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The Irish economy contracted 6.1 percent between April and June, as an increase in the value of exports offset much of the impact of the coronavirus.
The decline in activity, detailed in the latest quarterly national accounts from the Central Statistical Office (CSO), was considerably less than the euro zone average of 12 percent.
However, the drop in gross domestic product (GDP) continued to be the steepest in history, exceeding the 4.7% drop suffered in the fourth quarter of 2008.
The CSO also revised down its initial first quarter growth estimate to -2.1 percent, which means that the Irish economy is now officially in recession.
A recession is defined as two consecutive quarters of negative economic activity.
The CSO said that sectors focused on the domestic market experienced significantly lower levels of economic activity in the quarter, with construction contracting by 38.3 percent and the distribution, transportation, hotels and restaurants sector contracting by 30, 3 percent.
Consumption, the largest component of domestic demand, fell 19.6% as shops, bars and restaurants were forced to close to slow the spread of the virus.
However, overall industrial production grew 1.5 percent in volume terms, helped by exports from the globalized sector of the economy.
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The CSO said that Covid-19’s impact on overall economic activity was partially offset by a € 37.8 billion increase in net exports of goods and services in the quarter, driven in large part by a drop in imports of intellectual property products.
This was attributed to the impact of multinational subsidiaries here paying less royalties to their parent entities.
As a result, GDP, the standard yardstick for activity, fell just 6.1 percent.
However, modified domestic demand, possibly a more realistic reading of domestic activity as it removes some of the multinational distortions, fell 16.4 percent.
“The impact was not as severe as many of our trading partners, for example the United Kingdom, the euro zone and the United States, where GDP declined by more than 20, 12 and 9 percent respectively in the same period.” said Finance Minister Paschal Donohoe.
“Overall, the numbers are broadly as expected based on the second quarter data stream released over the summer. They largely highlight the double economic impact of the pandemic with net exports contributing positively to GDP in year-on-year terms thanks to the solid growth of pharmaceutical exports, while the national economy suffered a severe blow.
“Despite the severity of the national blockade, a large part of the manufacturers continued to trade and this is reflected in our export figures.
“However, many of our employment-rich domestic sectors were temporarily shut down, leading to the large contraction in domestic demand seen today,” added Mr. Donohoe.
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