DUBLIN (Reuters) - A third quarter acceleration showed the immediate impact on Ireland’s economy of Britain’s vote to leave the EU was milder than expected, Finance Minister Michael Noonan said on Friday.
Gross domestic product, which can vary wildly from quarter to quarter and be subject to huge revisions, expanded 4 percent in the three months to September from the previous quarter and 6.9 percent year on year, data showed earlier on Friday.
“Today’s encouraging data are mirrored in strong employment growth as well as tax receipts. They show the immediate impact from Brexit has been more benign than initially anticipated. However, we cannot be complacent,” Noonan said in a statement.
Ireland’s growth rate is forecast to be the highest in the European Union for a third successive year in 2016, though other data points to a more mixed picture since June’s Brexit vote.
While the jobless rate - which many economists prefer to GDP as a yardstick for the economy - fell to 7.3 percent last month, consumer sentiment weakened and robust retail sales growth slowed.
Britain is Ireland’s largest single trade partner, accounting for about 17 percent of Irish exports, according to official data - a figure that rockets when foreign-owned firms operating out of Ireland are excluded. Britons also account for 40 percent of tourist trips to Ireland.
The quarterly jump in GDP, which followed a weaker-than-expected start to the year, was driven by a 1.7 percent rise in exports and a 8.6 percent drop in imports. Personal consumption expanded by 0.7 percent on the quarter.
The relevance of using GDP to measure the true health of the Ireland’s open economy was called into question in July when growth for 2015 was adjusted up to 26 percent after a massive revision to the stock of capital assets.
While economists at Merrion and Davy Stockbrokers said the government was now likely to meet or better its forecast for GDP growth of 4.2 percent for 2016, others cautioned against reading too much into Friday’s numbers.
“Today’s data are consistent with indicators that suggest the economy is posting solid growth. However, the 4 percent quarter-on-quarter increase dramatically overstates the current momentum of the Irish economy,” Austin Hughes, chief economist at KBC Bank said.
Dermot O‘Leary, chief economist at Goodbody Stockbrokers, said stripping out aircraft leasing and research and development from domestic demand provided a more meaningful reading and suggested the economy grew by 3.2 year-on-year in the quarter.
Editing by Larry King and John Stonestreet