Noonan: no ‘daft spending’ in budget as economy grows 1.9%

The economy grew by 1.9 per cent in the second quarter of 2015, exceeding Government forecasts. But Minister for Finance Michael Noonan warned there will be no daft spending in the budget just because it is an election year.

He was speaking after the latest Quarterly National Accounts also show the economy is now growing at nearly 7 per cent on an annual basis.

The better-than-expected figures are likely to increase the clamour for tax cuts ahead of the budget.

The accounts show that gross domestic product (GDP) grew by 1.9 per cent in the three months to the end of June, the fastest rate recorded in the euro zone, which averaged 0.4 per cent.

Compared with the same period 12 months ago, the Irish economy has grown by 6.7 per cent in GDP terms.

Gross National Product (GNP), which strips out the effect of multinational companies, also grew by 1.9 per cent in the quarter and by 5.3 per cent year on year.

The figures also show the Balance of Payments Current Account, which reflects Ireland’s trade with the rest of the world, recorded a surplus of €2.7 billion in the second quarter, or 5.2 per cent of GDP.

Mr Noonan welcomed the latest data, which he described as extremely positive.

“The increase in economic activity is broadly-based - unlike in the past when activity was excessively concentrated in the construction sector we are now seeing both domestic-facing and exporting sectors performing strongly,” he said.

“Exports were strong in the second quarter, growing by 13.6 per cent. The multinational sector is contributing but so too are Irish-owned firms. The competitiveness improvements we’ve seen in recent years are standing to us. Domestic demand is also growing strongly, with consumer spending continuing to recover. Today’s encouraging data is mirrored in strong employment growth as well as tax receipts to end-August which increased by almost 10 per cent over the same period last year,” he added.

Davy meanwhile described the GDP growth rates as very strong but said they were not inconsistent with the rapid rise of goods exports, industrial production, retail sales, employment and tax revenues recorded throughout 2015.

“The underlying picture is that the natural bounce back in the economy has been accentuated by the weak euro stimulating exports and low oil prices and tax cuts helping real income,” said Davy economist Conall Mac Coille.