Irish economy grew by almost 6% last year despite pandemic

Growth in the Irish economy last year has been revised upwards, making it one of the strongest performers globally, despite the pandemic and the restrictions imposed on domestic activity.

The economy grew by 5.9 per cent in gross domestic product (GDP) terms last year, according to updated figures from the Central Statistics Office (CSO).

The CSO said headline GDP has been revised upwards from a preliminary figure of 3.4 per cent due to the availability of more comprehensive data.

The rise was driven by a 9.5 per cent increase in exports to almost €500 billion, while imports declined by 7.4 per cent. This meant that the value of net exports was €76 billion higher than the previous year.

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Increased multinational exports, particularly from the IT and pharma sectors here, have been a feature of the pandemic and a counterbalance to the falloff in domestic activity.

"I note the large revision to GDP growth last year, on top of what was already a very strong number," the Minister for Finance Paschal Donohoe said.

“ GDP is now estimated to have grown by just shy of 6 per cent, an upward revision of 2½ percentage points,” he said, noting the significant jump in exports. “This growth has come from a very small number of sectors with limited domestic employment.

“I have said since the onset of the pandemic that GDP is not an accurate measure of what’s going on in the Irish economy, and this view has been re-enforced by today’s numbers,” Mr Donohoe said.

Domestic side

On the domestic side of the economy, the CSO’s figures show headline investment fell by just over 22 per cent in 2020, predominantly due to a slide in purchases of intellectual property, with investment in research and development also down 27 per cent.

Personal consumption expenditure (PCE), a measure of consumer spending on goods and services, fell by 10.4 per cent in 2020, with the largest pandemic effects affecting spending on restaurants and hotels, foreign travel, transport and spending on recreation and culture.

The CSO’s de-globalised indicator – modified Gross National Income (or GNI*) – which better captures the effects of Covid-19-related restrictions, contracted by 3.5 per cent last year.

"Covid-19-related restrictions led to lower levels of economic activity in 2020 for many of the sectors focused on the domestic market," the CSO's Jennifer Banim said.

The CSO also published national account figures for the first quarter of 2021, which show the economy expanded by 8.6 per cent in GDP terms.

The information and communication sector, along with industry, excluding construction, recorded strong growth, increasing by 14.1 per cent and 7.9 per cent on the previous quarter.

The increased activity in these sectors saw exports increase by 2.3 per cent while imports declined by 16.4 per cent.

Lockdown

The CSO figures show activity in the domestically-dominated distribution, transport, hotels and restaurants sector declined by 4.6 per cent in the first quarter of the year, reflecting the impact of the ongoing lockdown and curtailed consumer activity.

Construction was one of the worst hit sectors with activity declining by 28 per cent but there were also falls in the the public administration, health and education (-0.7 per cent) and agriculture (-2.6 per cent) sectors.

Personal consumption expenditure fell by 5.9 per cent.

The CSO said modified domestic demand, often viewed as a better measure of the domestic economy, contracted by 3.5 per cent compared with the previous quarter.

Separate data shows that business activity rebounded in Dublin in the second quarter of 2021, rising at the fastest pace since the final months of 2015 as Covid-19 restrictions eased and the economy was kickstarted.

According to the latest IHS Markit Dublin Purchasing Managers Index (PMI) survey, the headline reading jumped to 60.2 in in the second quarter from 40.4 in the first three months of the year.