Ireland: Economy grows at fastest pace in three years
June 23, 2011
In the first quarter, GDP expanded a seasonally adjusted 1.3% over the previous quarter. The expansion contrasted the 1.4% contraction observed in the fourth quarter (previously reported: -1.6% quarter-on-quarter) and came in above market expectations that had the economy growing a more moderate 0.5%. In fact, the reading represented the fastest pace of economic growth since Q4 2007. Despite the strong start to the year, full-year growth is likely to remain subdued in 2011 due to fiscal consolidation measures introduced by the Irish government. On an annual basis, the economy added a meagre 0.1% in the first quarter, contrasting the 0.2% drop registered in Q4. The Q1 improvement was mainly the result of strong external demand, as the domestic environment remains depressed. Private consumption decreased 1.9% in the first quarter, below the fourth quarter's 0.9% drop, while government consumption returned to negative territory, contracting 1.9% in the first quarter (Q4: +0.1% qoq). On the other hand, fixed investment swung from a 1.9% drop in Q4 to expand 1.1% in Q1. Meanwhile, the external sector proved to be they key driver of the economic recovery. Exports accelerated, expanding 3.8% in the first quarter (Q4: -2.8% qoq), while imports fell 0.3% (Q4: -1.0% qoq). With exports outpacing imports, the net contribution from the external sector to GDP growth swung from minus 2.0 percentage points in the fourth quarter to plus 4.0 percentage points in the first quarter. The Central Bank expects GDP to grow 0.9% in 2011 and 2.2% in 2012.