Ireland: Economy shrinks in the third quarter
December 16, 2011
In the third quarter, GDP contracted a seasonally adjusted 1.9% over the previous quarter, contrasting the 1.4% increase observed in the second quarter (previously reported: +1.6% quarter-on-quarter) and falling faster than the 0.8% decline predicted by the market analysts. In fact, the result represented the sharpest decline seen since the first quarter of 2009. On an annual basis, the economy swung from a 2.1% expansion in the second quarter to a 0.1% contraction in the third. Domestic demand continued to weigh on economic growth in the third quarter, while the contribution to GDP growth from net exports remained positive. Private consumption contracted 1.3% in the second quarter (Q2: +0.1% qoq) and government consumption declined by the same amount in the third quarter, faster than the 1.1% decrease observed in the second quarter. Furthermore, fixed investment nosedived 20.9% in the third quarter, after falling 0.1% in the second quarter. Although exports were the only component of GDP to record growth in the third quarter, they nevertheless added only a paltry 0.8% (Q2: +1.1% qoq). Simultaneously, imports fell 1.5% (Q2: -0.8% qoq). As a result, the external sector's net contribution to GDP growth remained positive and inched up from plus 1.8 percentage points in the second quarter to plus 1.9 percentage points in the third. The Central Bank estimates that the economy has expanded 1.0% in 2011. Moreover, the Bank expects GDP to grow 1.8% in 2012.