The economy is continuing to grow very strongly with no slowdown in sight, according to the latest figures from the Central Statistics Office (CSO).
The current account surplus, or balance of exports over imports, was £281 million (€357 million) at the end of the second quarter of 1999, compared with £88 million at the same time in 1998 - and much larger than expectations.
According to Dr Dan McLaughlin, chief economist at ABN-Amro, the data does not support the view that imports will slow down growth this year. The Department of Finance, Central Bank and Economic and Social Research Institute have all estimated an easing in growth this year which, they say, will be linked to the current account moving into deficit.
However, according to Dr McLaughlin, there will have to be a huge surge in imports and falloff in exports for this prediction to prove correct. "The economy is still growing at 9.5 per cent to 10 per cent," he said.
One reason imports may be rising at a slower pace than predicted is that multinational companies are running down their stock and this may reverse over the next few months. However, according to Dr McLaughlin, for the ESRI prediction to prove correct, imports would need to rise by 12.5 per cent and in the first half of the year they have risen by only 3.9 per cent.
In an open economy such as the Republic imports are more governed by the importation of raw materials and components for exports than by consumers who account for only up to a third of the total.
Thus while many people would expect the trade gap to narrow as the economy grows and consumers import more items, multinational exports are a far more influential factor.
As long as exports keep above imports, with domestic demand and consumer spending still strong, a slowdown in gross domestic product growth is unlikely.
The data for the first three months of the year was revised significantly to show a deficit of £62 million compared with the previously published surplus of £352 million.
According to the CSO it had to estimate a large number of items in the first quarter to meet new deadlines demanded by the European Central Bank. Much less was estimated in the second three months and the revisions should not be significant, an official said.
It is also important to remember that not too much can be read into one set of figures. The Central Bank and others are likely to stick to their predictions of a slowdown in the economy until figures are released for the third quarter. Nevertheless, they are likely to be surprised by the slow growth of imports recorded so far.
