Paul Sweeney: A small increase of 0.3% in GDP in Q3 of 2009 means that Ireland is no longer in recession according to some economists, and this was the spin put out by the Tánaiste and Minster for Enterprise Trade and Employment Mary Coughlan on Thursday’s radio. She was commenting on Thursday’s National Income figures for Q3 2009
Ms Coughlan also seemed to take comfort from the decline in Q3 over Q1 & 2 figures. Tiny movements in a couple of quarters are no indicator of the end of the deep recession. Such short-termism was at the heart of the financial crisis and a major cause of the recession. Too many serious people swallowed the one swallow syndrome. Not again, now?
National Income in the year to September fell by a massive 11.3% in GDP. This is a wee bit less than the decline of over 12% in the previous two quarters, but it does not mean that the recession has bottomed out. The next quarter, Q4 includes Xmas, and could be below the 12% decline, but the impact of the savage Budget will depress domestic consumption further, deep into 2010.
Furthermore, it is wrong to take GDP as the marker simply because it was more favourable than GNP. GNP, not GDP is what is accepted by economists as the better measure of National Income in Ireland. The collapse in Irish GDP was a still huge fall of 7.4%, compared to the even bigger fall of 11.3% in GNP for year to Q3, 2009.
Ireland’s economic collapse in GDP was almost the worst in the world in 2009. The deflationary impact of the Budget will mean that the economy will continue to decline in 2010.
Consumer spending, which some economists seem to believe does not matter in Ireland, was lower by 7.3% in Q3 than in the same quarter in 2008. Investment was down by 35%, though exports were up in Q3.
In 2010, unemployment will rise, assisted by the Budget, even if many more foreigners flee our shores, and Ireland will have a further fall in National Income.