The Irish economy rebounded sharply in the third quarter of 2020, growing by a near record 11.1 per cent, as the easing of coronavirus restrictions triggered a resurgence in activity across all sectors.
This puts Ireland on course to be the fastest growing economy in the world in 2020, Goodbody Stockbrokers said. It now expects the Irish economy to grow by 1-2 per cent in gross domestic product (GDP) terms this year.
Most industrialised countries, with the exception of China, are expected to record an economic contraction this year.
The stronger-than-expected growth, detailed in the latest latest quarterly national accounts from the Central Statistics Office (CSO), follows a contraction of 3.2 per cent in the second quarter and 3.5 per cent in the first quarter.
The figures show sectors focused on the domestic market experienced significantly higher levels of economic activity, with construction activity jumping by 53 per cent.
Activity in the distribution, transport, hotels and restaurants sector, which had been severely impacted by the initial lockdown, grew by 46.9 per cent.
Growth also continued in the more globalised sectors with the pharma-dominated industry sector growing by 4.6 per cent while activity in the IT sector rose by 24.9 per cent in the quarter.
On the consumer side, personal spending on goods and services grew by 21 per cent in the quarter. This tallies with a sharp uptick in retail sales seen over the same period as consumer activity resumed.
The rebound is likely to be short-lived, however, with the reintroduction of lockdown measures in the fourth quarter expected to curtail economic activity again.
Overall, GDP, the standard measure of growth, is estimated to have increased by 11.1 per cent between July and September, driven largely by the increases in personal spending, and to be up by 8.1 per cent in annualised terms.
The bounce was also driven by growth of 5.7 per cent in exports of goods and services.
The State recorded a trade surplus - the value of exports over imports - of €41 billion for the quarter as pharma and IT exports grew rapidly as a result of the crisis.
Gross National Product (GNP), a measure of economic activity that excludes the profits of multinationals, contracted by 1.9 per cent, reflecting what the CSO said was a significant increase in multinational profit outflows.
The strong third quarter figures suggest the Irish economy will most probably record positive GDP growth for 2020 in contrast to early predictions for negative growth.
Responding to the figures, Minister for Finance Paschal Donohoe said: “This bounce-back was to be expected following the sharp hit seen in the second quarter, and is in keeping with patterns seen in other countries.”
He said the numbers “very much highlight” the dual economic impact of the pandemic, with net exports making a significant positive contribution to GDP in year-on-year terms on the back of robust growth in pharma exports, while the domestic economy still lags in annual terms having suffered a severe hit in the second quarter.
On foot of the figures, KBC Bank Ireland revised its 2020 forecast for Irish economic growth to 2.5 per cent. “Such an outturn seems to point towards an Irish economy that is very different both in terms of structure and strength at present to that suggested by double digit GDP declines widely feared through the Spring and Summer,” the bank’s chief economist Austin Hughes said.
The CSO said modified domestic demand, a measure that strips out some of the multinational distortions to give a better indication of the lift in domestic acitivty, grew by 18.7 per cent quarter-on-quarter.