DUBLIN (Reuters) - Ireland technically pulled out of recession in the third quarter, posting stronger economic growth than forecast, but economists said the outlook remained very weak.
Ireland, which became the first euro zone country to enter recession last year, exited after gross domestic product grew 0.3 percent in the third quarter, higher than economists’ forecasts of a 0.1.
However gross national product, which strips out the profits taken by multinational companies, fell for a sixth straight month, highlighting domestic woes which necessitated a 4 billion euros saving in last week’s budget.
“The technical ending of the recession might give some much-needed cheer, but the devil is in the detail,” Deirde Ryan, economist at Goodbody Stockbrokers said.
“What today’s data clearly indicate is that a better than expected performance from the external sector is masking a very weak domestic environment, where there is still further weakness to come.”
GNP, seen as a more accurate measure of domestic performance because of the large number of multinationals in Ireland, fell 1.4 percent in the third quarter from the preceding quarter. GNP had been expected to fall 0.35 percent on a quarterly basis.
The April to June domestic figure was also revised to minus 1.7 percent from a provisional mark of minus 0.5 percent.
“The GNP figure is probably the most important figure for Ireland, and the downward revision (in the previous quarter) was pretty large,” said Brian Devine, economist at NCB said.
Irish people have kept a tight grip on their wallets amid rising unemployment and tax hikes and Thursday’s figures showed consumer spending fell by 0.7 percent from July to September after it rose by a similar amount in the previous quarter.
More up to date data last week saw retail sales fell further in October although economists saw budgetary reductions in value added tax and duties on alcohol benefiting consumer spending from next year.
Government spending fell to a level last seen in 2000, the figures released by the Central Statistic Office (CSO) also showed, while investment remained in marked decline.
Year-on-year, this contributed to a 7.4 percent fall in Ireland’s GDP for the quarter, just behind Dublin’s forecast of a 7.5 percent contraction for the full year.
Dublin expects GDP to contract 1.3 percent in 2010, slightly more pessimistic than the most recent Reuters poll showing economists forecasting a 1.1 percent fall in GDP next year.
“Clearly we shouldn’t overstate. It is good news that GDP is growing rather than falling, but we still have to remain cautious,” Eoin Fahy, chief economist at KBC Asset Management said.
Editing by Hugh Lawson and Victoria Main