Irish Economy Suffers Dramatic Downturn

Ireland (Xetra: A0Q8L3 - news) 's economy shrank 1.9% in the third quarter - almost four times more than was expected.

Figures from the Irish Central Statistics Office (CSO) show gross domestic product (GDP) contracted in the three months to the end of September, after growing in the first two quarters of 2011.

Ireland had been the second-best performing economy in the eurozone in the period from April to June, but now falls to second-worst - only above Greece.

Earlier in December, Ireland cut its GDP growth forecast for 2012 to 1.3% from 1.6%.
The Irish finance and public expenditure ministers unveiled their latest austerity budget on December 6 and 7.

It included a 2% hike in VAT and a property tax of 100 euro (£84) per household.

Gross national product (GNP), seen by some as a better measure of the economy because of the large number of multinational companies operating in Ireland, shrank by 2.2% between July and September, compared with 0.7% growth in the second quarter.

The data leaves Ireland on course to register only marginal growth this year.

Looking at the changes over the year, the CSO said there had been a 15% increase in farming, forestry and fishing - but consumer spending, construction and government spending were all continuing to fall in the third quarter.

A more than 20% decline in construction effectively wiped out gains made in other sectors.

The CSO also said there had been a 20% fall in investment compared with the previous quarter, figures which can be heavily influenced by the purchase of valuable aircraft.

The country received a £72bn bailout from the European Union, European Central Bank and the International Monetary Fund in November (Stuttgart: A0Z24E - news) 2010.

It has often been held up by European leaders as a model for recovery following a series of austerity budgets.

Now, Ireland's Department of Finance was warning about the significant impact the eurozone crisis is having.