Irish economy outpaces euro zone peers with 5.2% growth in 2016

Quarterly national accounts from CSO suggest output grew in all sectors of economy

The latest figures show industrial output in 2016 increased 2.4% in volume terms. Photograph: Aidan Crawley/Bloomberg

The latest figures show industrial output in 2016 increased 2.4% in volume terms. Photograph: Aidan Crawley/Bloomberg

 

Ireland’s economy grew 5.2 per cent last year, outstripping all other euro zone countries and most official forecasts for the third successive year.

While the rate of growth is a fraction of the 26 per cent recorded for 2015, that was largely seen as an aberration.

The latest quarterly national accounts from the Central Statistics Office (CSO) suggest output increased in all sectors of the economy.

The figures show gross domestic product (GDP) accelerated 5.2 per cent in 2016, while gross national product (GNP) rose 9 per cent. The bigger GNP number reflects the profits associated with so-called redomiciled plcs, which have relocated their headquarters here for tax purposes.

On a quarterly basis, GDP advanced 2.4 per cent in the final quarter of 2016, down from the 4 per cent recorded for the three months to September.

Investment, meanwhile, jumped 45.5 per cent to €76 billion, driven by the import of intellectual property assets to Ireland. This was linked to once-off tax planning by multinationals amid a global clampdown on corporate tax avoidance.

Personal consumption, which accounts for almost half of domestic demand and ranks as the best indicator of local economic activity, rose 3 per cent. This tallies with the rise in employment and tax revenue evidenced in other indicators.

Vigilant

Minister for Finance Michael Noonan welcomed the latest figures, saying the Government was committed to remaining vigilant in the face of an increasingly uncertain external environment.

“Domestic demand is now the main driver of growth, with private consumption up 3 per cent in 2016 supported by favourable labour market dynamics, continued increases in disposable income and solid consumer confidence.”

While his department expects growth to stay above 3 per cent over the next three years, it has estimated that a “hard Brexit” – involving Britain exiting the EU’s single market entirely – could knock about 3.5 per cent off GDP over the next decade.

Merrion analyst Alan McQuaid said the latest figures show personal spending and construction were holding up well, but he warned of a possible Brexit-related slowdown in headline growth. “We expect that ‘Brexit’ worries will intensify in 2017, leading to lower overall GDP growth this year.”

Industrial output

The latest figures show industrial output last year increased 2.4 per cent in volume terms. Within the industry sector, building and construction grew 11.4 per cent, reflecting the recovery in property.

The distribution, transport, software and communications sector grew 7.8 per cent; while the other services and agricultural sectors grew 6 per cent and 6.2 per cent respectively.

Separate CSO figures on the State’s balance of payments pointed to a current account surplus of €12.5 billion in 2016, which was €26 billion lower than the surplus recorded in 2015.