Shock setback for Ireland as GDP contracts

 
Julian Harris
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IRELAND’S economy unexpectedly shrank by 2.3 per cent in the final three months of last year, knocking the Eurozone country’s recovery.

The official estimate, released yesterday, means that Irish GDP contracted by 0.3 per cent in 2013.

Yet there was better news for the formerly bailed-out state, as it returned to standard bond auctions for the first time since September 2010. It raised €1bn (£834m) at a yield of 2.967 per cent – the lowest level ever for 10-year notes.

“It’s an absolutely massive deal,” said Davy Stockbrokers’ Eamon Reilly. “An absolutely stellar auction.”

The government has continued to improve its credit rating and is hoping to raise €8bn this year. Its prospects remain strong despite yesterday’s disappointing GDP figures, according to economist Anthony Baert of ING.

“Output in 2013 mostly declined due to net exports. The pharma sector has suffered from the expiration of a number of patents, which hit exports hard,” Baert said.

“Also the performance of gross national product, which in Ireland mostly excludes the production of foreign multinationals, was striking: constant GNP increased by 3.4 per cent in 2013. We remain positive on the Irish recovery. Domestic demand should further strengthen this year.”