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Rebound Likely In Irish GDP Growth

James Boston
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Rebound Likely In Irish GDP Growth

The Irish Central Statistics Office has delayed the publication of this morning’s Gross Domestic Product (GDP) data for the first quarter of the year. However revised projections have been released which estimate the quarter on quarter GDP figure for Q1 to come in at 1.6% growth compared to the previous quarters contraction of -2.3%. Year on year the growth rate is projected to become 2.3%% compared to the prior reading of -0.7%.

Ireland was one of the harder hit Eurozone nations during the crises, primarily due to a banking sector collapse brought about by a bursting of the property price bubble. Elevated tax take during the boom years had lead to a significant current spending increase which had to be rolled back once the property related income ceased.

This country that was quick to adopt austerity measures has successfully completed the EU/ECB/IMF troika bailout program. The lack of safety net strategy on exiting this program has meant that Ireland’s authorities have little choice but to continue with the somewhat harsh fiscal rectitude measures. Ireland is currently shaping up for it’s fifth austerity budget in a row, this will take place in October but already there are discussions around how strictly this must adhere to EU guidelines.

Recent second order elections sent a clear message to the coalition government parties that there is little appetite for a further austere budget. Ireland had been facing the task of cutting a further €2Bn in current spending in order to meet the EU’s 3% deficit guideline. Last month’s changes in the EU GDP calculation rules have seen a nominal increase in Ireland’s GDP, this reduces the €2Bn requirement somewhat as does an unexpected pick up in the tax take.

There is now a slim but growing chance that the Irish authorities will be able to run a neutral budget this year, this has been made all the more probable in light of this morning’s GDP figures.

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