DUBLIN: The Irish economy experienced the highest growth ever seen in Europe in the first quarter of 2021, despite the national economy being shut down due to the COVID-19 pandemic. The latest figures from the Central Statistics Office (CSO) show that gross domestic product (GDP) grew by 7.8% in the first three months of this year.
The growth of Irish GDP was mainly driven by multinational activities and exports. The COVID-19 restrictions had a significant impact on the domestic economy, causing it to contract by 2.9%, while the two largely foreign owned sectors, pharmaceuticals and computer services, continued to export successfully, increasing by 12.8% and 19%, respectively.
According to the CSO report, the restrictions also had an impact on the construction sector, which plummeted by 23.4%, as well as transport, hotels, and restaurants, which fell by 10%.
Minister for Finance, Paschal Donohoe said that Ireland witnessed solid GDP growth in the first quarter of 2021. According to him, this was driven by a relatively small number of sectors, with increasing activity in some cases creating limited domestic employment.
For this reason, Mr. Donohoe believes that measures such as Modified Domestic Demand and GNI, rather than GDP, should be used to assess the Irish economy. “Modified Domestic Demand fell by 5% year-on-year in the first quarter, a figure that is in-line with expectations and reflects the impact of Level 5 restrictions in the first quarter,” he added.
However, Minister Donohoe said that the fall in domestic economic activity this time was significantly less severe than the first lockdown in the spring of last year. “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,” he said.
Ibec, the group that represents Irish business, welcomed the latest CSO figures. “Despite the comparatively poor performance of domestic sectors in the first quarter of the year, there are signs of light on the horizon, with strong VAT returns for March and April indicating the potential for a rapid recovery in consumption,” said Ibec Chief Economist Gerard Brady.
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