* Shock 0.6 percent GDP contraction in Jan-March
* Revised data shows three quarters of shrinkage
* Data, debt costs may raise questions over bailout exit
By Conor Humphries
DUBLIN, June 27 Ireland's economy slid into
recession late last year and continued to contract sharply in
early 2013, new and revised figures showed on Thursday, just
months before it is due to exit its EU/IMF bailout programme.
Gross domestic product shrank 0.6 percent in the first
quarter of this year from the previous three months, confounding
analysts' expectations of 0.3 percent growth - a shock reading
that shows the euro zone member is recovering from financial
crisis much more slowly than previously thought.
Revised data also showed a quarterly contraction of 0.2
percent in the fourth quarter of 2012, meaning Ireland's economy
has shrunk for three successive quarters and is in its first
recession since 2009.
The Irish government is targeting growth of 1.3 percent this
year and while Finance Minister Michael Noonan said he would not
tie himself to any particular number when asked if that forecast
would have to be revised, he said that other parts of the public
finances were holding up better.
"They're certainly disappointing but it's one set of
statistics," he said.
"We built the budget on 1.3 (percent growth) and the tax
flows for the first half of the year are consistent with our
budgetary targeting. We'll be slightly ahead of target, we
think, for June."
Ireland has been one of the few euro zone countries to have
eked out mild growth as the currency bloc's debt crisis has
unfolded, despite harsh spending cuts and tax hikes imposed to
help bring down one of Europe's highest budget deficits.
Though Irish people have not protested against austerity as
angrily as those in other indebted states such as Greece and
Spain, many have endured salary cuts of up to a fifth and big
tax rises. Unemployment has more than tripled, to 14 percent.
The second euro zone country to be rescued, in November
2010, it is due to complete its bailout later this year and has
made a limited return to bond markets, although yields on its
debt have recently started to rise again.
Analysts say the country has enough cash to cover most of
its funding needs through next year, however, and should exit
the aid deal on schedule, providing the European Union with a
badly-needed success story for austerity.
BAD WEEK FOR IRELAND
The poor economic data rounds off a bad week for Ireland,
where public anger is growing over leaked tapes of bankers
laughing about a government rescue of the financial system that
led to the bailout and years of austerity.
Three years on, a split in society is becoming clearer -
property is selling fast in upmarket areas of Dublin, while
shells of unfinished houses litter ghost estates and suburbs
around the country. Overall, house prices have fallen by half.
"Dublin is booming, but I go to my home town and most of the
shops are closed down," said human resources worker Lynn, who
did not want to give her second name. "It's heartbreaking. Here
it's completely different. I can't find properties to rent for
people who are relocating."
Thursday's data showed the economy grew by just 0.2 percent
last year, rather than the 0.9 percent initially thought, and an
export-led recovery stalled in the second half of 2012, largely
because of the slowdown in the rest of the euro zone.
Economic growth for 2011 was, however, revised up to 2.2
percent from 1.4 percent previously.
But returning to that level of growth this year now looks
unrealistic after personal consumption fell 3.0 percent in the
first quarter, its sharpest drop in four years. Exports of goods
and services had an even steeper decline of 3.2 percent, the
most since Ireland's economic crisis began.
The prospect of easing up a little on austerity, which the
government has been considering given leeway offered by a deal
which eased the terms of debt repayment, now looks trickier.
Noonan, who has said he would rather use the slack to invest
in capital projects, said on Thursday that it was still too soon
to say how the leeway would be used and that he would make a
call in September, a month before he presents his next budget.
"It's very fragile and it probably means we have to be very
careful about the scale of adjustment in budget 2014," said KBC
Ireland economist Austin Hughes, who revised down his growth for
GDP this year to 0.7 percent from 1 percent previously.