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Strong Irish growth raises prospect of eased austerity

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(Globalpost/GlobalPost)

Ireland's economy expanded by a strong 2.7 percent in the first quarter of 2014 in a fresh sign the eurozone nation is returning to health, official data showed Thursday.

The Central Statistics Office figures show GDP in the first three months increased 4.1 percent year-on-year, the strongest growth since 2011.

New European Union rules on calculating economic growth revealed a healthier picture for 2013, with revised figures showing the Irish economy expanded by 0.2 percent last year, instead of a 0.3 percent contraction.

Minister for Finance Michael Noonan said the data will have a favourable impact on both Ireland's deficit and debt ratios.

He said that the figures indicate Dublin's deficit this year would be closer to 4.5 percent of GDP, rather than the 4.8 percent previously predicted.

This could give Dublin breathing space to implement a less austere budget in 2015, previously forecast to require two billion euros ($2.7 billion) of cuts and tax increases.

"Indeed, if tax revenue continues to perform as it has done in the first half of the year, the outturn could be even better," Noonan said in a statement.

"It is clear that the difficult but necessary decisions taken over the past number of years have provided a strong and stable foundation for recovery, growth and job creation."

The revisions reflect Ireland's adoption of the EU's updated European System of National and Regional Accounts (ESA) framework on estimating economic activity, which includes spending on research and development and certain illegal economic activities, such as prostitution and sales of narcotics.

Alan McQuaid of Merrion Stockbrokers said the numbers suggest Dublin's official growth target of 2.1 percent for 2014 will be "easily beaten".

"An increase of 3.0 percent plus looks on the cards which should significantly ease the burden on the level of fiscal austerity required in the October Budget."

Conall Mac Coille of Davy said the economy was on track to meet Davy's forecasts for a 2.5 percent expansion in 2014.

The growth data was published a day after official figures revealed that Irish unemployment sank in June to five-year lows.

The unemployment rate had dropped to 11.6 percent in June -- the lowest level since April 2009.

Last December, Ireland became the first of the financially rescued eurozone countries to exit its bailout programme following a period of state spending cuts and tax rises, but its economy remains fragile.

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http://www.globalpost.com/dispatch/news/afp/140703/strong-irish-growth-raises-prospect-eased-austerity