Ireland back in recession in late 2011

Thursday 22 March 2012 11.49
GDP growth last year, but domestic economy still struggling
GDP growth last year, but domestic economy still struggling

Official figures show that Ireland technically returned to recession in the final three months of last year.

The Central Statistics Office said gross domestic product (GDP) fell by 0.2% during the final quarter of the year. This followed a 1.1% drop in the third quarter. Two consecutive quarters of falls in output is the technical definition of a recession.

Gross national product - which excludes profits from multi-nationals - fell by 2.2% in the fourth quarter, after a 1.9% drop in the third quarter. GNP is seen by many economists as a better indicator of the health of the domestic economy.

The CSO figures also show that GDP rose slightly during the whole of 2011, its first year of growth since 2007. GDP grew by 0.7% in 2011, but GNP fell by 2.5%.

Personal consumption which accounts for approximately two-thirds of domestic demand fell by 2.7% in 2011. Government expenditure also fell by 3.7% in the same period.

The largest drop was in business investment, down 10.6%, albeit, a smaller drop then 2010 and 2009, 24.9% and 28.7% respectively.

Sector by sector the CSO figures reveal that industry and agriculture were the main contributors to growth in 2011. Industry, excluding building and construction, grew by 4.5% while agriculture, forestry and fishing increased by 2% between 2010 and 2011.

Building and construction recorded the greatest decline in activity, a fall of 13.5% in 2011. Public administration and defence fell by 3.3%. Other services and distribution, transport and communications also fell by smaller amounts in 2011.

Smaller balance of payments surplus last year

Separate CSO figures show that there was a balance of payments current account surplus of €127m last year, down from a surplus of €761m in 2010. The balance of payments measures flows of income into and out of the economy.

The merchandise surplus increased as exports rose more quickly than imports, but there was a bigger deficit on the invisibles side. Invisibles include services and investment income flows.

For the final quarter of 2011, there was a balance of payments current account surplus of €796m.