Preliminary estimates from the Central Statistics Office (CSO) published yesterday indicated that Irish GDP decreased by 0.3% in volume terms in 2013. However, for the second successive year, GNP showed an increase over the previous year, of 3.4% in real terms.
On a seasonally-adjusted basis, constant price GDP for the fourth quarter of last year declined by 2.3% compared with the previous quarter while GNP rose by 0.2% over the same period.
On the expenditure side of the accounts, imports growth outpaced that of exports during 2013, a reversal of the trend in recent years. The combined effect resulted in a decline of €1,028m in next exports. This fall, in addition to the aggregate 0.1% decrease in total domestic demand led to the overall decline in real GDP last year of 0.3%.
Much of Ireland’s problems last year stemmed from the expiry of patents in the key pharmaceutical sector, which depressed merchandise exports overall. Encouragingly, services exports remained resilient and were 7.1% higher year-on-year in the fourth quarter.
The other positive is that fixed-investment showed positive quarter-on-quarter growth in the second, third and fourth quarters, which augurs well for 2014 as do the recent signs of improvement in personal spending. We wouldn’t read too much into the GDP data. In our view they are understating the true health of the economy at this juncture given the huge improvement we’ve seen in employment in the past year, with GNP a better barometer.
<b><i>But even on a GDP basis, we continue to believe that Ireland is better placed than most to benefit from the upturn in the world economy and assuming no major external shocks this year, there is every chance that the Government’s official 2.0% growth target will be met. Exports and domestic demand should both be stronger. Indeed, if anything the risks to growth appear tilted to the upside at this early stage of the year.
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