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Finance Minister Michael Noonan
Finance Minister Michael Noonan
Image: Sam Boal/Photocall Ireland

The economy 'flatlined' over the summer, but Michael Noonan's not worried

The country’s still on target to meet its Budget forecasts.
Dec 11th 2014, 6:25 PM 12,935 62

Updated at 6.25pm

IRELAND’S ECONOMIC GROWTH has slowed with the nation’s output flatlining over the period covering late summer and early autumn.

But Finance Minister Michael Noonan said the country was still on target to hit its Budget forecast – which meant it would easily lead Europe in growth this year.

Figures out from the Central Statistics Office this morning showed Gross Domestic Product (GDP) for the country was “practically unchanged” for the quarter to the end of September when compared to the previous 3 months.

The preliminary numbers showed GDP was up only 0.1% for the period, although the figures were still 3.5% higher than for the same 3 months in 2013.

Growth for the first 9 months of the year stood at 4.9% – above the 4.7% forecast Noonan’s government relied on for its October roadmap.

Meanwhile, Gross National Product (GNP), which measures the output which stays in Irish hands as is considered a more accurate economic yardstick by many, increased 0.5% on the previous quarter, or 2.5% on the same time in 2013.

CSO Source: CSO

In its October forecast, the CSO predicted the economy would grow 4.5% this year and 3.4% in 2015, while more bullish estimates like the most recent outlook from Ernst & Young (EY) have foreseen even higher figures.

But EY also warned the country’s underlying growth would be weaker than the numbers suggested because multinationals’ profits tended to artificially inflate Ireland’s GDP figures.

Ireland still Europe’s poster child

Noonan said the strong tax returns outlined earlier this month highlighted Ireland’s ongoing economic recovery.

“However, the recovery should not be taken for granted and there are risks,” he said.

French Minister Michel Sapin in Ireland Source: Leon Farrell/Photocall Ireland

Goodbody chief economist Dermot O’Leary said the figures showed “core domestic demand” had grown an impressive 3.6% in the first 9 months of the year.

“Investment continues to lead the recovery in domestic demand. Today’s data does not alter the view that the Irish recovery still has significant momentum that will mean it will continue to grow at a 4%-plus clip in 2015 and 2016,” he said.

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IBEC chief economist Fergal O’Brien said the quarterly numbers were weaker than most expected especially the “flatlining of domestic consumption”.

“Taking the first nine months of the year together, however, the recovery is still by far the strongest in Europe, and we continue to see a revival of the domestic economy,” he said.

There are still risks in the global environment, however, particularly from a weak eurozone. We must renew our focus on competitiveness in order to continue this strong economic performance.”

GDP figures artificially inflated

In a note this morning, before the results were published, Davy chief economist Conall Mac Coille said the figures from multinationals’ contract manufacturing – where Ireland-headquartered firms recruited overseas companies to make pharmaceuticals on their behalf – tended to distort the overall picture.

“The case for including this activity in Irish GDP at all seems questionable,” he said.

“So, just as the pharmaceutical sector artificially pushed down on the 0.2% Irish GDP growth rate recorded in 2013, it now looks set to artificially inflate the 2014 figure.

Nonetheless, even after accounting for these distortions, the Irish economy is still probably expanding at a faster pace than any other European country.”

READ: The official jobs and economic outlooks are better than expected, but don’t get too excited >

READ: Noonan: Economy will grow even more than we thought this year – but austerity isn’t over >

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Peter Bodkin


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