Rising confidence of huge Irish economic growth this year

The economy is now expected to surge by as much as 15% this year on the back of a strong first half driven by Ireland’s booming multinational sector.

CSO figures, this week, showed the economy grew by 6.3% in the second quarter of the year and by a whopping 16%, year-on-year, in the first half as a whole. That has prompted Davy to raise its current year GDP forecasts for the second time in less than a month. 

It recently forecast 10% GDP growth for this year, up from a previous estimate of 4.8% 

“If GDP were flat [in the second half of the year] it would still imply calendar year growth of 14% in 2021. Hence, our forecast for 10% GDP growth in 2021 will have to be revised upwards towards 15% or above – as will the Central Bank and Department of Finance projections,” said Davy’s chief economist Conall MacCoille.

Gross Domestic Product (GDP) grew by 6.3% in Quarter 2 2021https://t.co/091ohTr7Bz #CSOIreland #Ireland #NationalAccounts #BalanceofPayments #Economy #Economics #Macroeconomics #EconomicIndicators #CapitalStocks #GovernmentFinances #GovernmentAccounts #GovernmentExpenditure pic.twitter.com/k85641ApO0

— Central Statistics Office Ireland (@CSOIreland) September 2, 2021

Currently, the Department of Finance is guiding for 8.8% economic growth – in GDP terms - this year. The Central Bank most recently forecast 8.3% GDP growth for 2021, while think-tank the Economic and Social Research Institute (ESRI) said, in June, that it expects GDP to grow by 11% this year and even GNP – which excludes multinational contributions – to jump by over 8%.

Earlier this week, KBC Bank Ireland chief economist Austin Hughes said he expects the economy to surge by 15% this year also. As well as the strong GDP data, latest exchequer figures this week showed a larger-than-anticipated €800m jump in corporate tax receipts.

However, Davy has warned that the growth will be entirely fuelled by volatile multinational performance. It said the domestic economy still lags. It said the key message from the GDP figures was “a very gradual recovery in domestic activity”.

“Indigenous sector output rose by only 2% [in the second quarter], still 6.4% below pre-pandemic levels,” said Mr MacCoille.

Meanwhile, CSO figures show the total number of people on the live register – or receiving the PUP – declined by nearly 7%, to 323,010, in August. 

Total number of persons on the Live Register or receiving the Pandemic Unemployment Payment decreased by 6.9% to 323,010 over the month to August 2021https://t.co/1t41O2SkmT #CSOIreland #Ireland #LabourForce #Households #Families #LabourMarket #LiveRegister #Jobs #Employment pic.twitter.com/JDTMhkI1U5

— Central Statistics Office Ireland (@CSOIreland) September 3, 2021

Earlier this week, the CSO said the Covid-adjusted unemployment rate dropped to 12.4% in August from 13.5% in July.

Elsewhere, Britain's economic recovery from the pandemic lost more momentum last month than originally estimated as staff shortages and supply chain issues weighed on companies in the country's huge services sector, according to a survey.

"Many survey respondents commented on long wait times to fill vacancies and an unexpectedly high staff turnover as the UK economy reopened," said Tim Moore, economics director at IHS Markit.

A separate survey also showed UK employers were still hunting for more staff than they were just before the pandemic, added to signs of a tight labour market after lockdowns and Brexit.

IHS Markit said UK consumer demand slowed last month after an initial post-lockdown surge.

Others said a slowing property market caused by partial withdrawal of a tax break on home purchases, a lack of tourists and Brexit trade frictions dampened growth too.

-additional reporting Reuters