In addition to what’s now being called the ‘Irish Panic’ — after the market punched Ireland credit default swaps in the face on Thursday, following fears that Anglo Irish will be brought down by its subordinated debt — here’s another Gaelic headache.
From the Irish statistics office’s latest release on economic growth:
Initial estimates for the second quarter of 2010 show a decrease, on a seasonally adjusted basis, of 1.2 per cent in GDP and a fall of 0.3 per cent in GNP compared with the previous quarter. In quarter 1 there was an increase of 2.2 per cent in GDP and a decrease of 1.2 per cent in GNP compared to Quarter 4 ‘09. In comparison with the corresponding quarter of last year, GDP in constant prices was 1.8 per cent lower while GNP was 4.1 per cent lower…
… while that year-on-year GNP figure contrasts with economists’ forecasts of -2.7 per cent. Austerity is biting even fiercer than expected.
GNP is supposed to be a better measure of the Irish economy’s health, so this further bit is interesting:
The estimate of GNP is derived by adjusting GDP for income flows between residents and non-residents. The timing of these flows can be variable. They include, in particular, the profits of foreign owned enterprises which increased by €737m between Q2 2009 and Q2 2010. The increase, in this quarter, in the net factor income flows is also affected by increased interest payments on government debt. As a result, the annual decline in GNP was more severe than that in GDP.
Meanwhile, economist forecasts for the GDP figures beforehand: + 0.5 per cent growth quarter-on-quarter and -0.4 per cent year-on-year.
Quite some miss there too, then.
The Irish finance ministry has already played down the figures — and possible effects on fiscal revenues, by the looks of it:
RTRS-IRISH FIN MIN SAYS PACE OF DECLINE IN CONSUMPTION AND INVESTMENT IS EASING
RTRS-IRISH FIN MIN SAYS Q2 ECONOMIC FIGURES AFFECTED BY SPIKE IN IMPORTS
RTRS-IRISH FIN MINISTRY SAYS NO PLANS TO BRING FORWARD BUDGET DATE
RTRS-IRISH FIN MINISTRY SAYS WILL PUBLISH REVISED FISCAL NUMBERS IN EARLY OCTOBER
But we’d remind of what Barclays Capital’s analysts said in that report on Irish debt sustainability recently. There just isn’t that much room left for macroeconomic manoeuvre any more — and it appears to be fading fast.
Related links:
24 hours in the sovereign debt market – FT Alphaville
Access denied? – FT Alphaville
Irish government debt needs you – FT Alphaville