THE ECONOMY slipped into decline again at the end of last year, leading to the worst drop in annual growth for almost 60 years, according to new data from the Central Statistics Office (CSO).
The last quarter of 2009 brought a fall of 2.3 per cent in both gross domestic product (GDP) and gross national product (GNP), pointing to an acceleration in the downturn in the final three months of the year. Much of the drag on the numbers came from the continuing slump in construction and from new housebuilding in particular.
The bad news was compounded by a revision to the CSO’s earlier estimates for the third quarter, which had previously showed positive growth and thus suggested a technical end to the recession. The latest figures contradict this, showing conditions worsened in every quarter last year.
This resulted in GNP, seen as the best measure of domestic activity on the ground, shrinking by 11.3 per cent in 2009, the largest decline the CSO has recorded since it began to put together official figures around 1950.
GDP, which includes the profits of multinational companies operating in the Republic, was in slightly better shape, posting a fall of 7.1 per cent for the year.
Michael Connolly of the CSO’s national accounts division acknowledged there was “quite a gap” between GDP and GNP. As well as citing higher multinational profits, he attributed the difference to an increase in interest payments on State debt and to lower profits from Irish-owned companies abroad.
Data comparing the final quarter of 2009 to the same three months of 2008 show a 5.1 per cent fall in GDP and a 10.4 per cent weakening in GNP. Both figures were lower than comparable results recorded earlier in the year, but they still point to serious economic difficulties. “While we have some bottoming out in some sectors, it’s not across the board,” said Mr Connolly yesterday.
A breakdown of the quarterly figures showed a continued depression in construction, with the sector as a whole posting an annual 33 per cent fall in output and new housebuilding down by 45 per cent.
Minister for Finance Brian Lenihan noted in a statement that if new housebuilding was excluded, GDP was roughly unchanged in the fourth quarter.
“Today’s figures are consistent with my budget day projections for this year and, as I outlined, I expect that the economy will resume growing in the second half of the year.” There were already “tentative signs” of recovery among many of the Republic’s trading partners.
Fine Gael’s finance spokesman Richard Bruton was less sanguine, describing the Republic as “an economy caught in a vice-like grip”.
“The recession isn’t over, it’s getting deeper,” Mr Bruton said.
Labour’s Joan Burton said records were being set “for all the wrong reasons”, claiming the statistics masked “a world of pain” being experienced by Irish families.
A small highlight in the numbers came in consumer spending data, which indicates a stabilisation in an area most analysts deem crucial to economic recovery.
Export figures were also slightly encouraging, showing slight quarterly growth at the end of 2009. Imports were less solid, a trend which helped to narrow the State’s current account deficit last year to €4.8 billion, the lowest since 2004.
Ibec economist Fergal O’Brien said that while the economy was still shrinking at a “worrying pace” at the end of last year, the recession would end over the next few months as exports grew and consumer spending improved.
“It will be 2011 before we see annual growth re-emerge,” Mr O’Brien noted.
