THE Government is suggesting that the latest data on the performance of the Irish economy, which indicates a contraction so far of 7.4% in GDP, was as anticipated last April when the second Budget was introduced and that a slight increase in merchandise exports of €20.79 billion (+€154 million) from multinational companies in the second quarter reflects an encouraging sign.
One quarter of the merchandise exports comprise computer software that was not incorporated as part of computer hardware or physical media but separately transmitted by electronic means.
Outward direct investment from the International Financial Services Centre was €5.73 billion in Q2.
Some €4.77 billion was reinvested in Ireland by multinational companies and this was combined with an investment €12.56 billion brought directly from overseas.
Exports to EU predominate
The EU is the destination of 63% of Ireland’s merchandise exports and 66% of exported services. 43% of merchandise exports and 39% of exported services are despatched to € countries. The exhortations of the UK Independence Party in connection with The Lisbon Treaty neatly avoid this fact.
The population of Ireland has risen to 4.45 million, an increase of 38,000 in the 12 months since April 2008 despite the emergence again of net outward migration – of 7,800 persons. The increase is accounted for by a record birth rate. This trend will enlarge the dependency ratio and requirement for resources in education.
Unascertainable impact of Banking Crisis on recovery
The media are absorbed by the ramifications of NAMA. But I find it instructive to view this banking crisis in a broader context because that is what will define our prospects for economic recovery.
The last time the banking system was in relative equilibrium was 2002, the year before the € became our everyday currency and the year before The Financial Regulator was established.
Our GDP, at constant market prices, is likely to have grown by 82.4% from €94.3 billion in 2002 to an anticipated €172 billion at the end of 2009.
Six financial institutions (AIB, Bank of Ireland, Irish Life & Permanent, Anglo, Irish Nationwide and EBS) accumulated customer deposits of €1.025 trillion but they collectively lent €1.543 trillion - €518 billion more than their collective deposits in from 2002 to 2008, financed by money raised on international markets.
The Central Bank provide a sector breakdown of outstanding credit each quarter. While, not surprisingly attention is drawn to the €96 billion owing by the real estate sector and €21 billion owing by the construction sector, the growth in personal borrowing of over €80 billion is bound to hit Skid Row in a deteriorating economy.
The growth in borrowing by manufacturing was quite moderate at under 75% given that it is from this source that exports and employment are generate. The following table sets out the main changes:
The following table illustrates that while Ireland’s GDP grew by 82.4% private sector credit expanded by 175.3%.
|March 2009 |
|% Change 2002-09|
|Agriculture and forestry||5,457||2,304||73.1%|
|Mining and quarrying||575||334||138.6%|
|Electricity, gas and water supply||1,251||423||51.1%|
|Wholesale / retail||14,053||8,776||166.3%|
|Hotels and restaurants||11,437||6,267||121.2%|
|Transport, storage and communications||3,347||1,363||68.7%|
|Health and social work||2,787||2,232||402.2%|
|Community, social and personal services||2,967||1,773||141.8%|
|TOTAL PRIVATE SECTOR CREDIT||€391,401 M||€249,204 M||175.3%|