Fears of a major new recession in Ireland have revived following the news that the economy shrunk by almost 2 percent in the third quarter.

Opposition Fianna Fáil finance spokesman Michael McGrath said the economic situation was very negative.

“We’re facing a potent combination of weak consumer demand, an export sector which has been doing well but is now facing growing challenges, and lower Government spending,” he said.

Sinn Féin finance spokesman Pearse Doherty said the figures were no surprise.

“We warned the Government against concentrating solely on an export-led recovery when so many other economies were starting to struggle,” said Doherty.
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The CSO says that on an annual basis, GDP fell by 0.1% and GNP was down 4.2%. Consumer spending and government spending both fell by 1.3% during the third quarter, while investment slumped by 20.9%. Exports increased by 0.8%.

Compared to the previous 12 months, consumer spending and government spending both fell by 3.9% while investment slumped by 22.2%.

For the first nine months of 2011, there was a balance of payments deficit of $895 million, compared with a deficit of $1 billion in the same period last year.

Meanwhile, credit ratings agency Fitch stated that Ireland and six other European governments were on “negative credit watch.”

“Following the EU summit on 9-10 December, Fitch has concluded that a ‘comprehensive solution’ to the euro zone crisis is technically and politically beyond reach,” it said