The figures published last week by the CSO show that GDP contracted by -0.6 per cent quarter-on-quarter in the first quarter of 2013 and by -0.9 per cent year-on-year.
Almost all components of domestic demand contracted in year-on-year terms in the first quarter. Private consumption was down -1.6 per cent, partly due to low car sales. Investment fell -19.8 per cent as there were fewer purchases of aircraft than in the same quarter of the previous year. Government consumption continued to fall as public service employment continues to shrink in line with policy objectives.
On the external side, exports fell by -4.1 per cent. This is primarily due to patent expiration in the pharma sector as goods exports are down -9.4 per cent. Weak trading partner demand is also impacting. Imports fell by -4.2 per cent.
Notwithstanding these data, the labour market continues to show signs of stabilisation. Figures published this morning show that unemployment has fallen from a high of 15.1 per cent in February 2012 to 13.6 per cent in June 2013. In addition, the latest Exchequer returns published yesterday by my Department highlight the consistent improvement in Ireland’s public finances with the gap between income expenditure continuing to narrow.
The latest GDP figures are below expectations of both domestic and international forecasters. This makes the Government’s primary macroeconomic policy objective of putting the economy back on a sustainable growth path so as to move to a point where sustained net employment creation is taking place, even more imperative.
In this regard, competitiveness has improved substantially in recent years, with inflation at or below the euro area since March 2008. Tangible progress is being made to ensure a banking system healthy enough to support productive investment by inter alia the SME sector. In relation to the public finances, the policy objective remains the correction of the excessive general government deficit by 2015, as recommended by the ECOFIN Council in late-2010. All of the interim annual deficit ceilings set by the Council have been met, and the Government remains committed to bringing the deficit below 3 per cent of GDP within the stated time horizon.
Finally, I would like to emphasise that the Government remains committed to tackling the unacceptably high level of unemployment. Reflecting this, the Action Plan for Jobs 2013 set out over 333 actions to be undertaken in the coming year to support job creation and complement measures already undertaken in the Jobs Initiative and the Pathways to Work.