Exports, multinationals fuel growth of 0.5% in third quarter

It is the first time increases have been recorded in the same quarter in both since late 2007.

But the quarterly national accounts showed the economy shrank 0.5% in the 12 months to the end of September.

Finance Minister Brian Lenihan predicted year-on-year growth would return to positive figures by the end of December or early in the new year, claiming the latest figures showed the economy was stabilising.

“The budget day forecast for economic growth of 1.7% in 2011, which is in line with the consensus forecast, remains on track,” he said.

The CSO blamed the 0.5% annual drop on declines in all sectors other than agriculture and industry.

The minister said the economy was on an export-led growth path.

“Exports have increased at an annual rate of over 13%, which is the strongest rate of growth since early 2001 and this performance has occurred in both the goods and services sectors,” Mr Lenihan said.

He said personal spending was in line with expectations, while investment was weak, mainly reflecting the slow housing market.

Industry in the third quarter grew 1.4%, despite the building and construction sectors shrinking by 8.2%.

Agriculture also grew, but declines were seen in distribution, transport and communication, which fell 2.5 % and the services sector, which dropped 1.6%.

Over the three month period, exports were up 3.6% and imports 1.4%.

Mr Lenihan added: “The Government has consistently identified export-led growth as the strategy that will return this economy to growth and generate jobs.

“This strategy is working thanks to the improvement of competitiveness, and the flexibility and adaptability of the Irish economy.

“These economic output figures, when combined with the recent reduction in the Live Register, the positive producer and consumer sentiment indicators, and the higher than expected tax revenues, show that there are real positives for the Irish economy as we enter 2011.”

Mr Lenihan's view was supported by some economists.

Brian Devine of NCB stockbrokers described the Government’s growth forecast for next year - GNP growth of +1.0% and GDP growth of +1.7% - as "achievable".

"We believe that those targets are achievable and well within the bounds of a plausible outcome," Mr Devine said.

"NCB expect domestic demand to contract by more than the Government next year but we are also expecting a positive contribution from net exports, as such we see GNP at 0.3% and GDP at 1.0% in 2011."

Employers' group IBEC said that the latest economic growth figures prove that the Irish economy can outperform market expectations over the coming years.

"The export sector has performed exceptionally strongly so far this year and the third quarter numbers provide further evidence of this," IBEC chief economist Fergal O'Brien said.

"Overall, the picture is of a weak but stabilising domestic economy and a buoyant export sector. On balance, the numbers will give a positive message to the international markets on Ireland's ability to recover from the crisis."

The Dáil yesterday approved an €85bn bailout from the International Monetary Fund and Europe after the Government won a vote on the controversial rescue package with the support of three independent TDs.

Opposition parties Fine Gael, Labour and Sinn Féin rejected the deal and pledged to renegotiate it if elected to power after next year’s general election.

The Government unveiled the toughest budget in the State’s history last week to take €6bn out of the economy – the first phase of a four-year plan for recovery.

The most contentious aspects included cuts in child benefit, social welfare, and bringing lower earners into the tax base.