Minister Donohoe notes final growth for 2021 and updated first quarter numbers

Modified Domestic Demand – proxy for domestic economy – grew by just under 6 per cent last year, driven by a robust recovery in consumer spending which rose by over 4½ per cent
GDP grew by 13.6 per cent in 2021, due to strong MNC related exports
in the first quarter of this year, MDD contracted by -1 per cent as consumer spending fell by -1.3 per cent in the face of the Omicron wave and the economic fallout from the war
GDP up 6.3 per cent in Q1 2022, driven by a 5.3 per cent increase in exports

The CSO today (Friday) published the final National Accounts for 2021 and revised estimates for the first quarter of this year. Commenting on the figures, Minister for Finance, Paschal Donohoe, said:

“I note the final estimate of GDP growth for last year, with GDP growing by 13.6 per cent in 2021, broadly in line with previous estimates. It is important to put this strong growth in context. This growth has come from a very small number of multinational dominated sectors, with limited connections to the domestic economy. Indeed gross value-added in MNC sectors grew by over 20 per cent, whereas domestic sectors grew by around 5 per cent.

“As I have said for a number of years now, GDP is not an accurate measure of what’s going on in the Irish economy, and this view has been re-enforced by today’s numbers. I place a much greater emphasis on measures such as modified domestic demand, which better reflects the underlying domestic economic activity. Modified domestic demand rebounded strongly last year with growth of 5.8 per cent for the year a whole. The strong rebound in activity is reflective of the resilience of the Irish economy in the face of adversity. I am particularly pleased to see that this recovery has also been reflected in the labour market, with the economy-wide wage-bill growing by around 10 per cent last year, in line with income tax developments.

“Today’s figures confirm a weaker first quarter for the domestic economy this year, with modified domestic demand contracting by -1 per cent. The combination of restrictions associated with the Omicron wave in January and the surge in energy and other commodity prices weighed heavily on demand over the quarter. Faced with the uncertainty associated with the war in Ukraine and mounting cost of living pressures, households cut back, with consumer spending falling by -1.7 per cent.

“Today’s release underscores the challenges our economy faces. Momentum in the domestic economy and that of our trading partners is slowing and inflationary pressures are mounting.

“The government has worked proactively to tackle these challenges and Budget 2023 will be a ‘Cost of Living Budget’ which builds on the €2.4 billion in cost-of-living measures announced to date.

“In doing so we must ensure that budgetary measures strike the right balance. It is neither affordable nor appropriate to absorb all of the price shock. Borrowing costs are on a rising trajectory and our tax base is increasingly reliant on a small number of MNCs. Meanwhile we must ensure that policy doesn’t inadvertently add further inflationary pressures into the system.”