Economy grows at fastest pace since 2000

Annual expansion of 7.8% driven by domestic demand and exports

GNP grew by 5.7% in the last quarter of 2015. Photograph: Alan Betson/The Irish Times

GNP grew by 5.7% in the last quarter of 2015. Photograph: Alan Betson/The Irish Times

 

Ireland’s economy grew by 7.8 per cent last year, outstripping all other euro zone countries and most official forecasts.

This is the fastest rate of growth recorded since 2000, when the economy expanded by 10.2 per cent, and nearly five times the euro area average.

The latest quarterly national accounts, published by the Central Statistics Office, suggest output increased in nearly all sectors of the economy last year amid a strong recovery in domestic demand and a buoyant export trade that benefitted from a weak euro.

The figures show Gross Domestic Product (GDP) accelerated by 7.8 per cent year-on-year in 2015 while Gross National Product (GNP), which strips out the impact of multinationals, grew by 5.7 per cent.

On a quarterly basis, GDP growth accelerated to 2.7 per cent in the final three months of 2015, up from 1.4 per cent in the three months to September and 1.9 per cent in the three months to June.

Investment by firms operating here rose by 28.2 per cent to €46.4 billion.

The headline number was, however, flattered by the purchase of intangibles, including intellectual property, by multinationals.

This was linked to once-off tax planning by firms amid a global clampdown on corporate tax avoidance.

Nonetheless, spending on construction, machinery and equipment were still significantly up on the previous year, which helped offset a €3 billion drop in aircraft purchases.

Consumer spending, the largest component of domestic demand, rose by 3.5 per cent with car sales and tourist expenditure highlighted as the main contributors. The rise tallies with an 8 per cent jump in the volume of retail sales recorded last year.

Economic activity increased across almost all sectors of the economy in 2015, pointing to a broad-based recovery.

Manufacturing output was up 14.2 per cent, construction was up 8.8 per cent while the distribution, transport and software communications sector posted an 8.7 per cent rise.

The “other services” sector, the largest sector which includes all professional activities, advanced by 4.3 per cent while activity in agriculture rose by 6.4 per cent.

Separate figures showed the value of Irish exports grew by 13.8 per cent last year, which encompassed a 17 per cent jump in goods exports led by the State’s pharmaceutical sector and 10 per cent rise in service exports. 2015 marked the second successive year of double-digit export growth.

While sterling’s recent depreciation has hit export growth this year, the weak euro was a key factor behind the State’s strong trade numbers last year.

Imports grew by 16.4 per cent, with goods imports up 8.4 per cent and services imports - again linked to the purchase of intangibles by multinationals - up 21.5 per cent.

“If you strip out the multinational-dominated areas the underlying narrative is one of growth but obviously not at the sort of eye-popping rate suggested by the headline 7.8 per cent number,” said Investec’s Philip O’Sullivan.

Merrion economist Alan McQuaid note that Irish GDP growth last year was almost a full percentage point higher than the 6.9 per cent posted by global-powerhouse China.