Irish growth targets on track after GDP revisions

DUBLIN Tue Dec 18, 2012 12:33pm GMT

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DUBLIN (Reuters) - Ireland's economy grew by a slightly less-than-expected 0.2 percent in the third quarter but figures were revised up for the previous three months, putting the government on track to meet modest 2012 targets.

Bailed-out Ireland has avoided joining much of the euro zone in recession because of its robust export sector but weakening demand from trading partners, together with high unemployment at home, means growth has remained slow.

Dublin, which still has the highest budget deficit in the euro zone despite four years of relentless austerity, expects the economy to expand by 0.9 percent this year, down from a 1.4 percent uptick in 2011.

However, in what has become a regular pattern, the government recently cut its forecast for 2013 to 1.5 percent and the International Monetary Fund warned on Monday against imposing further budget cuts should growth disappoint.

"The first half of the year is a good bit stronger than the data had shown before so that means if growth is flat in the final quarter, you get 0.7 percent for the year," said Conall MacCoille, chief economist at Davy Stockbrokers.

"Today's release does little to change the bigger picture, however. Exports continued to slow, we did get a small increase in consumer spending but we'll have the tax rises and the budget hitting consumers in January."

Economists surveyed by Reuters had expected Irish gross domestic product (GDP) to grow by 0.5 percent in the three months to September, bouncing back from the flat second quarter that provisional data had shown.

However, the latter figure was revised up to 0.4 percent on Tuesday, while the decline in the first quarter was less than had been previously thought at -0.5 percent versus -0.7 percent.

DEPENDENT ON EUROPE

Ireland nevertheless needs growth to accelerate to above 2 percent from 2014 to begin eating into a debt set to peak at 121 percent of GDP next year. A third quarter rise in exports of just 0.3 percent showed how the downturn in Europe is weighing.

"We're still very dependent on what happens in Europe and it looks like the European economy will be in recession for the second consecutive year," said Dermot O'Leary, chief economist at Goodbody Stockbrokers.

"Despite that, I still think there's nothing in the numbers today that would say that the government forecasts for next year are totally unachievable. As we go into 2013, there are some glimmers of light."

One of those glimmers was the first year-on-year growth in domestic demand since the first quarter of 2008, just before a financial crisis began that left Ireland needing an 85 billion euro EU/IMF bailout two years ago.

Within the domestic figures, personal consumption also rose by 0.5 percent, just the second increase in the last nine quarters and one that was anticipated after retail sales grew for four successive months to the end of October.

However, economists warned that, notwithstanding the mildly positive domestic data, consumers would remain under pressure in 2013 as Ireland's sixth austerity budget in little over four years goes into effect. It includes a new property tax.

Tuesday's figures also showed that Gross National Product (GNP) which strips out the earnings of Irish-based multinationals, fell 0.4 percent in the quarter, compared with a 0.5 percent drop expected economists.

(Reporting by Padraic Halpin; editing by Stephen Nisbet)

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