At 4.8%, the Irish economy is growing at the fastest rate in the EU in 2014

Ireland’s economy grew by 4.8% in 2014, the fastest pace in Europe, a sign that the country has emerged from its difficult financial chapter since becoming the first eurozone country to emerge from the crisis. rescue program at the end of 2013.

Government figures show Ireland’s economic growth has increased significantly from a growth rate of 0.2% in 2013, when it left a bailout package provided by the European Union and Monetary Fund international after launching deep budget cuts and other austerity measures.

Ireland’s performance was better than that of the United Kingdom, which grew by 2.6% in 2014, and contrasts with the timid recovery of the euro zone as a whole. The combined economy of the 19-member currency bloc, which includes Ireland and recently expanded to include Lithuania, gained just 0.8%. Not all eurozone countries have yet released their 2014 figures, but none are expected to outpace Ireland’s growth in 2014, according to the latest EU forecasts.

Behind Ireland’s faster growth is its heavy economic dependence on the United Kingdom and the United States, where it exports a large part of its goods. Ireland’s economic performance mirrored that of its No. 1 market, Great Britain, with faster growth in the first half of 2014 followed by a slowdown in the second. This reliance, however, has raised concerns about the underlying strength of the Irish recovery.

“There is a very powerful link between the fate of Ireland and that of the UK and the US,” said David Byrne, an economist at the Irish Economic and Social Research Institute, a Dublin-based think tank . The performance of the US economy is also critical for Ireland, as it helps guide the business decisions of US tech giants such as Google. Inc.

and Twitter Inc., which established a regional headquarters in Ireland to take advantage of its lower corporate tax rates.

But there are signs that Ireland’s domestic economy is also picking up speed, as evidenced by increased business confidence and consumer spending.

“For the first time, we saw all contributors to growth improve in 2014,” said Annette Hughes, director of research firm DKM Economic Consultants Ltd. Capital investment, a gauge of business confidence, rose more than 11%, while consumer spending rose for the first time since the start of the recession.

A rise in consumer prices eased deflation fears, as they rose 0.6% in February compared to a 0.8% drop in January. On an annual basis, however, prices fell 0.5%, mainly due to low oil prices.

The Irish government was forced to take 67.5 billion euros ($71.2 billion) in bailout loans after a collapse in its property market and banking system led to it being shut out of the markets bondholders in 2010. International creditors stopped lending to Ireland after recapitalization costs for its troubled banks worsened, pushing its budget deficit to 32% of gross domestic product.

The strength of the economy in 2014 has already reduced public debt, although it remains at 115% of GDP, according to official EU statistics. Nevertheless, estimates indicate that the Irish government is on track to meet its target of reducing the budget deficit to 3% of GDP by the end of this year, thanks to an increase in tax revenue caused by the economic rebound.

The government’s latest budget, presented in October, signals that the long period of austerity measures in Ireland is coming to an end. The government has announced modest tax cuts and other measures that could further stimulate economic growth. Yet Irish businesses and households continue to face high debt levels, and unemployment remains stubbornly high at double digit unemployment.

Write to Jon Sindreu at [email protected]

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Pat R. Madsen