Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

61. To ask the Minister for Finance the extent to which the performance of the economy compares favourably or otherwise with other countries in the EU, within the eurozone and without; and if he will make a statement on the matter. [10877/21]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The outbreak of the Covid-19 pandemic last year and the restrictions introduced to suppress the virus led to an unprecedented contraction of global economic activity. Lockdown restrictions saw the Irish economy contract sharply by just over 3 per cent quarter-on-quarter in Q2, followed by a recovery of 11 per cent in Q3 as restrictions eased. Ireland’s quarterly GDP fall in Q2 was significantly less of a decline than that experienced by many EU Member States.

The European Commission recently estimated Irish GDP to have grown by 3 per cent in 2020. This compares to an estimated contraction in EU and euro area GDP of -6.3 and almost -7 per cent, respectively, with Ireland the only Member State with positive growth. However, Ireland’s GDP has been boosted by a surge in exports of pharmaceuticals, and this masks a very sharp hit to the domestic economy. In contrast, modified domestic demand declined by -6.3 per cent in the first three quarters of last year, figures which are more in line with the impact in other EU countries.

More recently, the pandemic has tightened its grip on Ireland and this has continued to negatively affect the domestic economy. As of 22 February, approximately 1 million people were in receipt of some category of state income assistance, which is still below the peak of 1.2 million on 5 May 2020. This is by no means out of line with the experience of other European countries. The resurgence in infections since the autumn, along with the emergence of new, more contagious variants of the coronavirus, has seen the reintroduction of additional restrictions across the EU. On the other hand, Ireland and other EU Member States are also likely to see the beginnings of a recovery in the second half of the year as vaccine rollout reaches critical targets. As a result, the European Commission are forecasting both EU and euro area GDP to grow by almost 4 per cent in 2021.

My Department will publish updated macroeconomic forecasts with the Stability Programme Update in April.