The Irish economy continues to grow but at a reduced rate reflecting the deteriorating international outlook. According to the Central Statistics Office (CSO), the economy, as measured by gross domestic product (GDP), expanded by 0.5 per cent in the second quarter compared with the first three months of the year.
This was down from a flash estimate of 3.3 per cent last month and reflects weaker-than-expected multinational exports linked to a fall-off in global demand. GDP was also down by 0.7 per cent on the same period last year.
The CSO’s latest national accounts show exports fell by 4.1 per cent between April and June while imports increased marginally leading to a decline in net exports (the value of exports minus imports) of 14.4 per cent (€7 billion) in the quarter.
“While today’s data confirm continued growth in the domestic economy, I am conscious of several headwinds,” Minister for Finance Michael McGrath said. “Our economy is clearly operating at full employment and capacity constraints, in both our housing and labour markets, are increasingly binding,” he said.
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“Externally, growth is slowing in some of our main trading partners, and this could have knock-on implications for Irish exports,” he said.
Mr McGrath said the fall-off in GDP on an annual basis reflected a fall in Covid-related pharmaceutical exports triggered by the passing of the pandemic, as well an easing exports associated with so-called “contract manufacturing”.
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“As has been well documented, multinational production in Ireland is extremely volatile and, given the outsized role the multinational sector plays in our economy, GDP is clearly not a useful measure of domestic living standards,” he said.
The CSO’s figures show modified domestic demand, a more accurate measure of domestic economic activity, rose by 1 per cent while personal spending on goods and services, the main driver of domestic growth, increased by 0.9 per cent.
“In terms of the domestic economy, I am encouraged to see that modified domestic demand – my preferred metric of domestic economic activity – grew at a solid pace in the second quarter of the year. These data are consistent with trends in the labour market, where figures published last week show employment at its highest level ever at end-June,” Minister McGrath said.
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The CSO figures indicated the globalised industry sector, which is dominated by big pharma, expanded by 3.8 per cent per cent in the second quarter while the information and communication sector increased by 2 per cent over the same period.
Overall, multinational-dominated sectors grew by 6.2 per cent in the quarter and accounted for 53.1 per cent of total value added in the economy, compared with a 46.9 per cent share for all other sectors, the CSO said.
