At last, our economy gets shot in the arm
New CSO figures show best growth in almost three years
Published 17/12/2010 | 05:00
THE economy got a pre-Christmas shot in the arm yesterday as new figures revealed the best growth performance in almost three years.
It prompted economists to predict the Government could meet the ambitious growth targets set out in the four-year recovery plan.
The Central Statistics Office figures showed a bounce of 1.1pc in gross national product (GNP) and 0.5pc in gross domestic product (GDP) in the three months from July to September. GNP measures national income while GDP includes production from multinationals.
The Government forecast of 1.7pc growth in 2011 has been widely dismissed, especially by foreign commentators and credit ratings agencies.
Were the economy to deliver this kind of growth next year -- or come close -- it would have a major effect on market sentiment towards Ireland.
Even with €15bn of budget adjustments, the country needs growth of more than 2pc a year on average to restore stability to the public finances by 2014.
And two leading analysts last night insisted the official forecasts might be achieved.
"The Department of Finance forecasts of 1.7pc growth don't appear entirely unrealistic," said Austin Hughes, chief economist at KBC Bank.
"The Government's growth forecast for next year are now achievable and well within the bounds of a plausible outcome," said NCB Stockbrokers' chief economist Brian Devine.
The chief economist at the employers' body IBEC, Fergal O'Brien, took a similar view.
"Looking at the first three quarters of 2010 together, it is clear that Ireland's competitive position has been greatly strengthened and the 9pc annual growth in exports is really encouraging.
"With other sectors of the economy stabilising, we believe that the economy will grow by close to 2pc in 2011," he said.
Mr Hughes conceded that the cutbacks and tax rises would hurt personal spending.
"The prospect of a further significant budget hit to spending power in the coming year means the outlook for consumer spending remains poor."
The economy is being buoyed, not by spending, but by strong exports.
"Irish exports have outperformed in the global recovery, helped by a substantial improvement in Irish competitiveness," said Dan McLaughlin, chief economist at Bank of Ireland.
Government forecasts are for no change in consumer spending next year and see only a 4pc increase during the following three years. They are looking to a 5pc increase in exports and a stabilisation of the building industry to deliver growth.
"Exports have now expanded solidly for each of the three quarters of this year, so that the annual rate of increase has surged to 13.2pc, said Simon Barry, economist at Ulster Bank.
"That's a dramatic turnaround from the 3.7pc annual decline posted in the same period last year and is the strongest pace of export growth since early 2001."
Opinion in the financial markets is closer to this week's forecast by eurozone analysts at international consultants Ernst & Young. They see consumer spending plunging 4pc next year under the pressure of tax rises and lack of confidence, and continuing to fall until 2014. This would make it impossible for Ireland to reduce the budget deficit.
The CSO said that both measures of economic growth -- GNP and GDP -- showed increases for the first time since the last quarter of 2007.
Finance Minister Brian Lenihan welcomed the figures, saying the economy had stabilised and was now on an export-led growth path. He said the Budget day forecast for next year remained on track.