Ireland technically back in recession but GNP pushed them through.

The Irish economy unexpectedly shrank last year on the back of a sharp fall-off in net exports linked to the so-called pharma patent cliff.

Preliminary figures published today by the Central Statistics Office (CSO) showed gross domestic product (GDP) contracted by 0.3 per cent in 2013.

Economists polled by Reuters had expected full-year growth of 0.3 per cent.

Gross national product (GNP), which provides a better picture of domestic activity as it excludes the profit flows of multinationals, increased for the second successive year, growing by 3.4 per cent.

The latest quarterly accounts indicated import growth outpaced exports during 2013, a reversal in the trend of recent years, resulting in a €1.02 billion decline in net exports.

Despite the pick-up in employment in the latter half of the year, personal consumption, which accounts for two thirds of domestic demand, fell 1.1 per cent.

The CSO’s figures also revealed GDP contracted by a worse-than-expected 2.3 per cent in the fourth quarter compared with the previous quarter.

This was driven in the main by 10.5 per cent decline in net exports and a 4.7 per cent drop in industrial output.

Fourth quarter GNP rose by 0.2 per cent on the previous quarter.

“Today’s numbers show that measured GDP in Ireland fell slightly in 2013,” Minister for Finance Michael Noonan said.

“By contrast, labour market conditions are encouraging. Employment data is a reliable indicator of underlying developments in the economy and figures released a fortnight ago show employment growth of 3.3 per cent year-on-year in the fourth quarter of 2013.”

 Much of Ireland’s problems last year stemmed from the expiry of patents in the key pharmaceutical sector, which depressed merchandise exports overall.

However,services exports remained resilient and were 7.1 per cent higher year-on-year in the fourth quarter.

At face value, the 0.3 per cent fall in GDP in 2013 indicates that the Irish economy was back in recession. However, GNP, excluding multinational sector profits, was up 3.4 per cent.