Irish economy set to grow despite Covid shock

Ireland’s economy will experience strong growth this year despite the shock of the coronavirus as multinational exports increase in the face of ‘catastrophic’ damage to domestic sectors that shut down during the lockdown, the country’s leading think-tank predicted.

A new report from Institute of Economic and Social Research suggests Ireland’s gross domestic product will grow 3.4% this year and 4.9% in 2021, even after hundreds of thousands of job losses when the government shut down much of the national economy to struggle against the pandemic.

The forecast for 2021 assumes a Brexit trade deal will be reached before the end of the UK’s transition period on December 31, but GDP growth would drop to 1.5% in 2021 if talks fail. “There would be a major impact if there was a no-deal scenario,” said Conor O’Toole, senior research manager at ESRI.

The growth outlook for 2020 comes despite a forecast of 20% unemployment in the fourth quarter of the year and a “considerable” drop in domestic demand. Even if a Brexit deal is reached, the unemployment rate is expected to remain high at 10% by the end of 2021. Ireland entered the pandemic with near full employment, with an unemployment rate of 4 , 8% in February.

These figures highlight strong divisions in the country’s ‘dual economy’ between the burgeoning multinationals, for which Ireland is a thriving European export hub, and the Covid-stricken domestic companies that have struggled since the shutdown for months from the retail, hospitality and tourism industries.

“It’s really extraordinary. There are very few economies in the world that will grow this year and the Irish economy will grow at a rate that would have been the envy of many European economies before the pandemic, ”said Mr O’Toole.

“This is explained by the very good performance of the export sector and in particular the concentration of exports in medicinal and pharmaceutical products and IT services.

Mr O’Toole said that a “very large contribution” from these sectors had led to “a very strong export performance this year”, boosting GDP growth. “It definitely sets Ireland this year apart internationally compared to other countries.”

Global companies employ some 245,000 workers in Ireland, taking advantage of the low corporate tax rate of 12.5 percent in a country whose business model relies heavily on large volumes of foreign direct investment from multinationals.

The best-known technology investors are Apple, Google, Facebook, and Microsoft. But the pharmaceutical sector, whose investors include GlaxoSmithKline and Pfizer, is large enough to make the country the world’s third-largest exporter of pharmaceuticals, according to IDA Ireland, the national investment agency.

Kieran McQuinn, research professor at ESRI, said the strong performance of multinationals highlighted an economic dichotomy. “We have a lot of people employed in the multinational sector – relatively well-paid jobs, high-tax jobs, and so on. “, did he declare.

But citing the impact of Covid-19, he added: “Then we have people who are employed in other sectors of the economy, sectors which have been mainly affected by the pandemic which are not as well. paid, not as rich in taxes – and. . . you could almost call it a catastrophic impact on these sectors of the economy.

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Pat R. Madsen