Remember Europe’s so-called success story – Ireland? Time to scratch it off the list, as the “best performing” PIIG, and “peripheral reform” wunderkind, just reminded everyone that the only true success story in Europe is that other I country – Iceland, after its fourth quarter GDP unexpectedly dropped 0.2%, well below consensus estimates of a 1.0% GDP boost. Odd – recall that back in October, following the announcement that Greece would be allowed to extract a bondholder haircut, initially at 50% and ultimately at 78.5%, we said that “this means that Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece.” Looks like Ireland is well on its way to doing just that, and the GDP slide is actually not all that surprising. Next: prepare for more “surprising” GDP misses from Portugal, Spain and, of course, Italy.
From Business Week:
Ireland’s economy unexpectedly contracted in the fourth quarter, pushing the nation back into recession, led by a drop in exports and government spending.
Gross domestic product fell 0.2 percent from the third quarter, when it slipped 1.1 percent instead of a previously reported 1.9 percent, the Central Statistics Office said in Dublin today. Economists forecast a gain of 1 percent, according to the median of five estimates in a Bloomberg News survey. The economy expanded 0.7 percent from a year earlier.
Irish Finance Minister Michael Noonan said last week that he expects to cut the government’s growth forecast for this year as exports slow and consumer spending continues to contract. Ireland is struggling to revive its domestic economy as austerity measures weigh on household demand and unemployed remains above 14 percent.
“We think the boost by the external sector is likely to fade over the coming quarters and that domestic spending will continue to contract,” said Ben May, a London-based economist at Capital Economics Ltd. “As a result of that, Ireland will fall back into recession.”
Exports fell 1.1 percent from the third quarter and government spending dropped 3.4 percent, the statistics office said. Consumer spending rose 0.5 percent in that period, while investment advanced 14 percent.
Unemployment stayed at 14.2 percent in February, close to the highest level since the 1980s, when the country last endured similar austerity measures. Retail sales declined 0.8 percent in January from the previous year, and 3.7 percent percent from the previous month.
“Uncertainty over the world economy and euroland in particular is likely to weigh negatively on the country’s growth prospects,” said Alan McQuaid, an economist at Dublin-based Bloxham, which is forecasting 0.5 percent growth this year. “There is little to be optimistic about as regards the Irish consumer and personal expenditure in the immediate future.”
This post originally appeared at Zero Hedge and is posted with permission.