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Date Posted: 09:10:22 07/09/08 Wed GMT
Author: Lynn
Subject: Ireland's economy shrinks 1.5 percent )Boston Globe)

Ireland's economy shrinks 1.5 percent
By Shawn Pogatchnik, Associated Press Writer  |  June 30, 2008

DUBLIN, Ireland --Ireland's economy shrank 1.5 percent in the first quarter of 2008, offering the first official evidence that this long-booming country is heading for its first recession in 25 years.

The Central Statistics Office said the January to March fall in gross domestic product from the first quarter of 2007 -- when Ireland's decade-old Celtic Tiger economy was still roaring ahead with 8.7 percent growth -- was the first time that the Irish GDP has dropped since quarterly calculations began in 1997.

Ireland previously calculated GDP only on an annual basis. The year 1983 was the last time that the country recorded negative growth and, therefore, a recession.

Ireland's major think tank, the Economic and Social Research Institute, earlier this month forecast that the country would fall into recession this year while unemployment would rise from its current 5.4 percent to above 7 percent. Economists typically consider a recession at least two straight quarters of falling GDP.

Monday's report pinned principal blame for the economic U-turn on Ireland's property bubble, which burst last year amid global fallout over the U.S. subprime mortgage crisis. Celtic Tiger growth was buttressed in recent years by frenzied construction activity as developers sought to cash in on soaring prices and swelling personal incomes.

The Central Statistics Office reported that the building of new houses and apartments has slumped 30 percent over the past year as demand has fallen and prices have declined by 10 percent or more, leaving thousands of construction workers to search for new jobs.

A related report Monday from the Central Bank of Ireland corroborated the trend. It reported that mortgage lending grew by 11.1 percent last month -- the lowest rate of growth since 1992.

Investors dumped shares on the bank-heavy Irish Stock Exchange, which fell more than 2 percent Monday to below the 5,200-point level, a measure last reached in August 2004.

The market was above 9,000 points as recently as July 2007, just before the U.S. subprime crisis began eroding global confidence in financial shares.

Irish Life & Permanent, Ireland's No. 1 mortgage provider, was hit hardest Monday, falling 7 percent. Bank of Ireland, Ireland's second-largest bank, fell 5.5 percent and small-business specialist Anglo-Irish Bank Corp. fell 6 percent. The biggest bank, Allied Irish, was down 2.9 percent. 


© Copyright 2008 The New York Times Company
 

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