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The Irish economy contracted 6.1% between April and June, as an increase in the value of exports offset much of the impact of the coronavirus.
The drop in activity, detailed in the latest quarterly national accounts from the Central Statistical Agency (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 growth.
The CSO said that sectors focused on the domestic market experienced significantly lower levels of economic activity in the quarter, with a contraction in construction at 38.3 percent and a contraction in the distribution, transportation, hotel and restaurant sector in 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.
Overall industrial production, however, grew by 1.5 percent in volume terms, helped by exports from the globalized sector of the economy.
Exercise
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 (IPP).
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.
Finance Minister Paschal Donohoe said: “The impact was not as severe as many of our trading partners, for example the UK, the Eurozone and the US, where GDP declined by more than 20, 12 and 9 percent, respectively, in the same period. “
“Overall, the numbers are generally as expected based on the second-quarter data stream released over the summer,” said Donohoe.
“The double economic impact of the pandemic stands out very much 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,” he said.
“Despite the severity of the national closure, a large part of the manufacturers continued to trade and this is reflected in our export figures,” he said.
“However, many of our job-rich domestic sectors were temporarily shut down, leading to the large contraction in domestic demand seen today,” Donohoe said.
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