Ireland’s economy is in free-fall

GDP contracted by an alarming 8.5% year on year in the first quarter of 2009, while the fall in domestic demand was even more marked at 15.5%. These contractions were larger than any other high-income OECD country, reflecting the impact of the collapse in Ireland’s property market and the decimation of its construction sector. Surging job losses are now weighing heavily on private consumption and, with the public finances in disarray, the extent of downside risk to the Irish economy appears without precedent.

Ireland is mired in a recession of a different order from those being seen in its developed-economy peers. According to recently released national accounts data, GDP collapsed year on year by 8.5% in the first quarter of 2009—a sharper contraction than in any other high-income OECD country. And if the GNP (gross national product) measure of growth is used instead, which also takes into account the value of income from abroad (particularly important for economies with large traded sectors, such as Ireland) the slump is worse still, with a year-on-year fall of 12%. …