Ireland economy in nosedive
Dublin - Ireland's economy switched sharply into a downturn in the third quarter, shrinking 1.9% from growth of 1.4% in the second quarter of 2011, official data showed on Friday.
The data indicates that the Irish economy, which was rescued in 2010 by the IMF and EU, is struggling to recover from the depths of the nation's devastating property and debt crisis.
Growth of gross domestic product in the second quarter, or three months to June, was revised down from an original estimate of 1.6%, the Central Statistics Office (CSO) said in a statement.
Massive debt and deficit problems led to an €85bn ($115bn) rescue package for Ireland in November last year, as Dublin fell victim to the eurozone's sovereign debt crisis.
Prior to Friday's grim data release, Ireland had been hailed as an example of how a rescued eurozone country could face up to the consequences of its economic collapse.
German Chancellor Angela Merkel had recently praised Ireland as a "superb example" of how a country can work its way out of a debt crisis, as Dublin implements spending cuts and tax rises under its bailout programme.
"Ireland's third quarter GDP figures rather spoil its emerging image as a 'poster boy' for other debt-laden peripheral eurozone economies," said Jonathan Loynes, chief European economist at the Capital Economics consultancy.
"Of course, it would be wrong to read too much into one quarter's figures. The Irish data are notoriously volatile and the third quarter's drop in GDP reverses little more than half of the growth seen in the first half.
"Nonetheless, the figures still put something of a dent in hopes that Ireland was starting to reap the rewards of its economic reforms and austerity measures. With borrowing costs way higher than those of Italy, Ireland's future prospects within the single currency are far from secure," Loynes added.
The Irish GDP figures include output generated by both domestic and foreign companies based in Ireland.
Excluding the foreign contribution, Ireland's gross national product (GNP) shrank by 2.2% in the third quarter, or between July and September. This compared with 0.7% growth in the second quarter.
Conall MacCoille, Davy stockbrokers' chief economist, described the figures as "disappointing," adding: "Exports continue to grow and that trade made a positive contribution to GDP growth so the narrative is more or less the same - export-led growth, weak domestic demand - and the risks looking forward to 2012 are that the slowdown in the euro area will be bad for Irish exports.
"Today's data doesn't really change that story but nonetheless they are a little bit weaker than expected."
Ireland's austerity budget last week estimated that GDP growth this year will be 1%. It predicted 1.3% growth in 2012, down from the government's previous estimate of 1.6% in a November fiscal plan.
The €3.8bn austerity budget aims to bring the country's deficit down to 8.6% of GDP in 2012. The government has pledged to bring the deficit below 3% of GDP by 2015.