Ireland Out of Recession?

Post author By Karl Whelan
Post date December 17, 2009

The CSO today released the Quarterly National Accounts for 2009:Q3. Consistent with other indicators such as a stabilising unemployment rate, the release is consistent with a bottoming out of the economy. Though the year over year patterns still show sharp declines (7.4 percent for GDP and a whopping 11.4 for GNP) the best read we have on what happened during the latest quarter—seasonally adjusted quarter-over-quarter changes—point to stabilisation. GNP was down 1.4 percent on a seasonally adjusted basis over the quarter and GDP was up 0.3 percent. So technically, one could argue that this release confirms commenter John the Optimist’s call in September that Ireland was already out of recession.

There are, of course, caveats to this. The seasonal factors are based on limited data and so not particularly reliable. And the increase in GDP occurred despite declines in consumption, investment, government spending and exports (this was offset by the decline in imports). But still, one has to welcome anything that looks like good news.

How do these figures square up with the government’s projections in the budget? One point to note is that the bottoming out means that next year won’t have the same negative carry-over that this year did. In other words, if quarterly GDP remains flat at its 2009:Q3 level up to the end of 2010, then the year average for 2010 will be essentially the same as the year average for 2009. This assumption also implies a year-over-year projection for GDP in 2009 of minus 6.8 percent.

Against this background, one could argue that the budget’s projection of a 1.3 percent decline in GDP next year is perhaps too negative. Alternatively, with €4 billion of fiscal adjustment to be applied and a banking system that will still be restricting credit, perhaps the government have it about right.

Categories In Economic Performance
Tags Quarterly National Accounts
22 Comments on Ireland Out of Recession?

22 replies on “Ireland Out of Recession?”

Where does that put the total peak to trough fall in GDP & GNP?

This is a welcome change in direction for these stats but is this change in direction enough to counter the negative effect that the €4bn reduction in public expenditure will have on the economy over the next year. Assuming those savings are realized they must have a knock on effect on the economy as a whole, $4bn is around 2% of our GDP after all.

Congratulations to John the Optimist for a good call, quite early too! Will the revised figures cause us to take away his prize?

Throughout my undergrad economics classes, it was heavily emphasised that GNP is the output metric that matters for Ireland.

Bill Keating, assistant director-general of the Central Statistics Office, said: “The general picture shows that on a seasonally adjusted basis there is a levelling off in GDP but GNP continues to decline, albeit at a slower pace than it has in previous years.”

http://www.ft.com/cms/s/0/a2329b40-eb29-11de-bc99-00144feab49a.html?nclick_check=1

Constantin Gurdgiev points out ( http://trueeconomics.blogspot.com/2009/12/economics-17122009-end-of-recession-in.html ):
“consider why the GDP expanded in Q3 2009.

In the case of Q3 2009, every category of domestic expenditure fell on Q2 2009:

* Spending by consumers down by 0.7%qoq;
* Government expenditure down 0.9% qoq (good news given the deficit);
* Investment down some 10%
* Spending on Irish exports down 0.6% relative to Q2 2009.

So how did the economy grow? Imports fell a whooping 4.5%. Fewer BMWs and Mercs and flat screen TVs imported into the country and, magic happens – we are now richer by 0.3% than we were in June 2009. Right… North Korean model of growth indeedanyone?.. ”

These aren’t even figures pumped by stimulus. These are “the cure for inflation is inflation” figures… Q2, by contrast, looks positively benign.

So in a bizarre twist, it turns out that John the Optimist is the new Morgan Kelly 🙂

C, I, G and X down. M down more, and we’re growing again.

Sounds mad, and we all know the GDP statistics are unreliable in the Irish case. But, in principle, it could be possible: if a sufficiently smaller share of Irish expenditures fell on imported goods, then you could end up with more expenditure on Irish goods, even though total Irish expenditures (and export demand) had declined.

I’ll stick with GNP, though.

Irrespective of the actual significance of these figures when you drill down into them, in my view this is very welcome international PR for Ireland, especially given the Greek shenanigans at the moment.

Assume that sa real figs persists to Q4 2010. The carryover for real GDP is about zero. For real GNP is, sadly, minus 1.1%. Even +1% per quarter for real GNP through 2010 will produce yoy of only, real, +1.4%.

The budget projections on tax revenue, given static? price level, are not excessively gloomy. Tax revenue, at the margin, is likely to track nominal GNP closer than nominal GDP. The DoF figs are plausible, but policy needs to protect against the less favourable outcome.