Irish Economy To Dip In 2002

by Jason Gorringe, Tax-News.com, London

02 April 2002

Economic statistics published by the Irish government show that there was a sharp slowdown in the pace of activity in the Irish economy during 2001, with GDP growth slowing from 12.7% year-on-year in the first quarter of 2001 to 9.4% in the second quarter and 3.2% in the third.

Mirroring the situation in the UK, a sharp decrease of 6.2% in the level of manufacturing output between the first and fourth quarters of 2001 was balanced by a 5% increase in consumer spending and a 6% increase in government spending during the same period. Consumer spending was particularly strong in late 2001, ahead of the changeover to euro notes and coins.

Business investment was weak during 2001, with a year on year decline of 25% in purchases of machinery and equipment in the third quarter of the year, and export growth slowed from 21.5% year-on-year in the first quarter to 5.3% year-on-year in the third quarter.

Output of goods in the information and communications technology (ICT) sector fell particularly sharply, declining 22% year-on-year in the final quarter of 2001. This fall in manufacturing output, especially in the ICT sector, reflects the trend in the global economy last year, most notably in the US and Britain.

GDP growth looks to have weakened further in the final quarter of the year, and the average growth rate for 2002 is expected to be relatively subdued. However, most leading indicators point to a strengthening of economic activity in 2002. The latest Central Statistics Office data show a large rise in manufacturing output in December and January. Meanwhile, there has been a sharp rebound in new housing registrations from their November lows. and in February new car registrations recorded their first year-on-year increase since mid-2000.

A return to strong year-on-year GDP growth rates, however, is unlikely to become evident until the second half of this year, given the high annual growth rates registered in the first half of 2001, when GDP increased by 11 per cent year-on-year. The consensus forecast for GDP growth for the whole of 2002 is no more than 3.5%, compared with estimated GDP growth of 6.75% in 2001 and 11.5% in 2000. 2003 however should see a return to a higher rate of growth.

Recommended