RPT-UPDATE 1-Irish growth stalls with sharp Q3 GDP fall

Fri Dec 16, 2011 6:53am EST

Related Topics

* Ireland's Q3 GDP falls 1.9 pct Q/Q vs -0.5 pct forecast

* Falls from euro zone's second-best performer to worst apart from Greece

* Weaker global outlook seen damaging future growth prospects

By Padraic Halpin

DUBLIN, Dec 16 (Reuters) - Ireland's economy contracted by 1.9 percent in the third quarter, far worse than expected, as global economic turmoil dented export growth, raising the stakes for its fiscal and debt targets under an EU-IMF bailout.

Ireland was the worst performing economy in the euro zone in the third quarter apart from Greece, which no longer publishes seasonally adjusted figures, marking a stunning reversal of fortune from the second quarter, when it was the second-best in class after Estonia, official data on Friday showed.

Ireland's quarterly GDP data are notoriously volatile due to the inclusion of the earnings of Irish-based multinationals and analysts said the country should achieve full-year GDP growth this year, the first since 2007, but below the 1 percent forecast by the government.

"It (GDP) is probably below the 1 percent this year," said Austin Hughes, chief economist at KBC Bank. "In terms of next year it just emphasises the difficulty we have."

The contraction in Gross Domestic Product (GDP) on a seasonally adjusted basis was far worse than forecasts of a 0.5 percent fall by seven economists polled by Reuters.

Held up as a role model for other indebted euro zone nations, deteriorating prospects for Irish growth threaten to undermine its efforts to become the first country to emerge from an EU-IMF bailout in 2013.

Ireland's international lenders have warned that growth could deteriorate in the months ahead if Ireland's main trading partners slide into recession.

Gross National Product (GNP), seen by some economists as a more accurate indicator of the state of the economy because it strips out the earnings of Irish-based multinationals, was down 2.2 percent in July-September, disappointing expectations for a flat performance.

The data shows exports are struggling to compensate for a domestic economy still stuck in the doldrums due to an unprecedented housing crash and prolonged austerity measures, including 3.8 billion euros ($5 billion) of fiscal adjustment in its budget earlier this month.

Ireland's current account surplus came in at 850 million euros compared to a surplus of 1.18 billion euros in the same period last year.

Second quarter GDP growth was revised to 1.4 percent from 1.6 percent previously.

Ireland this month cut its GDP growth forecast for 2012 to 1.3 percent from 1.6 percent, the second downgrade in a month, in line with 11 economists polled by Reuters at the start of the month.

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