THE STARK FIGURES released by the Central Statistics Office yesterday have sent commentators on the economy into a tizzy.
To recap, the Irish economy is still officially the worst-performing one of all the 27 EU states. Our Gross Domestic Product (GDP) fell by 1.9 per cent in the months from July to September this year. Gross National Product (GNP), a more accurate barometer of economic performance, fell by 2.2 per cent in that time. This contraction in the economy is the worst since early 2009 and reverses the growth trend of Q1 and Q2 of this year.
So where does this leave us “going forward”? The Irish Times carries a front page story that puts together these figures, and the “exceptional circumstances” as described by Herman van Rompuy of the European Council which prompted him to release the draft EU fiscal deal yesterday, and comes up with the headline, “Fears of new recession as economy suffers sharp decline”.
Certainly, the latter document does not make for comfortable reading – it says that countries with a debt-to-GDP ratio of over 60 per cent would have to agree to reduce their debt by 5 per cent per year. As Ireland currently falls into that category (our ratio is around 90 per cent), that would mean coming up with billions more in taxes and cuts from each Budget for the best part of the next decade. Sinn Féin finance spokesperson Pearse Doherty was quickest off the blocks last night to criticise the clause and told TheJournal.ie that it is “unworkable”.
The London Independent’s Economics Editor Ben Chu is also sounding a note of caution over the “poster child of the eurozone’s austerity drive” because of the figures. Business Week also had a pop at Ireland’s ‘Poster Boy’ image, saying the figures had “tainted” it.
So it’s rather heartening to consider the Wall Street Journal’s take on the situation. Eamon Quinn has written that the figures “should certainly not be read as a sign that Ireland – long praised (or patronised) as best in class of the eurozone’s troubled bailout-out economies – is sliding back into its deep three-year recession”.
Instead, Quinn focuses on the fact that these quarterly figures can be “remarkably volatile” and claims that it is austerity that is stopping the Irish economy from growing. In fact, he says, the Department of Finance is probably right in predicting a 1.3 per cent growth in Irish GDP next year.
So who is right? Investors.com – the digital portal of the Investor’s Business Daily – posted a brief comment yesterday:
With Europe falling into a recession and the global economy slowing, foreign demand may not offset government austerity measures and weak domestic demand.
The question, ultimately, is whether the economic downturn of Q3 is here to stay. This is a visualisation of what Q3 looked like. Let’s hope the guy from the Wall Street Journal and his caution on calling a full-blown ‘new’ recession is right.
(via CSO)
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