Irish economy growing at the fastest rate in EU
Ireland's economy is surging ahead of its 26 EU partners as more sectors reopen post-pandemic.
The latest figures put the country on course to record double-digit growth in 2021 and bode well for the public finances.
The economy grew at three times the EU average between April and June, compared with the first three months of the year, the EU’s statistics agency, Eurostat, said yesterday.
As the construction, retail and hospitality sectors were allowed out of lockdown over the second quarter, the economy expanded by 6.3pc, compared with the first quarter, while the average growth rate was 2.1pc in the 27-member EU and 2.2pc in the 19-member eurozone.
Ireland’s gross domestic product (GDP) surged by a massive 21.1pc in the second quarter of this year, compared with the same period in 2020, another EU high.
Last year, Ireland was the only EU country to register positive GDP growth (+3.4pc), largely down to multinational pharma and IT exports.
Kieran McQuinn, a research professor with the Economic and Social Research Institute (ESRI), said Irish firms are increasingly driving the recovery this year.
“Last year the economy was a complete outlier to every other economy in Europe and in the western world.
“What happened this year is that the exports have kind of held up but now, as the economy is opening up, the domestic sectors are coming on stream.”
In June, the ESRI predicted the economy would grow by 11pc this year, a figure that was way up on Central Bank, European Commission and other institutions’ projections.
“We felt lonely coming out with that figure at the time, but events seem to have borne that out,” Mr McQuinn said. “The economy is set to record double-digit growth this year.”
Finance Minister Paschal Donohoe announced the high second-quarter results last week, saying the figures were “supported by broad-based growth in both domestic demand as well as in net exports”.
High consumer spending and increased construction activity in the second quarter were the main contributors to the higher growth rate.
But Mr Donohoe said modified domestic demand (MDD), which grew by almost 8.5pc in the second quarter, was a better measure of economic success as it captures the health of the indigenous economy.
It is the second-highest quarterly growth rate on record, bringing MDD well above pre-pandemic levels.
GDP has always been a “less reliable” measure for Ireland, Mr McQuinn said, but is “readily recognised” by investors and analysts.
The EU uses GDP to measure countries’ debt and deficit limits, putting Ireland well on the way to fiscal health when the rules come back into play in 2023.
Government debt last year was just under the EU’s 60pc of GDP limit, and the deficit is very likely to be under 4pc this year if the economy continues growing. The EU’s upper limit is 3pc.
“In general, I don’t think the public finances are a problem,” said Mr McQuinn. “The economy is doing a lot of the heavy lifting in getting the public finances back in order.”
Overall, the data revisions mean that eurozone GDP was 2.5pc below its pre-pandemic peak.
Article by Irish Independent