Multinationals mask lockdown damage in Irish 2020 GDP growth

DUBLIN: Irish gross domestic product grew by 3.4% in 2020 as the large and relatively pandemic-proof multinational sector cushioned the impact of one of Europe's toughest lockdowns, which left one in four people temporarily or permanently out of work.

Some of the world's top pharmaceutical and technology companies have their European hubs in Ireland, and while they account for around 12% of the workforce, their activities have diminished the relevance of GDP as a gauge of the economy.

Modified domestic demand, a measure that strips out some of the ways multinationals can distort Irish GDP, was 5.4% lower in 2020, more accurately capturing the tough restrictions put in place since COVID-19 spread to Ireland a year ago.

Finance Minister Paschal Donohoe described the rise in GDP as "remarkable" both in an international context and compared with expectations.

But he said it was entirely because of a 6.2% year-on-year gain in exports driven by the multinational sector.

"While 2020 was a challenging year for indigenous exports, the pharma and ICT (information and communications technology) sectors recorded extraordinary export growth, driven by blockbuster immunological drugs, Covid-related products, and the shift to home-working," Donohoe said in a statement.

"However, as I have said many times, GDP is not the most accurate measure of what is going on in the economy."

Donohoe also pointed to a 9% fall in household consumption to get a better sense "of what is happening on the ground."

Irish GDP rose by 1.5% year-on-year in the fourth quarter, Friday's data showed, driven by a brief reopening of the economy in December. It was down 5.1% quarter-on-quarter compared with the three months to September, when most businesses were open.

Ireland returned to a strict lockdown from late December, which is set to be only gradually unwound in the coming months. The unemployment rate, including those receiving temporary COVID-19 jobless benefits, stood at 24.8% last month.

As the restrictions on hospitality, construction and retail have disproportionately hit lower income workers, the impact on Ireland's public finances has also not be as severe as initially feared, again helped by multinational employers.