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Associated Press
Irish Minister for Finance Brian Lenihan
Irish Minister for Finance Brian Lenihan
The Boom Is Over: Ireland Officially in Recession
September 26, 2008 10:38 AM
by
Anne Szustek
Data from Ireland’s Central Statistics Office confirms the country is officially in a recession, after indications this summer that the once-thriving economy was softening.
The ‘Celtic Tiger’ Goes into Hibernation
Ireland’s vigorous economic expansion over the past 20 years has earned it the moniker “Celtic Tiger.” But numbers from the past two quarters suggest the tiger is no longer on the prowl.
The Irish Central Statistics Office released figures Thursday showing an 0.8 percent year-on-year contraction in gross domestic product during second-quarter 2008, compared to the second three months of 2007. Because this is the second quarter in a row to show overall negative performance, the country is now technically in a recession.
“[However] the question of whether Ireland was in recession or not in the second quarter is nitpicking and almost inconsequential because we are there now in the third quarter,” economist Rossa White was quoted as saying by the Irish Times.
The two leading factors weighing on Ireland’s economy are decreases in real estate investment and consumer spending, respectively. Construction as a contributor to GDP decreased 12.2 percent in euro terms year-on-year from second-quarter 2008 to second-quarter 2007—€3.35 billion ($5.1 billion) in 2008 from €3.8 billion ($5.45 billion) last year.
Consumer spending in terms of volume dropped 1.4 percent during the second quarter of this year.
The transformation from one of Europe’s poorest nations to a high-tech upstart beckoned foreigners to the Emerald Isle. The country has seen 7.2 percent annual growth for the past decade, partly due to “buoyant labor markets,” writes the Financial Times. When eight Eastern European nations joined the EU in 2004, the number of immigrants to Ireland was in the hundreds of thousands.
In June, Irish Finance Minister Brian Lenihan called a report from Irish think tank the Economic Social Research Institute a mere “wake-up call.” The report showed a 3.3 percent jump in applications for unemployment benefits during May and predicted GDP was to decrease 0.4 percent this year. The economic conditions were leading some older Irish to recall the country's recent financial troubles.
As Llewellyn King writes in The Globalist, Ireland’s culture tends toward fatalism, including the country’s economic health. Pundits such as RTE radio host Pat Kenney have said “it’s time for Ireland to rediscover its recessive gene.”
As long-time residents contend with bearish economic indicators, the Eastern European immigrants, whose lower wages helped make Ireland’s original upswing possible, are returning to their home countries, welcomed back by upstart “tiger” markets.
Of the immigrants, restaurateur Vincent Mullen told The Wall Street Journal, “I couldn’t afford to be in business without them.”
The Irish Central Statistics Office released figures Thursday showing an 0.8 percent year-on-year contraction in gross domestic product during second-quarter 2008, compared to the second three months of 2007. Because this is the second quarter in a row to show overall negative performance, the country is now technically in a recession.
“[However] the question of whether Ireland was in recession or not in the second quarter is nitpicking and almost inconsequential because we are there now in the third quarter,” economist Rossa White was quoted as saying by the Irish Times.
The two leading factors weighing on Ireland’s economy are decreases in real estate investment and consumer spending, respectively. Construction as a contributor to GDP decreased 12.2 percent in euro terms year-on-year from second-quarter 2008 to second-quarter 2007—€3.35 billion ($5.1 billion) in 2008 from €3.8 billion ($5.45 billion) last year.
Consumer spending in terms of volume dropped 1.4 percent during the second quarter of this year.
The transformation from one of Europe’s poorest nations to a high-tech upstart beckoned foreigners to the Emerald Isle. The country has seen 7.2 percent annual growth for the past decade, partly due to “buoyant labor markets,” writes the Financial Times. When eight Eastern European nations joined the EU in 2004, the number of immigrants to Ireland was in the hundreds of thousands.
In June, Irish Finance Minister Brian Lenihan called a report from Irish think tank the Economic Social Research Institute a mere “wake-up call.” The report showed a 3.3 percent jump in applications for unemployment benefits during May and predicted GDP was to decrease 0.4 percent this year. The economic conditions were leading some older Irish to recall the country's recent financial troubles.
As Llewellyn King writes in The Globalist, Ireland’s culture tends toward fatalism, including the country’s economic health. Pundits such as RTE radio host Pat Kenney have said “it’s time for Ireland to rediscover its recessive gene.”
As long-time residents contend with bearish economic indicators, the Eastern European immigrants, whose lower wages helped make Ireland’s original upswing possible, are returning to their home countries, welcomed back by upstart “tiger” markets.
Of the immigrants, restaurateur Vincent Mullen told The Wall Street Journal, “I couldn’t afford to be in business without them.”
Background: Ireland’s gloomy economic indicators
The number of Irish citizens signing up for unemployment reached a 10-year-high during May. Between April and June, applications rose from 199,700 to 207,300, an increase of 3.3 percent. Economist Jim Power said that there are few economic remedies the government can take in the short term to stem the downturn, however the state will need to cut back spending in some sectors and channel the funds into other areas. "Things are going to get significantly worse over the next 12 months, and the numbers could easily reach 225,000 or 230,000 by the end of the year,” said Power.
Source: Irish Independent
The Economist predicted in a 2008-09 outlook for Ireland that “GDP growth is expected to slow sharply in 2008-09, mainly because of the ongoing slowdown in the previously overheated property sector. If the decline in house prices were to accelerate, a recession would be likely.”
Source: The Economist
Reaction: Interview with Irish Immigration Minister Conor Lenihan
Conor Lenihan, Ireland’s immigration minister, reflected on the role a sluggish economy could play in Irish immigration relations in an interview with The Wall Street Journal. “The irony is that such is the skills level inherent in the migrant population that it's quite possible in a downturn there are quite a lot of migrants who could be retained versus indigenous people. … Because construction has been a huge part of employment in Ireland in recent years, it's also been one of the [biggest immigrant employers]. But many immigrants have also penetrated higher-skilled employment categories.”
Source: The Wall Street Journal (subscription required to read full article)
Historical Context: Ireland’s rise over the past two decades
Some 20 years ago, Ireland was at risk of being “the sick man of Western Europe,” writes Llewellyn King. Structural unemployment stood at 22 percent and an ingrained sense of fatalism stemmed from the country’s economic and political histories. But with the 1992 Maastricht Treaty’s subsidies for infrastructure development and agriculture, followed by the rise of the Internet throughout the decade and the 1998 Belfast peace agreement, the country developed into what came to be known as the “Celtic Tiger,” becoming an economic model for other emerging market nations.
Source: The Globalist
Opinion & Analysis: Ireland bracing for recession
According to a PricewaterhouseCooper survey published in June, 14 percent of CEOs in Ireland believe the national economy will be strong over the next 12 months and 77 percent of were unhappy with local labor costs. Of the Irish company heads that were polled, 88 percent were satisfied with the corporate tax structure, however.
Source: RTE
Irish newspaper columnist Kathy Foley writes on her blog that 1940s fashion will be a trend in Ireland this winter—not in the glamour girl sense, but in terms of rationing. “Those pointy heads over at the ESRI may think the economy is going to recover by 2010, but that is seasons away. … In the meantime, those of us who care about being on-trend are going to have to cut our cloth.”
Source: Kathy Foley’s blog
“The non-housing sector must be in robust shape if growth is still expected in the economy overall,” writes The Irish Times.
Source: The Irish Times
The Guardian’s Allegra Stratton feels that the Irish people are turning against the EU as it becomes less advantageous to the Irish economy. During the 1990s, the economy flourished with help from considerable EU funding. Now, that funding has shrunk and Ireland is on target to become a net contributor to the EU. “Ireland may simply be acting rationally,” Stratton writes, “pulling up the drawbridge on a political project that did so well for it once but could sour now that economic times are harder for all.”
Source: The Guardian
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