Irish GDP slowed by 2.8% in Q1, revised CSO figures show

July 18, 2023

The Irish economy, as measured by Gross Domestic Product (GDP), contracted by 2.8% in the first three months of the year, updated data from the Central Statistics Office has found.

Last month, early data from the CSO suggested that GDP between January and March had fallen by 4.6%.

That, coupled with a downward revision to the economic performance in the final quarter of last year which found the economy contracted by 0.1% between October and December, meant that Ireland had entered a technical recession.

The CSO says that remains the case, although the dip in GDP in the final quarter of 2022 is said to be extremely small.

The data shows that sectors dominated by multinational firms contracted by 9% overall in the first quarter of this year.

“The Industry sector recorded a significant decrease over the same period compared with the previous quarter, falling by 13.2%, more than offsetting the growth in the Information and Communication sector of 4.9% in the quarter,” said National Accounts Statistician Gordon Cavanagh.

Sectors focused on the domestic market experienced mixed results during the period, the CSO added.

“The domestically facing Construction sector increased by 4.3% quarter-on-quarter while the Agriculture, Forestry & Fishing sector expanded by 2.1%,” Mr Cavanagh added.

“Finance & Insurance increased by 8.4% in Quarter 1 2023 while the Distribution, Transport, Hotels & Restaurants sector grew by 1.7%,” he said.

“The Arts & Entertainment sector recorded a marked decline of 22.3% in the quarter while Professional & Administrative services fell by 2.5%,” he added.

The CSO said factor income outflows in the first quarter of the year were higher than in the previous three months, and that led to an overall decline in Gross National Product (GNP) of 6.9% when compared to the previous quarter.

GNP is a measure of the economy that strips out the profits of multinationals.

Meanwhile, the CSO has also updated its estimate for economic growth for last year.

It found GDP grew by 9.4%, less than the 12.2% provisionally reported in January.

GDP exceeded €0.5 trillion for the first time during 2022.

The CSO said multinational dominated sectors expanded by 15.6% during the year, while all other sectors grew by 5.6%.

Exports of goods and services grew by 13.9% during 2022 and that had a big impact on the overall growth of the economy.

“Growth in the globalised Industry (excluding Construction) sector expanded by 18.7% in 2022 compared with 2021 while the Information & Communication sector increased by 7.1% in the year,” said Assistant Director General with responsibility for Economic Statistics at the CSO, Jennifer Banim.

“Overall, the multinational dominated sector growth was 15.6% and in 2022, these sectors accounted for 54.2% of total value added in the economy, compared with a 51.9% share in 2021,” she added.

Modified Gross National Income, or GNI* as it is known, which is seen as better measure of overall economic activity here as it strips out the globalisation effects specific to Ireland that can skew GDP, expanded by 6.7%.

GNP during the year rose by 3.9%, while Modified Domestic Demand, which is a broad measure of the underlying activity in the domestic economy, increased by 9.5%.

Personal spending on goods and services rose by 9.4% as Covid restrictions came to an end, while Government spending increased by 3.5%.

“The ending of Covid-19 related restrictions led to higher levels of economic activity in 2022 for many of the sectors focused on the domestic market,” Ms Banim said.

“The Distribution, Transport, Hotels & Restaurants sector increased by 16.9% in the year, with Agriculture, Forestry & Fisheries up by 6.3%, while Construction and Real Estate activities both posted growth of 4.2%. However, the Finance & Insurance sector contracted by 7.8%,” she added.

Commenting on today’s CSO figures, Finance Minister Michael McGrath said they confirm the strong post-pandemic rebound in the domestic economy last year.

Finance Minister Michael McGrath

Despite multi-decade high rates of inflation, he said it was encouraging to see the very strong growth in both consumer and investment spending.

The Minister noted that consumer spending increased by 9.5% last year, an upward revision relative to earlier estimates that is now more in keeping with robust VAT receipts.

“This performance reflects the strength of the labour market as well as the important role Government supports have played in helping to mitigate the impact of inflationary pressure,” the Minister said.

“As a result of the upward revisions last year, the reported growth rate in MDD and consumer spending in the first quarter this year have been revised downwards – both were essentially flat in the first quarter. That said, higher frequency data – such as the 3.8% unemployment rate recorded in June – confirm the strength of the economy,” he added.

The Minister also said he was encouraged to see the strong and sustained investment by multinationals in the Irish economy, with machinery and equipment investment increasing by over 50% last year, which he described as a massive vote of confidence in the Irish economy by the multinational sector despite the many challenges facing the global economy.

“This investment will boost the productive capacity of the multinational sector in Ireland and will bring with it employment and exports in the years ahead,” he said.

Article Source: Irish GDP slowed by 2.8% in Q1, revised CSO figures show – Will Goodbody – RTE

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