The Irish economy contracted by 1.1 per cent in the first three months of 2011, official figures showed yesterday. Consumer spending fell by 2.1 per cent as the government continued to impose deep cuts and tax rises.
The sharp drop in output casts doubt on the European Commission's forecast that Ireland, alone of the eurozone states that have been bailed out, will register growth in 2012. The commission predicted in its spring forecast that Ireland would grow by 0.5 per cent this year.
However, Ireland's Central Statistics Office also said that the economy expanded in the final three months of 2011 by 0.7 per cent, having previously recorded a 0.2 per cent decline. That means Ireland avoided a technical recession last year, defined as two quarters of negative growth. Growth for 2011 as a whole was revised up from 0.7 per cent to 1.4 per cent.
Last week Ireland successfully sold €500m of three-month bills, its first capital markets auction since applying for a bailout in November 2010.