At last some good news to cheer about; the Irish Republic’s economy has registered a growth of 0.5% in the third quarter of 2010. However, the growth rate between July and September fell a little short of analyst’s expectations.
After the country came out of recession at the beginning of the year, the economy actually shrank in the second quarter. To improve the country’s economic health, the Irish Parliament approved the toughest budget in its history, slashing government expenses and increasing taxes.
The industrial production has led the country to recovery, according to the report of the Central Statistics Office. Apart from industries, only agricultural output grew over second quarter.
Expressing confidence, the Finance Minister Brian Lenihan said: “Today’s figures show that the economy has stabilised and is now on an export-led growth path. The budget day forecast for economic growth of 1.7% in 2011, which is in line with the consensus forecast, remains on track”.
However, the analysts did not sound very optimistic and said that domestic demand is yet to recover.
According to Dan McLaughlin of Bank of Ireland “It seems very clear that consumer spending has fallen, we know government spending has fallen [along with] capital spending. Domestic demand is still very weak”.
However, the Irish government plans to cut spending further by €15 billion over the next four years, starting with an immediate cut of €6 billion in 2011. This will narrow down the expanding budget deficit the country is witnessing.
The recent tax hike and the expense cut were preconditions for securing €85 billion bail-out loans from the European Union and the International Monetary Fund.
The republic was forced to borrow from multilateral lending agencies after jittery international investors refused to invest citing high sovereign debt levels.