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The CSO today (4 December) published the Quarterly National Accounts for the third quarter of 2020. Commenting on the figures, Minister for Finance, Paschal Donohoe T,D, said:
“Today’s figures show the largest quarterly level of GDP on record, with growth of 11 per cent on the quarter and 8 per cent in annual terms. Meanwhile modified domestic demand grew by 19 per cent, having contracted in the first two quarters of the year. This bounce-back was to be expected following the sharp hit seen in the second quarter, and is in keeping with patterns seen in other countries. However it is important to put these numbers in context. While GDP is up in annual terms, it is not an accurate measure of what is going on in the economy, given the size of the multinational sector. Domestic demand, along with most other domestic indicators are still down in annual terms following sharp contractions earlier in the year.
“These numbers very much highlight the dual economic impact of the pandemic, with net exports making a significant positive contribution to GDP in year-on-year terms on the back of robust growth in pharma exports, while the domestic economy still lags in annual terms having suffered a severe hit in the second quarter. Exports in the pharma sector have greatly benefited from a surge in exports in Covid-related products such as testing kits and other medical consumables produced here. However, on the domestic side, despite strong growth in goods consumption and house-building reflecting pent-up demand that had built up in the Spring, certain services activities, particularly in hospitality and the arts and entertainment sectors, remain very weak.
“Looking forward, a further contraction of the domestic economy is expected in the fourth quarter due to Level 5 restrictions. Numbers on the pandemic unemployment payment rose by around 105,000 to roughly 350,000 during this period however this remains well below the peak of 600,000 seen in May. Overall I am optimistic that the economic fall-out from the recent restrictions will not be as severe as in the previous lockdown, as construction, education, childcare and most manufacturing remained open this time. Indeed we saw a modest decline in numbers on the pandemic payment this week, the first weekly reduction since early October and I expect significant declines in the weeks ahead.
“The policy response throughout the Covid-19 crisis has been swift and forceful. 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 longer-term plan for economic recovery will be set out in the forthcoming National Economic Plan.
Recent news in terms of vaccines is certainly positive and Government is working to ensure roll-out in the new year. While this will clearly take time, given the logistics involved, we can be confident that there is now light at the end of the tunnel.”
Ends
Note to editors:
The level of GDP in constant market prices stood at €98 billion in the third quarter this year (€93.7 billion in seasonally adjusted terms), up 8.1 per cent on the third quarter 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.
The numbers of recipients of the pandemic unemployment payment this week fell by 654 and now stands at 351,424. This compares to 602,107 at the peak in early May.
The impact of COVID-19 related products in the pharmaceutical sector is discussed in Box 1 in ‘Taking Stock: The Fiscal Response to Covid-19’, Department of Finance, November 2020. Taking Stock - The Fiscal Response to COVID-19