Ireland's gross domestic product fell by 2.6% quarter-on-quarter in the first three months of the year but still stood 6.1% higher than a year ago after data for the previous quarter was revised up sharply, data showed on Friday.
Irish GDP has outperformed anywhere else in Europe for the last three years but the relevance of using the conventional measure for economic growth was called into question a year ago when 2015 growth was adjusted up to 26% after a massive revision to the stock of capital assets.
While not as dramatic, quarterly GDP growth for the final three months of 2016 was revised up to 5.8% from an already strong 2.5%, although growth for the year as a whole was nudged down to 5.1% from 5.2%.
That had a knock-on effect on the quarterly comparison for January to March, with the quarter-on-quarter dip contrasting with Ireland's fastest pace of jobs growth since the financial crisis achieved over the same period.
"This reflects Ireland's notoriously volatile GDP figures, distorted by the multinational sector," said Conall Mac Coille, Chief Economist at Davy Research, referring to the 2.6% decline.
"At first glance there doesn't appear to be that much news in today's release to make us deviate significantly from our current forecast for 5 percent Irish GDP growth in 2017. Clearly the underlying health of the economy remained exceptionally strong in early 2017."
While a swathe of other data, from retail sales and business surveys, have also pointed to a sharp recovery continuing into 2017, the skewed GDP figures - dubbed "leprechaun economics" by U.S. economist Paul Krugman - forced the state statistics office to consider new ways of measuring the true size of the economy.
The phasing in of "Modified Gross National Income" - or "GNI*" - which strips out the effects of multinational firms re-domiciling, relocating or depreciating their capital assets - began on Friday and will be fully phased in by the end of 2018.
It showed that Ireland's debt as a percentage of GNI* stood at 106% at the end of 2016 compared to 73% of GDP, putting Irish debt levels closer to those of Spain and Cyprus than Germany and the Netherlands, as implied by debt-to-GDP.
"The still elevated levels of debt in the Irish economy and the increasingly uncertain external environment underlines the importance of sensible management of the public finances," Finance Minister Paschal Donohoe said in a statement. (Reuters)