The last months of 2009 brought no relief to the Irish economy. According to the Irish Central Statistics Office, GDP declined 7.1% year-on-year and unemployment was 13.1% in 2009. In Q4 of 2009, consumer spending decreased 5.2%, capital investment declined 28.2% and the volume of industry output decreased 6%. That said, the Bank of Ireland noted, in their latest research, that Ireland outperformed most European states in its export performance in 2009. Net exports increased by Euro 2,042 million year-on-year in Q4 of 2009, and export orders are still rising.
According to AIB Global Treasury, house building has continued to decline, with just over 2,000 new registrations in the three months to February 2010, at a seasonally adjusted annualised rate, compared to 7,000 at the beginning of 2009 - and over 70,000 at the height of the housing market boom. This fall in new building will assist with the disposal of the surplus stock of unsold accommodation that built up over the boom years.
House prices continue to fall, albeit at a slower pace than in the past. According to the Irish property website, the average nationwide asking price of a house was slightly below Euro 235,000 in the first three months of 2010, down one third from the peak of early 2007. The decrease in the first quarter of 2010 was 3.4%, the smallest quarterly decline in almost two years. Year-on-year, the fall in the first quarter of 2010 was 18%, a slight decline on the record year-on-year fall of 19% in the third quarter of 2009.
In contrast, motor sales recorded a year-on-year increase of 31.15% in Q1 of 2010, rising to 42,554 units total unit sales for 2009 were 57,460. Similar increases are noted in the sales of light commercial vehicles up 42.87% to 4,976.
In the first quarter of 2010 corporate insolvencies continued to rise; by 25% year-on-year, to 402 cases. Annualising this figure, Crédito y Caución expects an increase this year of at least 16% on the 2009 figure unless the business environment for Irish companies improves in the coming months.
It comes as no surprise that construction suffered a further increase and accounts for most of the failures, followed by services and retail, both of which were affected by consumer restraint.
Massive support for the troubled financial sector is underway
In March 2010 the start of the transfer of bad loans from troubled Irish banks to the National Asset Management Agency [NAMA] began. It is expected that up to Euro 80 billion of loans will be purchased by NAMA by the end of the year, with average discounts of up to 50% on the loan value. NAMA will acquire around 14,000 loans, with the 100 largest borrowers accounting for 50% of the portfolio. About 67% of NAMAs assets are based in the Republic of Ireland and 27% in the UK. 43% of these assets are land, 26% development and 31% commercial properties.
As, currently, access to bank credit is very difficult, Crédito y Caución expects that, following the transfer of the assets, banks will begin the process of lending to businesses to spur the recovery. Anecdotal evidence suggests that late payments will continue to be an issue until companies get access to working capital from banks.
Irelands fiscal deficit was 11.7% of GDP in 2009, so fiscal consolidation has become of paramount importance. To stabilise government finance and restrict the massive increase in public debt, tough austerity measures were introduced at the end of last year, before the European global plan, including harsh public service pay and social welfare payment cuts. The aim is to cut the deficit by more than a half, to 4.9%, in 2013. The irish approach to controlling national debt has been used as a blueprint by other struggling EU economies in Southern Europe.
There are tentative signs that the worst is over and that the overall economy will rebound in the second half of the year. The rate of job losses has slowed in the first months of 2010, and manufacturing industries recently showed some signs of improvement: according to the Irish Central Statistics Office, industrial production increased 13.7% year-on-year in February 2010. The seasonally adjusted turnover index was 4.3% higher in the period December 2009 to February 2010 than in the preceding three months period.
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