Donohoe: Level-5 'not as severe' to economy

CSO figures show that, in GDP terms, the economy grew by a near record 11.1% in the third quarter, compared to slumps of over 3% in the first and second quarters

Finance minister Paschal Donohoe expects to see “significant declines” in the numbers of people receiving the pandemic unemployment payment in the coming weeks. Picture: Julien Behal

Finance Minister Paschal Donohoe is “optimistic” the recent Level-5 Covid-19 lockdown restrictions will have had a less damaging impact on the economy than the first lockdown earlier in the year.

He also said he expects to see “significant declines” in the numbers of people receiving the pandemic unemployment payment in the coming weeks.

The Minister was speaking after latest CSO figures showed the economy — in GDP terms — grew by a near record 11.1% in the third quarter, compared to a revised 3.2% slump in the second quarter and a 3.5% first quarter fall. 

On a year-on-year basis, GDP grew by 8.1% in the third quarter, the CSO said.

However, when profits from multinational exports are excluded, the economy actually shrank by nearly 2% in the quarter.

While eased Covid-19 restrictions played a part in the headline increase — personal spending rose strongly and hotels, restaurants and construction all saw heightened activity — the growth was mainly driven by the multinational sector and a near 6% jump in exports.

Pharmaceutical exports played a particularly major role during the latest quarter, with a surge in Covid-related exports such as testing kits.

However, when measured in GNP terms — which strips out multinational profits — the economy shrank by 1.9% in the third quarter.

Minister Donohoe said the headline GDP figure “is not an accurate measure of what is going on in the economy,” given the size of the multinational sector.

“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,” he said.

The recent six-week lockdown, as part of the Level 5 restrictions, is sure to have resulted in a further shrinking in the domestic economy, but Mr Donohoe said he remains upbeat.

“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,” he said.

“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 number of people on the PUP rose to around 350,000 in the third quarter. While an increase of 105,000 people, the total was still below the peak of 600,000 seen in May.

Separate CSO figures showed that the number of people receiving job benefit payments on the live register grew by 2.5% last month to 535,786. Earlier in the week, the CSO said the Covid-adjusted unemployment rate was 21% in November.

Dermot O’Leary, Goodbody chief economist, said Ireland is on track to record the fastest GDP growth in the world this year because of its pharma and IT exports.

Overall, the economy is expected to contract by around 2.5% this year.