Irish economy grows by 7.8% in first quarter despite lockdown

CSO cautions that headline GDP numbers does not reflect domestic conditions

The Irish economy grew by 7.8 per cent in the first quarter of 2021 – the strongest level of growth anywhere in Europe – despite the domestic economy being in lockdown to curb the spread of coronavirus.

The growth in gross domestic product (GDP) was driven primarily by multinational activity and exports. Modified domestic demand – a better indicator of the domestic economic conditions – contracted by 2.9 per cent.

The latest quarterly national accounts from the Central Statistics Office (CSO) reflect Ireland's two -tier economy. They show sectors focused on the domestic market experienced significantly lower levels of economic activity while the more globalised parts of the economy continued to expand despite the restrictions.


Activity in the construction sector fell by 23.4 per cent while activity in the distribution, transport, hotels and restaurants sector contracted by nearly 10 per cent.


In contrast, activity in the State’s IT sector rose by 19 per cent in the quarter while industrial output, which includes the pharma sector, rose by 12.8 per cent.

On the consumer side, personal spending on goods and services fell by 5.1 per cent. This tallies with weaker retail sales seen over the period as consumer activity was restricted by lockdown.

The figures show exports grew by 5.8 per cent while imports fell by 8.9 per cent. The CSO said the strong net trade result drove GDP growth in the quarter.

Minister for Finance Paschal Donohoe described the latest acceleration in headline GDP as “exceptionally strong”.

“This was driven by a relatively small number of sectors with, in some cases, the increased activity generating limited domestic employment,” he said.


"It is for this reason that I have often said that GDP is not an accurate measure of what's going on in the Irish economy," Mr Donohoe said, noting a more accurate barometer was modified domestic demand, which declined by 5 per cent year-on-year in the first quarter.

“Encouragingly, while the level of restrictions was comparable with that of the first lockdown in the spring last year, the fall in domestic economic activity was much less severe on this occasion,” he said.

“This points to a weakening in the relationship between restrictions and economic activity, a phenomenon observed in many countries and one with reflects adaptation and innovation by firms and consumers,” Mr Donohoe said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times