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Ireland records largest ever quarterly GDP drop

The economy shrank by 6.1% between April and June

Ireland’s economy shrank by 6.1% between April and June as the impact of the coronavirus pandemic brought the largest quarterly drop on record.

The decline in economic activity in the second quarter surpassed the 4.7% reduction recorded in the fourth quarter of 2008 – at the height of the financial crisis.

With an initial GDP growth estimate for quarter one having now been revised to a 2.1% drop, Ireland is now officially in recession – as it has recorded two successive quarters of negative growth.

Despite the unwelcome quarter two results, the economic contraction experienced in Ireland was not as severe as that seen in many other countries in the developed world.

UK and US GDP fell by 20% and 12% respectively in the same three-month period, while the overall GDP of the Eurozone reduced by 12%.

The impact of the pandemic in Ireland was in part mitigated by strong performance in the export sector.

The annual GDP figure is down 3% compared to the same point last year.

In terms of the domestic economy, in quarter two Modified Domestic Demand fell by over 15% year on year.

Finance minister Paschal Donohoe said Covid-19 was having a severe economic impact.

“Overall the numbers are broadly as expected based on dataflow on the second quarter released over the course of the summer,” he said.

“They very much highlight the dual economic impact of the pandemic with net exports positively contributing to GDP in year-on-year terms on the back of robust growth in pharma exports, while the domestic economy suffered a severe hit.

“Despite the severity of the national lockdown, a large portion of manufacturers continued to trade and this is reflected in our export numbers.

“However many of our jobs-rich domestic sectors were temporarily closed giving rise to the large contraction in domestic demand seen today.”

Mr Donohoe said GDP was experiencing a recovery in quarter three.

He sale retail sales were up in July and August while the numbers receiving the pandemic unemployment had fallen by 60% from a peak of 600,000 in early May.

“The policy response to the Covid-19 crisis has been swift and forceful,” he said.

“The Government has acted to cushion, in as much as possible, the contraction in private sector demand.

“Measures to support the economy have looked to protect household incomes and to help firms to re-open and to bridge-the-gap for those still affected by restrictions.

“This policy response is possible as a result of the careful management of the economy and the public finances in recent years which means that we entered this period of uncertainty from a position of strength.

“The Government’s plan for protecting our citizens’ health and that of the economy will be set out in the coming weeks, firstly in the form of a comprehensive plan on living with Covid, quickly followed by the Budget and an economic recovery plan.”

PA