Ireland: GDP tumbles in Q4, patent cliff takes toll on 2013 result
March 18, 2014
In Q4, the economy contracted 2.3% over the previous quarter in seasonally-adjusted terms. The decline contrasted the 2.1% increase observed in Q3 and the 1.0% rise in GDP the market had expected. The contraction, which marks the lowest quarterly reading since Q4 2008, came on the back of a fall in private consumption and a surge in imports. The contraction in Q4 compared to the previous quarter was driven in part by a deterioration in domestic demand. Private consumption fell 0.6%, which contrasted the 1.0% growth tallied in Q3. Government consumption increased just 0.2% (Q3: +1.1% quarter-on-quarter). Fixed investment was up 3.0%, but marked a significant deceleration compared to the 13.0% expansion recorded in Q3. On the external side of the economy, exports recovered from a 0.5% contraction in Q3 to a 2.1% expansion in Q4. However, imports also surged, recording a 5.8% expansion (Q3: +0.1% qoq). As a result, the external sector's net contribution to GDP growth fell from minus 0.7 percentage points in Q3 to minus 2.5 percentage points in Q4. On an annual basis, the economy fell from a 2.7% expansion in Q3 to a 0.7% contraction in Q4. In the full year 2013, GDP contracted 0.3%, which contrasted the 0.2% growth tallied in 2012. The expiration of several patents towards the end of the year made a large dent in the output and exports of multinational pharmaceutical companies located in Ireland. The pharmaceutical industry in Ireland accounts for a quarter of GDP and almost half of exports. According to its Q1 Quarterly Bulletin, the Central Bank expects GDP to grow 2.1% in 2014 and 3.2% in 2015. FocusEconomics Consensus Forecast panelists expect the economy to grow 2.0% in 2014, which is down 0.1 percentage points from last month's forecast. For 2015, the panel sees economic growth accelerating to 2.4%.
Author: Carl Kelly, Economist