Ireland would grow further if fiscal cuts were less harsh, says Barclays

Ireland

During the third quarter of this year, the economy in Ireland improved by 0.2 percent, which was half a percentage point lower than market expectations. For analysts at Barclays, the cause of this mild behaviour must be found in the strict programme of adjustment through which government expenditure is currently going.

Public investment, said Barclays, “remained a drag. This is unsurprising, considering that fiscal consolidation continues at a significant pace.”

Almost elsewhere in the economic system figures brought notes of optimism. Year on year, the Irish GDP expanded by 0.8 percent, when Barclays forecasts pointed at 0.6 percent. In fact, revisions of previous data showed that contraction in the first quarter was -0.5 percent against -0.7 percent, while in the second quarter the tide changed quite remarkably to 0.4 percent growth against a flat 0.0 percent believed before.

Exports have also performed assuredly since the start of the crisis. In July-September, external sales grew by 0.3 percent from -0.4 percent in the previous three months. Imports went up, too, by 2.1 percent: domestic demand is expected to recover next year gradually.

But again, although last quarter “painted a slightly better picture for the Irish economy, with domestic demand’s tentative signs of a recovery and exports returning to positive territory after a brief contraction,” Barclays experts warned that there are “downside risks to this from the ongoing fiscal adjustment, the weakness in the labour market and falling real disposable income.”

About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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