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16th Apr 2024

Irish economy in surprise decline, threatens debt-cutting plan

  • Personal consumption fell by 0.6 percent in the final quarter of 2013 (Photo: William Murphy)

Ireland's economy suffered a shock decline in the final months of 2013, posting negative growth for the year and casting a pall over the country's full return to the financial markets.

Data from the country's Central Statistics Office (CSO) on Thursday (13 March) indicated that its gross domestic product (GDP) contracted by 2.3 per ent in the fourth quarter, turning a year that had been expected to yield modest growth into a 0.3 percent recession for the year as a whole.

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  • A surprise decline? Ireland fell back into recession following a sharp fall in the final three months of 2013. (Photo: Paola Farrera)

According to the figures, personal consumption fell by 0.6 percent in the final quarter of 2013, while exports rose 2.1 percent and imports climbed 5.8 percent.

Analysts attributed the decline to the so-called pharmaceutical patent cliff, with a sharp drop-off in revenue from pharmaceutical sales as a number of drugs made in Ireland lose intellectual property protection.

"The numbers show that measured GDP in Ireland fell slightly in 2013. By contrast, labour market conditions are encouraging," said Irish finance minister Michael Noonan.

But the figures are still an unexpected setback. The European Commission expects Ireland's economy to continue its recovery in 2014 and 2015 with GDP growth of 1.7 percent and 2.2 percent respectively. The country's unemployment rate has also started to fall and is now below the 11.9 percent average across the eurozone.

Weaker growth also reduces the prospects of Ireland starting to reduce a debt burden that peaked at 124 percent in 2013, lower only than Portugal, Italy and Greece in the EU. The Commission predicts that Ireland's debt will fall to 121 percent and 119 percent over the next two years.

The news also cast a shadow over Ireland's first full return to the bond markets. Ireland raised €1 billion from 10-year debt on Thursday, in its first auction since it was forced to seek a three year rescue package in September 2010. The auction saw Ireland's borrowing rate fall to a record low rate of fractionally below 3 percent.

Ireland became the first eurozone country to exit a bailout programme last December, after deciding not to request a temporary credit line when its €85 billion rescue finished.

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