Size of Ireland's economy surpasses pre-global crisis levels

Ireland’s economy has surpassed the size it reached at the peak of the “Celtic Tiger” boom, official figures have revealed, in the latest evidence that the country is shrugging off the legacy of the crash.

Annual output reached €189bn (£132bn) in 2014, which statisticians said was larger, in real terms, than its pre-crisis level. Economic growth for last year was revised up, to 5.2%.

Ireland’s banks were brought to the brink of collapse when its property bubble burst in the wake of the global financial crisis, and after rescuing them, the Dublin government was forced to turn to its eurozone partners and the International Monetary Fund for an emergency loan in 2010.

Ireland left the €67bn bailout programme 18 months ago, after implementing stringent austerity policies, and the economy has since recovered strongly.

The upturn continued into the first three months of 2015, with GDP growth of a healthy 1.4%, putting it on track to be the fastest growing economy in Europe for the second year running.

Separate data yesterday showed that another victim of the eurozone crisis, Spain, has recorded its strongest growth since 2007, before the global financial crash plunged the country into recession.

Economic growth was 1% in the second quarter of the year, up from 0.9% in the first quarter, reaffirming the strength of Spain’s recovery, and underlining the divide with more troubled eurozone economies such as Greece.

Spain’s centre-right government expects the economy to grow by 3.3% this year, although unemployment remains a huge problem with more than 5 million people out of work, an unemployment rate of 22.4%.

Economy minister Luis de Guindos said in a radio interview: “We’re starting to see the light at the end of the tunnel. We are now able to return to pre-crisis income levels.”

Spain expects a record tourist season this summer, which should help growth in coming months. Inflation is now non-existent, with the latest reading at zero this month, down from 0.1% in June.

“We draw encouragement from the acceleration in the pace of recovery,” said Timo del Carpio, of RBC Capital Markets. “Today’s outturn should cement Spain’s position ahead of many of its peers, and we forecast 3.1% growth this year and 2.7% in 2016.”

Analysts said weak inflation had boosted the buying power of Spanish consumers. “Low inflation, accommodative financial conditions and, more importantly, improving labour market conditions are likely to have boosted private consumption,” said Antonio Garcia Pascual, European economist at Barclays.

The strong economic performance may help to underpin support for Spain’s prime minister Mariano Rajoy, who faces a tough re-election battle in the autumn.

Despite Spain’s economic recovery, voters punished Rajoy for a series of corruption scandals in local elections in May, with both the anti-austerity Podemos (“We Can”) party, and pro-market Ciudadanos (“Citizens”) polling well.

Madrid was forced to ask its eurozone partners for financial support to rescue its troubled banking sector in 2012, but it “exited” the bailout in January 2014. Spain’s banks were hit hard by the property crash that followed the global financial crisis, after a frenzy of speculative lending in the boom years that followed Spanish euro-entry.