The latest Irish economic data were broadly positive over the last several weeks and suggest the economy entered the coronavirus crisis with substantial forward momentum. Irish GDP figures show that the Irish economy grew by 6.2% yoy in the final quarter, bringing the growth rate for 2019 as a whole to 5.5%.The exceptional increase in multinational activity through 2019 coupled with the buoyancy of corporation taxes means there may be some possibility of an upward revision when more detailed data are released in the summer.
The coronavirus crisis will have a major negative impact on the Irish economy because of the importance of international trade and the effect of domestic health related policy actions entailing major disruptions to economic activity. While significant fiscal policy measures have been announced these will provide only a partial offset. Apart from the intrinsic uncertainty in relation to degree and duration of economic dislocation, quantifying the likely impact on Irish GDP growth is complicated by potentially positive impacts on pharma and IT activities. That said, we expect sharply negative growth for the second quarter and a more restrained recovery thereafter. While positive carryover effects and the impact of fiscal support measures will partly offset the adverse impact of the coronavirus, we have amended our GDP forecast from 4% to 3% and in light of the pace of health related shutdowns in recent days, a further downward adjustment of similar magnitude may well be warranted.