ECB rate cuts to variable rate mortgages has long been contentious.

As the first meeting of the 32nd Dáil failed to elect a taoiseach, Fianna Fáil finance spokesman Michael McGrath said he will press for legislation to empower the Central Bank of Ireland to intervene in the market to cap the price of variable rate loans. “I remain firmly of the view that variable rates in Ireland are too high and are not justified by the cost of funds that the banks are facing,” Mr McGrath said.