GDP returns to its pre-crash level but slowing of house prices expected to continue
Published 31/07/2015 | 02:30
House-price growth of 9pc in Ireland this year is set to be the fastest in Europe, but will slow sharply in 2016 and 2017, including because from the effect of strict new lending rules, according to Standard & Poors.
The overall size of the economy here has now exceeded the pre-crash peak of 2007, the Central Statistics Office (CSO) confirmed yesterday, although population growth means economic activity per head remains less than it was in the boom.
The economy grew by 1.4pc in the first three months of this year, based on the GDP measure that includes sales by multinational based here, although it shrank slightly looking at the domestic economy alone.
GDP increased by 1.4pc in the first quarter of this year, according to new figures from the Central Statistics Office (CSO), but gross national product (GNP) declined by 0.8pc.
Economic growth here is the highest among our European peers, including the UK, and more than three times the EU average.
Crucially, consumer spending which is closely watched by economists because it makes up 60pc of all economic activity increased by 1.2pc in the first three months of 2015.
The economy here is benefiting significantly from a pick up in the value of exports - which are flattered by a weak of the euro, as well as from the unusually low cost of imported oil and gas.
Last year, GDP increased by 5.2pc, significantly more than initially thought, the CSO said. It was enough to take the overall economy back to the previous peak in 2007.
The better than expected figures reflected increases in both the level and the rate of growth, but changes to the way the size of the economy is calculated, including adding the value of aircraft owned by leasing firms based here, had an impact on the tallies for last year.
Minister for Finance Michael Noonan welcomed the latest economic data. "The competitiveness improvements we've seen in recent years are standing to us. Domestic demand is also growing strongly, with consumer spending increasing by 3.8pc in the first quarter - the sacrifices are now paying dividends."
"We have laid the foundations for a solid recovery. The task now is to build upon the gains we have made in recent years. The Government will continue to work to support sustainable growth in order to improve living standards and reduce unemployment further," Minister Noonan said.
However, the figures could complicate the minister's plans for an expansionary Budget.
The pace of growth is likely to prompt calls for the minister to ease back on looser spending and tax cuts planned for October's Budget, because both are likely to fuel even faster growth.
Such so called "pro-cyclical" policies, that add to an already fast pace of growth, have been blamed for overheating the Irish economy before the last crash.
Rapidly rising house prices were also a major contributor then. Standard & Poors expects the housing market to cool off this year, with growth of 5pc and 3pc forecast for 2016 and 2017.
Credit restrictions will limit the pool of first time buyers, while many households remain highly indebted since the crash, the agency said.