International

null
Associated Press
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

facebook
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.”

Background: Ireland’s gloomy economic indicators

Reaction: Interview with Irish Immigration Minister Conor Lenihan

Historical Context: Ireland’s rise over the past two decades

Opinion & Analysis: Ireland bracing for recession

facebook

Most Recent Beyond The Headlines