| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

News Main Page 
 
 News
 Irish
 European
 International
 Asia-Pacific Business Week
 
 Analysis/Comment

RSS FEED


How to use our RSS feed

 
Web Finfacts

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:

Links

Finfacts Homepage

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Search

News : Irish Last Updated: Dec 19th, 2007 - 13:17:15


Ratings agency Standard & Poor's says both Ireland and Spain are likely to experience significant slowdown in GDP growth beginning in 2008
By Finfacts Team
Oct 22, 2007, 07:04

Email this article
 Printer friendly page

Ireland and Spain face a prolonged slowdown in economic growth, according to US ratings agency Standard & Poor's, as a drop in construction activity and consumer sentiment hits labour markets and weakens public finances.

Standard & Poor's says in a report published on Monday*, that house prices in Ireland , Spain and the UK have been among the fastest-growing in Europe over the past decade.

"These countries are now leading the subsequent downturn," the agency says.

S&P says house prices in the three countries are about 20 per cent overvalued and on the verge of a "protracted correction".

The impact of the expected correction in the housing market, would be more pronounced in Ireland and Spain, whose "economies are heavily exposed to the direct effects of the housing market slowdown on the construction sector", the agency says as construction accounted for 12.6 per cent of the total employment in Spain in 2006 and 13.0 per cent in Ireland, compared with a European Union average of 8.2 per cent, it says.

In a situation where activity eases gradually, the Irish economy will grow by 3.8 per cent next year, following growth of 5 per cent this year, according to S&P.

If construction sector output slows very sharply, however, this growth could fall to 1 per cent in 2008 from 4.8 per cent this year, Standard & Poor's finds.

It sees a sharp contraction as similar to what the UK experienced in the late 1980s after the housing market boom in that country, or the slowdown seen in Germany after reunification.

Unemployment in the Spanish construction sector has risen 53 per cent in the past 12 months, and the number of immigrants out of work has risen by 22 percent.

In a best-case scenario, Standard & Poor's sees gross domestic product growth in Spain slowing to 2.5 per cent in 2008, from 3.7 per cent this year. This compares with official estimates of more than 3 per cent.

 "Under the benign assumption the construction sector as a share of GDP will moderate gradually back towards its 10-year average ... both Ireland and Spain are likely to experience a significant slowdown in GDP growth, beginning in 2008," says Standard & Poor's.

The agency says that it would take until 2015 to regain the growth rate that both countries could be expected to achieve in 2008, in a more orderly construction slowdown.

This suggests that Irish GDP growth would remain below 4 per cent for seven years after a severe slowing in construction.

"A sharp downturn would have a much more debilitating effect for medium-term growth in Ireland and Spain," the report says.

Standard & Poor's also says that the heavily-indebted nature of the Ireland's private sector (203 per cent of GDP) poses "significant risks over and above that of a construction sector slowdown".

*not currently available online.


© Copyright 2007 by Finfacts.com

Top of Page

Irish
Latest Headlines
C&C reports plunge in UK cider sales; Revenue and profit margin to fall 10% in year to February 29, 2008
Shannon Development calls for urgent national launch of high-speed fibre Broadband infrastructure across Ireland
Irish SMEs can reduce costs by adopting Green IT
Irish construction employment fell 5.4% in year to November 2007 - actual job losses were about 15,000
Two Dublin Firms "score major deals" during South Africa Trade Mission
Dublin Airport: DAA to start work on €55m extension to Terminal One
Forfás says Employment in IDA and Enterprise Ireland client firms grew by 1,187 in 2007; Over 18,500 people were employed in research activities across Ireland in 2007
Wyeth Ireland invests €5 million in Dublin and creates 24 jobs
Irish Consumer sentiment fell slightly in December 2007
Aer Lingus begins Belfast-London Heathrow service; Ryanair's Michael O'Leary visits Shannon on last day of Aer Lingus service to London
Martin welcomes over 50 Irish Firms on South African Trade Mission
Irish Construction: December data signalled record falls in activity - housing, civil engineering and commercial sectors
Britvic Ireland to cut 60 jobs in Cork
Irish Live Register increased 2,100 in December; Grew 14,987 in 2007 to 171,800 at end of December
Irish Public Service Benchmarking Body Report: Increases recommended for just 15 of the 109 grades examined
Irish Financial Services Ombudsman says complaints increased 15% in 2007
Nuclear Power in Ireland: Government calls for a debate without a deadline to avoid having to make decision
Irish Industrial Sector had best year in 2007 since 2002
Irish National Employment Rights Authority carries out 14,000 inspections; Recovers €2.5m in arrears for workers; Martin launches "major publicity campaign"
Horizon Technology hit by falling revenue and bad debt provision increase of €0.8 million