Irish economic growth revised downwards in fourth quarter

Irish economic growth in the fourth quarter has been revised downwards to 0.3 per cent, new figures from the Central Statistics Office show. It had previously been estimated at 3.5 per cent on January 30th in a preliminary assessment of our GDP by the CSO that was based predominantly on economic output data.

This latest figure includes both expenditure and output data. Resulting from this revision, the CSO said the Irish economy grew by 12 per cent in 2022 driven by strong expansion in multinational-dominated sectors. Gross national product (GNP), which strips out multinational sector activity, grew by 6.7 per cent.

The CSO also found that modified domestic demand, a broad measure of underlying domestic activity that excludes intellectual property and aircraft-related effects, declined by 1.3 per cent in the fourth quarter. For the year as a whole modified domestic demand increased by 8.2 per cent.

Minister for Finance Michael McGrath said it was “important to remember that GDP is not reflective of the living standards of domestic residents given the outsized role the multinational sector plays in our economy. That being said, the economic activity that takes place here by the sector is considerable. Our preferred metric is modified domestic demand, data for which show domestic activity fell by 1.3 per cent in the fourth quarter. However, this decline largely reflects an easing in investment in plant and machinery following the very strong increase, to record levels, earlier in the year. The overall level of investment remains very high.”

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Multinational-dominated sectors grew by 19.4 per cent in 2022. These sectors accounted for 55.7 per cent of total value added in the economy, compared with a 53 per cent share in 2021, a 49.5 per cent share in 2020, and a 42.5 per cent share in 2019. All other sectors grew by 7.2 per cent last year.

The data also shows that personal spending on goods and services increased by 6.6 per cent in the year. Personal spending reached €111.4 billion, a further recovery compared with the 2021 result of €104.5 billion, but 0.6 per cent lower than the €112.1 billion pre-pandemic level of spending in 2019.

It accounted for 23.5 per cent of GDP in 2022, down from 24.7 per cent of GDP in 2021, 26.8 per cent in 2020, and 31.9 per cent in 2019.

Mr McGrath said he was “very encouraged to see that despite inflationary pressures, consumer spending increased by just over 1 per cent in the final quarter, with similar growth recorded in the third quarter”.

“Since the start of this year incoming data both domestically and internationally has suggested that the expected slowdown may not be as severe as previously anticipated,” he said. “While inflation remains elevated, it is expected to ease from the second quarter of 2023.”

The balance of payments current account recorded a surplus of €44.2 billion in transactions with the rest of the world in 2022 driven by an improvement in the merchandise trade balance.

CSO assistant director general with responsibility for economic statistics Jennifer Banim said the impacts of the conflict in Ukraine, the rise in inflation, and the continued unwinding of the Covid-19-related restrictions “varied across the sectors of the economy in 2022″.

Growth continued in the more globalised sectors of the economy, with industry increasing by 23 per cent and the information and communication sector up by 11.4 per cent.

A number of sectors focused on the domestic market experienced markedly higher levels of economic activity in the year, with the construction sector growing by 14.4 per cent.

The distribution, transport, hotels and restaurants sector grew by 11.6 per cent, while the arts and entertainment sector increasing by 26.6 per cent. All other sectors posted more modest single-digit growth in the year.

Looking at expenditure in the economy, government spending on goods and services increased by 0.7 per cent in the year.

Compared with 2021, investment in intellectual property products increased by 34 per cent in 2022, driving an increase of 13.2 per cent in final domestic demand in the year.

In the international accounts, there was a surplus of €44.2 billion in flows with the rest of the world, driven largely by an improvement in the merchandise trade balance of €37.1 billion.

The results show a surplus of €10.8 billion for trade in goods and services with the UK in 2022, a drop of €5.1 billion on the 2021 trade balance.

The trade surplus was offset by a deficit of €17.6 billion for net income flows, giving an overall current account deficit of €6.8 billion with the UK in 2022.