Business Irish

Thursday 30 March 2017

Economy shrinks to same levels as 2003 after record slump

CSO figures reveal 'largest output decline in single year'

Emmet Oliver Deputy Business Editor

The collapse of the Irish economy in 2009 was the largest decline ever recorded and positive growth still appears some way off, figures from the Central Statistics Office (CSO) showed yesterday.

The economy is now the same size it was in 2003 and has officially been in recession since the first quarter of 2008.

The output of the Irish economy plunged by 11.3pc in 2009, a performance described by the CSO as "the largest decline in output ever recorded in a single year''. Based on GDP, the economy slid by 7.1pc, but the larger figure of 11.3pc was for GNP, which excludes the contribution of foreign-owned multinationals.

Some economists had hoped the rate of decline in the economy would be slowing noticeably, but there was little sign of this in the latest figures.

The fourth quarter, for example, saw the economy falling back by 2.3pc, which was a larger contraction than recorded in the third or second quarters. This prompted opposition parties to claim yesterday that the recession was getting deeper, a claim denied by the Government.

Value tumbled

The cash value of the Irish economy tumbled from €154bn to €131bn in 2009, a painful drop of almost 15pc. Much of this was caused by a fall in consumer spending and investment.

Consumer spending in volume terms was 5.2pc lower in the quarter, while capital investment tumbled by 28.2pc. Consumers continued to pay down debt and raise their savings, although the CSO said yesterday it would be some months before it issued fresh data on savings.

Across the various sectors, construction continued to perform poorly, with the fourth quarter one of the worst quarters on record as volume in this area fell by 32.3pc. Most economists do not expect any recovery in this sector in the foreseeable future.

The one positive growth factor was exports, which held up in 2009 and increased slightly in the fourth quarter. But this export growth was not spread evenly, with foreign multinationals doing far better than local firms.

Recession

The recession has prompted Irish consumers and companies to buy less imports, allowing exports to get a greater share of capital flows.

"Imports have dived during the recession, while exports are resilient. That has helped close the current account deficit to its smallest since 2004. Ireland is not living beyond its means as much as it was,'' said economist Rossa White of Davy Stockbrokers. Mr White said Ireland should finally move into positive growth in the second quarter of this year.

But he acknowledged the economy had been through a very difficult time, with GNP shrinking by 17.2pc from its peak. Some sectors did return to positive growth in the fourth quarter, including agriculture.

"While we had factored in some acceleration in the pace of contraction of economic growth in Q4, the extent of the deterioration was slightly greater than we were expecting,'' said Ulster Bank economist Lynsey Clemenger.

"We take some encouragement from the fact that there are signs of stabilisation evident in the majority of expenditure categories. While construction-related spending remains a clear laggard, we take particular note of the continued resilience of exports,'' she added.

Irish Independent

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