Sunday 24 September 2017

Economy bounces back with surprise 1.5pc rise in GDP

Ajai Chopra from the IMF
Ajai Chopra from the IMF
Colm Kelpie

Colm Kelpie

THE economy is bouncing back after its strongest spell of growth in two years.

New figures from the Central Statistics Office (CSO) reveal that the economy grew much faster than expected in the third quarter of the year.

The figures show that people are back spending again, construction companies are busy, and businesses are investing after years of cuts.

The figures come with the Christmas shopping season in full swing and just days after Ireland became the first eurozone country to exit a bailout since the financial crisis began.

The CSO calculates that gross domestic product (GDP) -- the most common measure of economic activity -- rose 1.5pc between July and September, compared with the previous quarter.

This was the strongest growth since 2011.

"Today's GDP data shows the economy bouncing back sharply in the third quarter," said Conall Mac Coille an economist with Davy Stockbrokers.

Economists said the figures reinforced other recent positive trends, including a sustained rise in employment.

The data will give a welcome boost for the Government as it enters the Christmas break -- especially as the strong growth is chiefly driven by home-grown demand. "For the first time in many quarters, we have a very strong contribution to GDP coming from domestic demand," said the CSO's Michael Connolly.

The CSO data follows the Economic and Social Research Institute's forecast that the economy will grow 2.7pc next year -- a more bullish assessment than projected by the Department of Finance, which expects growth of 2pc.

Tempering the positive news, the International Monetary Fund (IMF) signalled a tougher Budget may be needed in 2015 if the Government is to meet a crucial EU deficit target.

The Washington-based organisation warned that the number of mortgages in arrears remains "unacceptably high".

It said there needed to be a continued focus on reforms in health, education and welfare now that the country has left the bailout. Former Irish bailout chief Ajai Chopra also said it was unfair that taxpayers here had to be hit with the cost of bailing out the banks when bondholders got their money back. But he put the blame on Europe.

"Eurozone partners precluded the Irish from imposing haircuts on senior creditors of insolvent banks," Mr Chopra said.

Mr Chopra is leaving the IMF to pursue other interests, including volunteer work on financial literacy with low-income families.

The overall economic outlook for Ireland remains broadly positive but we will need to see similar levels in the years ahead if we are to meet the Government's economic targets.

Alan McQuaid of Merrion Stockbrokers said the performance was better than expected.

"Overall, we continue to believe Ireland is better placed than most to benefit from the upturn in the world economy and, assuming no major external shocks next year, there is every chance that the Government's official 2pc GDP growth target will be met," he said.

Irish Independent

Also in Business