Ireland Out of Recession?

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.

22 replies on “Ireland Out of Recession?”

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.”

Constantin Gurdgiev points out ( ):
“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.

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.

I’d just like to point out that i was a fan of JohnTheOptimist way before the rest of you…:D

@ Karl

i’ve just read that the unions and the DAA have agreed on a (on initial reading) rather significant pay and job cuts proposal at Dublin Airport. Although this will lead to immediate reductions in both staff and wages, there is also a provision to restore wages if the DAA income turns around. As a rather vocal opponent of many public sector and semi state unions recently, i feel its required that i give credit where it is due, and it certainly is in this case. Similarly level headed and reality-based negotiations like this will help to put the country back on its feet. Bravo.

“Consistent with other indicators such as a stabilising unemployment rate, the release is consistent with a bottoming out of the economy”

Consistent with other indicators?

What would those “other” indicators be Karl?

More Polish people leaving Ireland so Fianna Fail will not pay welfare?

It seems fairly clear to me that if the Poles leave the “unemployment” rate drops.

What a surprise Karl?

Fianna Fail worked out that they can export Poles not Irish.

Welcome to the Smart Economy.

“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.”

Is that it Karl?

Christ if only it was a 1.3% decline in GDP.

But it’s not Karl. It’s €100bn hard cash.

If you think it’s not hard cash you have to ask yourself, where does the money come from?

It comes from the labour and capital of this Republic.

It doesn’t come from anywhere else.

€100bn is 66% of the entire labour and capital output of this country.

It’s the banks Karl.

There is nothing else.

We as a Society can work out our differences and accommodate the value of a Nurse with the value of a Barrister.

Anglo Irish Bank and the Irish Nationwide Building Society should be liquidated. It disgusts me that they live.

A Debtors’ revolt is not out of the question.

@ Bond. Eoin Bond


Sell it.

The State has no business owning airports.

Oh, and liquidate Anglo Irish and Irish Nationwide.


Certainly there are aspects of the Irish economy that inspire hope, but talking about the end of the recession now is, as I have argued before, irresponsible.

Alas, €4 bn is only a fraction of the necessary fiscal adjustment required. If our deficit is 12% of GDP, that means a balanced budget would imply GDP of 10.6% less than what it is now.

And this is without factoring in the cost of Nama-related debt, as Greg has evoked above.

Light years from green shoots. And the hyperdrive is leaking.

The Irish household and business sectors both need to repair their balance sheets by repaying foreign borrowing and perhaps even buying foreign assets. This helps to justify to some extent the GDP up / GNP down contrast. Domestic consumption and investment (and certainly government expenditures) down relative to domestic production is a good thing.

@ Greg

“More Polish people leaving”…..And where were these Poles living, renting? More flats and apartments empty!

We brought them to build them, then told them to rent them and now tell them to please leave! That is called planning in Ireland!

Oh! BTW “recession is over” One of the best laughs I’ve had this year. This is the kind of statement that brings economics into disrepute!

The problem is Ireland is a two speed economy. We have the multinational internationally traded sector which seems to have done pretty well during the downturn and the domestically traded part where most of us live and work and get paid (or not). The GDP figure is an average of the two, we can assume the domestic side is still in recession.

It explains the incredulity with the announcement the recession is over. For most people it isn’t.

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