Fri, 22 Jan 2021

DUBLIN, Ireland - Ireland's Central Statistics Office on Friday released the Quarterly National Accounts for the third quarter of 2020, showing a record 11 percent growth in GDP, a record.

The figures indicate the Irish economy is rebounding after the easing of Covid-19 restrictions.

Highlights of Friday's figures include:

  • Personal spending on goods and services grew by 21.3% in the quarter
  • Modified Domestic Demand, a broad measure of underlying domestic activity covering personal, government and investment spending, increased by 18.7%
  • Growth of 46.9% in the Distribution, Transport, Hotel & Restaurants sector, while the multinational dominated Industry sector grew by 4.6%
  • Exports of Goods & Services increased by 5.7% in the quarter
  • Significant growth in multinational profit outflows drove a contraction of 1.9% in GNP
  • The Balance of Payments Current Account recorded a surplus of €12.7 billion in transactions with the rest of the world in the quarter

"Today's figures show the largest quarterly level of GDP on record, with growth of 11 percent on the quarter and 8 percent in annual terms. Meanwhile modified domestic demand grew by 19 percent, having contracted in the first two quarters of the year. 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. However it is important to put these numbers in context. While GDP is up in annual terms, it is not an accurate measure of what is going on in the economy, given the size of the multinational sector. Domestic demand, along with most other domestic indicators are still down in annual terms following sharp contractions earlier in the year," Minister for Finance, Paschal Donohoe said Friday.

"These 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. Exports in the pharma sector have greatly benefited from a surge in exports in Covid-related products such as testing kits and other medical consumables produced here. However, on the domestic side, despite strong growth in goods consumption and house-building reflecting pent-up demand that had built up in the Spring, certain services activities, particularly in hospitality and the arts and entertainment sectors, remain very weak."

"Looking forward, a further contraction of the domestic economy is expected in the fourth quarter due to Level 5 restrictions. Numbers on the pandemic unemployment payment rose by around 105,000 to roughly 350,000 during this period however this remains well below the peak of 600,000 seen in May. Overall I am optimistic that the economic fall-out from the recent restrictions will not be as severe as in the previous lockdown, as construction, education, childcare and most manufacturing remained open this time. Indeed we saw a modest decline in numbers on the pandemic payment this week, the first weekly reduction since early October and I expect significant declines in the weeks ahead," Donohoe said.

"The policy response throughout the Covid-19 crisis has been swift and forceful. The Government has acted to cushion, in as much as possible, the contraction in private sector demand. Measures to support the economy have looked to protect household incomes and to help firms to re-open and to bridge-the-gap for those still affected by restrictions. This policy response is possible as a result of the careful management of the economy and the public finances in recent years which means that we entered this period of uncertainty from a position of strength. The Government's longer-term plan for economic recovery will be set out in the forthcoming National Economic Plan."

Central Statistics Office Assistant Director General with responsibility for Economic Statistics, Jennifer Banim, added: "Easing of COVID-19 related restrictions led to growth across almost all sectors of the economy in Quarter 3 (Q3), 2020. Sectors focused on the domestic market experienced significantly higher levels of economic activity in this quarter, with Construction increasing by 53.4% and the Distribution, Transport, Hotels & Restaurants sector growing by 46.9%. Growth continued in the more globalised sectors and Industry increased by 4.6% while the Information & Communication sector increased by 24.9% in the quarter. The Arts & Entertainment sector contracted by 3.9% in Q3, 2020."

"Looking at expenditure in the economy, personal spending on goods and services (the PCE indicator) increased by 21.3% in Q3, 2020. This significant growth brings personal spending amounts in the quarter to €25.8 billion, approximately €0.5 billion lower than Q1, 2020 levels. Government spending on goods and services showed a small increase of 0.1% in Q3, 2020," said Banim.

Overall, Gross Domestic Product (GDP) is estimated to have increased by 11.1% in Q3, 2020, driven largely by the increases in personal spending and by growth of 5.7% in Exports of Goods & Services in the quarter. Gross National Product (GNP) - a measure of economic activity that excludes the profits of multinationals - contracted by 1.9%, reflecting the significant increase in multinational profit outflows in Q3, 2020.

"As in the previous quarter, investment in Intellectual Property Products (IPP) and in aircraft by leasing companies was low in Q3, 2020. Modified Domestic Demand (MDD), a broad measure of underlying domestic demand that excludes IPP and aircraft related globalisation effects, increased by 18.7% in Q3, 2020. Along with the increase in personal spending, the main driver of MDD growth in the quarter was an increase of 34.4% in underlying domestic capital investment," the CSO assistant director general said.

"In International Accounts results, the Current Account of the Balance of Payments recorded a surplus of €12.7 billion in flows with the rest of the world in Q3, 2020. The accumulation of the IPP relocations to Ireland in recent years is now leading to reduced overall quarterly royalty payments abroad. Specifically, royalty imports for pharmaceutical products and preparations decreased to €2.9 billion in Q3, 2020 from €5.3 billion in Q3, 2019. Multinational profit outflows were €28.1 billion in the quarter, an increase of €6.6 billion on Q3, 2019 levels."

"Friday's International Accounts publication includes a table of Current Account transactions with the UK. The results show a surplus of €3.2 billion for Trade in Goods & Services with the UK in Q3, 2020. The trade surplus was offset by a deficit of €1.9 billion for income flows, giving an overall Current Account surplus of €1.3 billion with the UK in the quarter," said Banim.

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