|Source: CSO |
Irish Economy 2012: Preliminary estimates indicate that GDP
(gross domestic product) in volume terms increased by 0.7%
for the year 2011. This follows three successive annual decreases in GDP during
the years 2008 to 2010. GNP (gross national product), on the other hand, declined by 2.5% in
2011. However, contractions in the two final quarters of the year meant that
Ireland was technically back into recession.
On a seasonally adjusted basis, constant price GDP for the fourth quarter of
decreased by 0.2% compared with the previous quarter while GNPdeclined
by 2.2% over the same period.
Industry and Agriculture the main contributors to growth in 2011
Industry (excluding Building and Construction) grew by 4.5% while
Agriculture, Forestry and Fishing increased by 2.0% between 2010 and
However, the remaining sectors of the economy registered declines during
greatest declines were experienced by Building and Construction (-13.5%) and
Public Administration and Defence (-3.3%). Other Services (-2.1%) and
Distribution, Transport and Communications (-1.6%) also registered annual
between 2010 and 2011.
Strong export growth: On the expenditure side of the accounts exports
performed strongly in 2011, while
Imports declined slightly. The combined effect resulted in overall growth of
€7,245m in net exports. This growth more than offset the declines which took
in the final domestic demand components of expenditure.
Personal consumption, which accounts for approximately two thirds of domestic
demand, fell by 2.7% while Government expenditure was 3.7%
down on 2010. Capital formation registered the largest percentage annual decline
in 2011 (-10.6%) although this is on a smaller scale than for the previous two
years (-24.9% and -28.7% respectively).
Quarterly decreases in GDP and GNP in Q4 2011: Initial estimates for
the fourth quarter of 2011 indicate seasonally adjusted declines
of 0.2% in GDP at constant prices and of 2.2% in GNP compared
Q3 2011. On the output side Industry (incl. Building and Construction) increased
by 1.4% while Distribution, Transport and Communication increased by 0.6%. There were quarterly seasonally adjusted declines in Public
Administration and Defence and Other Services.
On the Expenditure side there was a small decline in net exports and a
Government expenditure compared with the third quarter. Stock levels also fell.
Personal expenditure and Capital investment, on the other hand registered
increases on the previous quarter.
Factor income outflows were 9% higher than in the previous quarter
to an overall decline in GNP of 2.2% in Q4 2011 compared to Q3 2011.
Ireland: GDP or GNP? Which is the better measure of
Balance of Payments: Quarter 4 2011 current account surplus of €796m
The 4th Quarter 2011 Balance of Payments current account surplus was €796m
giving a slight surplus of just €127m for the year as a whole. The annual
was €634m lower than in 2010. While the annual merchandise surplus decreased
by €100m the invisibles deficit increased by over €500m. Within this the
deficit decreased by €3.9bn while the income deficit increased by €4.7bn.
Other points of note in Quarter 4 are:
Merchandise exports (€20,487m) increased by €848m while imports (€12,293m)
increased by €141m compared to the same quarter of 2010.
Services exports at €21,220m were up €1.4bn largely due to increased computer
services and business services exports. Service imports (€21,806m) were almost
Investment income earned abroad (€14,128m) decreased by €830m compared
with one year earlier. Income payable to foreign investors (€21,601m) increased
by €2.1bn. However direct investment income outflows were very low in the
fourth quarter of 2010.
Direct investment abroad showed a disinvestment of almost €12bn in the 4th
quarter due mainly to a decrease in other capital (€11,345m). Inward FDI showed
a disinvestment of over €19bn.
Net portfolio investment in foreign assets decreased by almost €4bn in the
quarter. Net portfolio investment in Irish entities increased by over €11bn due
investment in funds based in the IFSC.
Other investment assets decreased by €2.9bn in the quarter while the
corresponding liabilities decreased by €11.7bn.
|Source: CSO |
Dermot O'Leary, chief economist of Goodbody,
commented:Q4 GDP numbers for Ireland were a mixed bag and confirmed that while the
economy grew for the full year, it contracted in the second half of the year.
A mixed bag of data... - There
are positives and negatives to be taken from this morning’s Q4 GDP release.
On a positive note, it was confirmed that GDP grew for the full year in 2011
(+0.7%) for the first time since 2007. This was in line with our forecasts
of a 0.8% increase. However, it was a year of two halves for the Irish
economy. Two consecutive quarters of GDP growth in the first six months of
the year were followed by two consecutive quarters of contraction in the
second six months. In the final quarter, GDP declined by a modest 0.2% qoq.
...with domestic demand continuing
to fall... - Within the
details of the quarterly numbers, we tend to focus on annual changes due to
the volatility. On this basis, consumption fell, albeit at a slower pace, in
Q4 (-2.2% yoy), government spending fell sharply (-7.0% yoy), while
investment fell at its slowest annual pace since Q2 2007. An increase in
investment in planes contributed to the slowing pace of decline in
investment (-1.3% yoy), but there was also a pick up in other areas. For
example, non-plane investment increased by 4.9% yoy, while residential
improvements increased by 6.1% yoy in Q4.
...and export growth continuing - The
slowdown in export growth in the second half of the year (+2.8% in H2 versus
5.5% in H1) can be partly attributable to the wider Eurozone concerns.
Despite this, exports from Ireland had a buoyant year. This was largely due
to the continued impressive increases in service exports, particularly in
computer services. Ireland still had a services trade surplus of €3.2bn in
2011, but this is the smallest since 2007. The goods trade surplus of
€36.4bn remains close to a record high. As a result of these trends, Ireland
ran a small current account surplus in 2011.
Material 2012 forecast changes
unlikely - It is still
very much a tale of two economies in Ireland, a trend that has been in place
since 2008. In Q4, the decline in domestic demand did slow, but still fell
by 3.1% yoy (-5.5% yoy in Q3). There continues to be a sizeable contribution
from exports. We are unlikely to be making major changes to our GDP
forecasts for 2012 following today’s numbers (Goodbody forecast of 0.7%
GDP), but Irish Government forecasts are likely to be reduced.
Commenting on the latest economic growth figures from the CSO, IBEC chief
economist Fergal O'Brien said:
"2011 was a year of two halves - with solid growth in the first half, a
particularly weak third quarter and further marginal decline in Q4. The
Eurozone crisis resulted in weaker demand for Irish exports towards the end
of last year but the final quarter figures were largely as expected.
Consumer spending and investment by firms in machinery and equipment
improved in the quarter but not enough to offset the drop in exports.
"Encouragingly the weaker dollar helped boost the nominal value of exports
in the final quarter and this contributed to the money value of GDP also
rising last year for first time since 2007. Nominal GDP last year at €156.4
bn was some €1.2 bn greater than Government had expected in December's
Budget. This is of crucial importance in terms of the deficit target and
meeting the terms of the troika agreement. The positive carry-over on
nominal GDP into 2012 coupled with the more benign outlook for the
euro-dollar rate will ease the pressure somewhat on reaching this year's
budget deficit target of 8.6%.
"The Eurozone and global economies have clearly improved in the first
quarter of this year and Irish exporters are now much more positive about
their sales forecasts than they were at the end of last year. Ireland will
record another record year of export sales in 2012, resulting in economic
growth of about 1%. However the domestic economy remains very fragile. Until
we see a return to more normal spending and saving patterns growth will
remain muted and unemployment high. Government must find innovative ways
through which to unlock some spending and stimulate domestic activity. IBEC
has submitted a range of proposals to achieve this."
Check out our new
subscription service, Finfacts Premium
, at a low annual charge of €25 - - if
you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to
support the service.
It's a simple fact that in the
prevailing economic climate, the provision of high quality content cannot be
sustained through advertising alone.
Business executives who put a
premium on time and value high quality information, should use our service.