Irish Economy Grows at Fastest Pace Since 2011 As Bailout EndsDonal Griffin and Joe Brennan
Ireland’s economy accelerated more than expected in the third quarter to the fastest pace since 2011, buttressing the government as it prepares to fully re-enter international credit markets.
Gross domestic product rose 1.5 percent from the previous three months, when it grew a revised 1 percent, the Central Statistics Office said in a report published in Dublin today. Economists had estimated a 0.6 percent expansion, according to the median of five estimates in a Bloomberg News survey. GDP rose 1.7 percent from a year earlier.
Ireland sought an international rescue in 2010, as the collapse of a real-estate bubble sent the nation to the brink of bankruptcy. This week, the nation became the first to leave an aid program since the euro-region’s crisis erupted in 2009, with the government opting not to seek a precautionary line of credit from international authorities.
“The improvement in economic conditions is likely to give the government more assurance in its decision for a clean return to the market and more room for manoeuvre in further fiscal adjustment,” Gizem Kara, an economist in BNP Paribas SA, said in a note to clients. “The economy has picked up in the second half of 2013 and we expect this to continue into 2014.”
Irish bonds rose today, pushing the yield on 10-year debt down 1 basis point to 3.45 percent.
Growth in the third quarter was helped by a 0.9 percent gain in consumer spending. Net government spending rose 1.1 percent. Imports fell 0.3 percent.
Exports dropped 0.8 percent, partly because of the so-called patent cliff in the pharmaceutical sector, according to Alan McQuaid, an economist in Dublin with Merrion Stockbrokers. Five of the world’s once top-selling dozen medicines are produced in Ireland by firms including Pfizer Inc. and sales are falling as they lose exclusive sales rights.
Investment spending jumped 10.9 percent, the biggest increase since the first quarter of 2012. The improvement may have been helped by drug companies spending more money on machinery and equipment as they seek to replace products that have lost their patent, according Conall Mac Coille, chief economist at Davy, Ireland’s biggest securities firm.
The biggest quarterly gain among the economy’s sectors was in building and construction, which expanded 4.3 percent on a seasonally adjusted basis. Property prices have soared in Dublin this year as the nation recovers from a 2008 real estate crash that prompted the 67.5 billion-euro bailout.
“Today’s will be very welcome following lackluster figures in the first half of the year, with the upgrade to second-quarter data also noteworthy,” said Ronan Dunphy, an analyst at Glas Securities, in Dublin. “However, the year-on-year growth rate of 1.7 percent will need to be matched in fourth quarter just to meet the government’s forecast for full-year growth in 2013.”