Friday 23 March 2018

Austerity pushes economy back into recession for first time in three years

Colm Kelpie and Michael Brennan

CONSUMERS overburdened by austerity, plus a fall in exports, have pushed the economy back into recession for the first time since 2009.

The economy is performing much worse than expected, with new figures showing that we have been in recession since last summer.

Revised data from the Central Statistics Office shows the economy contracted in the second-half of last year and shrank another 0.6pc in the first three months of 2013.

It is the first time Ireland has entered recession since 2009.

The main reasons for the disappointing growth are falling exports in the first three months and the reluctance of austerity-weary consumers to spend.

Personal spending slumped at a rate not seen since the start of 2009, stoking fears that the Government's austerity programme is harming confidence.

Between January and March, the economy performed worse than both Spain and Portugal.

The Department of Finance branded the data "disappointing", but said the Budget targets remained on track.

Finance Minister Michael Noonan last night said the figure were "certainly disappointing but it's one set of statistics".

"When you think back to the first quarter it was dreadful weather, agri food was down, lots of things were going wrong in the first quarter."

Asked if the 1.3pc growt rate predicted in the Budget was too high to meet, Mr Noonan said he "wouldn't tie myself to any particular numbers."

The CSO's revised preliminary figures show that gross domestic product declined by 0.6pc in the first three months of the year.

It is now the third quarter in a row of contraction, after a 0.2pc decline in the final three months of last year and a 1pc contraction between July and September.

The definition of recession is two consecutive quarters of negative growth.

Focus now will shift to whether the Government will ease up on austerity in October's Budget. Business body IBEC reiterated that no new taxes should be imposed this year.

IBEC senior economist Reetta Suonpera blamed the property tax for contributing to weak consumer confidence.

"Consumer spending fell by 3pc, the sharpest drop since the start of 2009," Ms Suonpera said. "But unlike four years ago, fundamentals such as employment and incomes are stabilising and even improving.


"Weak confidence, exacerbated by the introduction of the property tax, is likely to have been the main culprit to the sharp decline this time around."

Key figures from the CSO data include:

* GDP declined by 0.6pc in the first three months.

* Agriculture, forestry and fishing grew 4.8pc, while industry increased by 2.1pc.

* Personal spending dropped 3pc, while capital investment slumped 7.4pc.

* Net exports were down by about €1bn.

Economist Alan McQuaid of Merrion Stockbrokers said Ireland was better placed than most to benefit from a global upturn when it comes.

Fianna Fail said the scale of the recession was deepening.

Trade union Unite said the figures were more evidence that austerity needed to end.

Irish Independent

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