Ireland: Economy shrinks in the fourth quarter on the back of weak exports
March 24, 2011
In the fourth quarter, GDP contracted a seasonally adjusted 1.6% over the previous quarter, according to the Central Statistics Office (CSO). The Q4 print contrasted both the 0.6% increase observed in the third quarter (previously reported: +0.5% quarter-on-quarter) as well as market expectations that had the economy adding 0.6%. On an annual basis, the economy contracted 0.7% in the fourth quarter, settling below the 0.3% drop registered in Q3. In the full year 2010, the economy contracted 1.0% (2009: -7.6%). Although remaining depressed, domestic demand showed signs of improvement. Private consumption decreased 0.4% in the fourth quarter, a notch above the third quarter's 0.5% drop. Fixed investment fell 2.3% over the previous quarter, up from the severe 21.7% decrease registered in Q3. Government consumption rebounded to enter positive territory, adding 0.3% in the fourth quarter (Q3: -1.2% qoq). The Q4 deterioration was primarily driven by the poor performance of the external sector. Exports fell back into negative territory and contracted 1.4% in the fourth quarter (Q3: +3.6% qoq), while imports dropped 0.1% (Q3: +1.5% qoq). As a result, the net contribution from the external sector to GDP growth swung from plus 2.2 percentage points in the third quarter to minus 1.2 percentage points in the fourth quarter. Meanwhile, the Central Bank expects GDP to grow 1.0% in 2011 and 2.3% in 2012.