Ireland in recession as economy contracts by more than 6%

Decline in economic activity from impact of Covid-19 offset by increase in value of exports

The Irish economy contracted by 6.1 per cent between April and June as a jump in the value of exports offset much of the coronavirus’ impact.

The slump in activity, detailed in the latest quarterly national accounts from the Central Statistics Office (CSO), was considerably less than the euro zone average of 12 per cent.

Nonetheless the decline in gross dometic product (GDP) was still the sharpest on record, surpassing the 4.7 per cent drop suffered in the fourth quarter of 2008.

The CSO also revised down its initial estimate for growth in the first quarter to -2.1 per cent, meaning the Irish economy is now officially in recession.


A recession is defined as two consecutive quarters of negative economic activity.

The CSO said sectors focused on the domestic market experienced significantly lower levels of economic activity in the quarter, with construction contracting by 38.3 per cent and the distribution, transport, hotels and restaurants sector contracting by 30.3 per cent.

Consumption, the largest component of domestic demand, fell by 19.6 per cent as shops, bars and restaurants were forced to close to curb the spread of the virus.

Industrial output overall, however, grew by 1.5 per cent per cent in volume terms, helped by exports from the globalised sector of the economy.


The CSO said the impact of Covid-19 on overall economic activity was partly offset by an increase of €37.8 billion in net exports of goods and services in the quarter, largely driven by a fall in Intellectual Property Product imports.

This was put down to the impact of multinational subsidiaries here paying less royalties to their parent entities.

As a result, GDP, the standard yardstick of activity, fell by just 6.1 per cent.

However, modified domestic demand, arguably a more realistic reading of domestic activity as it strips out some of the multinational distortions, fell by 16.4 per cent.

“The hit was not as severe as many of our trading partners, for instance the UK, euro zone and the US where GDP declined by over 20, 12 and 9 per cent respectively in the same period,” said Minister for Finance Paschal Donohoe.

“Overall the numbers are broadly as expected based on dataflow on the second quarter released over the course of the summer. They very much highlight the dual economic impact of the pandemic with net exports positively contributing to GDP in year-on-year terms on the back of robust growth in pharma exports, while the domestic economy suffered a severe hit.

“Despite the severity of the national lockdown, a large portion of manufacturers continued to trade and this is reflected in our export numbers.

“However many of our jobs-rich domestic sectors were temporarily closed, giving rise to the large contraction in domestic demand seen today,” added Mr Donohoe.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times