Press release
Minister Donohoe notes the two-speed impact of the pandemic on the Irish economy
Published on
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Published on
Last updated on
The CSO today (5 March) published the Quarterly National Accounts for the fourth quarter of 2020. Commenting on the figures, Minister for Finance, Paschal Donohoe T,D, said:
“Today’s figures once again point to the dual economic impact of the pandemic, with domestic activities bearing the brunt. The GDP growth of 3 ½ per cent for 2020 as a whole is remarkable both in an international context and compared with expectations this time last year as the coronavirus pandemic reached our shores. This is entirely a result of the growth in exports, up 6 ¼ per cent growth despite a sharp decline in world demand. While 2020 was a challenging year for indigenous exports, with food and beverage exports suffering a decline, the pharma and ICT sectors recorded extraordinary export growth, driven by blockbuster immunological drugs, Covid related products, and the shift to home-working.
“However, as I have said many times, GDP is not the most accurate measures of what is going on in the economy. To get an overall sense of what is happening on the ground there are 3 key figures that I take-away from today’s full-year numbers. Firstly the domestic economy, as measured by MDD, contracted sharply, falling by 5 ½ per cent last year, a figure much closer to the typical fall across advanced economies. Secondly household consumption fell by 9 per cent last year, double the peak GFC fall in 2009. The combined impact of a collapse in private consumption as a result of restrictions and extraordinary income supports by the State led to a near €15 billion increase in household deposits last year, some of which should unwind later this year and support the recovery. Thirdly despite the wide-scale closure of the construction sector in the spring I am encouraged that the overall fall in house-building was considerably less than expected with a 2 per cent decline over the course of the year. Overall almost 20,700 housing units were delivered last year, down by around 400 on the previous year. This will no doubt increase considerably in the years to come as a result of recent and ongoing policy initiatives by the Government.
“Looking forward, a further contraction of the domestic economy is expected in the first quarter due to Level 5 restrictions, though not to the same extent as we saw last Spring. For instance while retail sales in January were down 20 per cent on December, this compares to a 35 per cent decline in April last year. Similarly there are roughly 130,000 less people on the PUP this week than at the peak in early May. Indeed we saw modest declines in the numbers on the PUP for the last three weeks and I am hopeful of continued declines in the weeks ahead.
“The Government will continue to cushion, in as much as possible, the contraction in private sector demand. We have not and will not be found wanting. As I said in my speech yesterday, Government will continue supporting households and firms during lockdown. As vaccination is rolled-out and recovery gains momentum, it will be necessary to better align spending and revenue and, over the medium term, to balance the books. The Government’s longer-term plan for economic recovery will be set out in the forthcoming National Economic Plan.”
Ends
Note to editors:
The level of GDP in constant market prices stood at €90.5 billion in the fourth quarter this year (€89.9 billion in seasonally adjusted terms), up 1.5 per cent on the fourth of 2019.
The level of exports in constant market prices stood at €133.9 billion in the fourth quarter this year (€124.2 billion in seasonally adjusted terms), up 10.6 per cent on the fourth of 2019.
Modified (final) domestic demand, a proxy for the domestic economy, is the sum of personal and government consumption and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.
Household deposits, according to the Central Bank, amounted to €126.4 billion in January this year, up from €111.4 in January las year.
The numbers of recipients of the pandemic unemployment payment this week fell by 4,560 (following falls of 4250 and 3660 in recent weeks) and now stands at 468,850. This compares to 602,110 at the peak in early May.