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11 Dec 2015
Eurozone: Irish 3Q growth puts 7% for 2015 in reach - ING
FXStreet (Delhi) - Anthony Baert, Research Analyst at ING, suggests that the Ireland might grow faster than China this year as the fresh GDP data for the third quarter confirms Ireland’s position as the strongest grower in the Eurozone.
Key Quotes
“According to the Central Statistics Office, Irish seasonally adjusted GDP grew by 1.4% QoQ in the third quarter, somewhat slower than the 1.9% in the second quarter. This resulted in a slight acceleration of year-on-year growth from 6.8% to 7.0%. Even without any further expansion in the second half, growth for 2015 as a whole would near 7%. GDP now is more than 7% higher than the pre-crisis peak reached in 4Q2007, in sharp contrast with the Eurozone average.”
“Again, growth was mainly driven by domestic demand. Investment, the major driver, added 1.1pp to growth. Private consumption continues to be “lacklustre” in comparison with GDP, but still grew by 0.7% over the quarter, adding 0.3pp to growth. Surprisingly, government expenditure was a drag on growth for the third quarter in a row, despite this year’s “expansionary” budget and signs that the government was spending windfall tax receipts. Net exports were an even bigger drag, as imports grew twice as fast as exports.”
“Currently, positive domestic demand developments are working together in the Irish economy. First, the isle is surfing on an investment wave from multinational companies, which boosts both activity today and structural growth in the longer term. Second, consumption is supported by falling unemployment and low oil prices, although it lags somewhat behind compared with overall activity.”
“Will this continue? Very likely. Leading indicators still point to expansion at the current pace. Investment and consumption will probably be joined by government expenditure ahead of the next general elections planned in early spring next year. Thanks to high tax revenues, this can even be attained with a further reduction of the budget deficit. But the surge of domestic demand also implies that the contribution of net exports might abate in the coming years, as imports should start growing faster than exports. In any case, a bright economic future awaits this unexpected new “emerging market”.”
Key Quotes
“According to the Central Statistics Office, Irish seasonally adjusted GDP grew by 1.4% QoQ in the third quarter, somewhat slower than the 1.9% in the second quarter. This resulted in a slight acceleration of year-on-year growth from 6.8% to 7.0%. Even without any further expansion in the second half, growth for 2015 as a whole would near 7%. GDP now is more than 7% higher than the pre-crisis peak reached in 4Q2007, in sharp contrast with the Eurozone average.”
“Again, growth was mainly driven by domestic demand. Investment, the major driver, added 1.1pp to growth. Private consumption continues to be “lacklustre” in comparison with GDP, but still grew by 0.7% over the quarter, adding 0.3pp to growth. Surprisingly, government expenditure was a drag on growth for the third quarter in a row, despite this year’s “expansionary” budget and signs that the government was spending windfall tax receipts. Net exports were an even bigger drag, as imports grew twice as fast as exports.”
“Currently, positive domestic demand developments are working together in the Irish economy. First, the isle is surfing on an investment wave from multinational companies, which boosts both activity today and structural growth in the longer term. Second, consumption is supported by falling unemployment and low oil prices, although it lags somewhat behind compared with overall activity.”
“Will this continue? Very likely. Leading indicators still point to expansion at the current pace. Investment and consumption will probably be joined by government expenditure ahead of the next general elections planned in early spring next year. Thanks to high tax revenues, this can even be attained with a further reduction of the budget deficit. But the surge of domestic demand also implies that the contribution of net exports might abate in the coming years, as imports should start growing faster than exports. In any case, a bright economic future awaits this unexpected new “emerging market”.”