Irish Economy Expanded In Second Quarter As Hospitality Sector Emerged From Lockdown
According to The Irish Independent, the Irish economy expanded in the second quarter as the hospitality sector emerged from lockdown, and is now surging ahead of its 26 EU partners as more sectors reopen post-COVID-19 pandemic.
The latest figures put the country on course to record double-digit growth in 2021 and bode well for the public finances.
ReOpening Accelerating Irish Economy Recovery
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 6.3 percent, compared with the first quarter, while the average growth rate was 2.1 percent in the 27-member EU and 2.2% in the 19-member eurozone.
Ireland's gross domestic product (GDP) surged by 21.1% 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 (+3.4%), largely down to multinational pharma and IT exports.
Kieran McQuinn, a research professor with the Economic and Social Research Institute (ESRI), reportedly said that Irish firms are increasingly driving the recovery this year, and, "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 11% 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," McQuinn reportedly said. "The economy is set to record double-digit growth this year."
Finance Minister Paschal Donohoe announced the high second-quarter results last week, reportedly saying that 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 reportedly said that modified domestic demand (MDD), which grew by close to 8.5% 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 the Irish economy, McQuinn reportedly 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 60% of GDP limit, and the deficit is very likely to be under 4% this year if the economy continues growing. The EU's upper limit is 3%.
"In general, I don’t think the public finances are a problem," McQuinn reportedly said. "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 2.5% below its pre-COVID-19 pandemic peak.
Economy To Return To Pre-Pandemic Levels Of Activity In 2022, Says NTMA CEO
In other economy-related news, as reported by rte.ie, the chief executive of the National Treasury Management Agency (NTMA), Conor O'Kelly, has told an audience of investors that the economy is set to return to pre-COVID-19 pandemic levels of activity in early 2022.
O'Kelly reportedly said at an event organised by the Irish Strategic Investment Fund that Ireland's position coming out of the pandemic crisis "couldn't be more different" from the period following the financial crisis, and that technology, pharma, food and financial services companies in Ireland are all exporting goods and services that are in demand, creating "sustainable profitability" and government revenue.
On the tax front, income tax reportedly fell in the last crisis by 11%, but is reportedly now already 17% above its 2019 level, while disposable income, despite the pandemic, has reportedly risen by 5% compared to a fall of the same magnitude during the last recession.
O'Kelly reportedly said that since the start of the pandemic, the NTMA has raised €35.75 billion at an average rate of 0.16%. Over 70% of these bonds have reportedly been purchased by the European Central Bank.
O'Kelly reportedly said that the average interest rate payable on Ireland's national debt will fall to a record low of 1.5% this year, dipping below €3.5 billion, and reportedly described Ireland as one of the "outlier" countries during the financial crisis, whereas now he reportedly believes that Ireland is in a "middle of the pack" position.
© 2021 Hospitality Ireland – your source for the latest industry news. Article by Conor Farrelly. Click subscribe to sign up for the Hospitality Ireland print edition.