In marked contrast to most other economies, preliminary data suggest Irish GDP growth grew by 1.2% in in the first quarter of 2020. Notwithstanding these numbers, it remains the case that Ireland will suffer a severe downturn in economic activity this year but the scale of deterioration, at least in terms of the hit to GDP, may be more limited than for many other economies.
The GDP data are broadly consistent with a reported quarterly rise in employment of 1% through the same period and pockets of strength in some tax headings of late. As such, they confirm that the Irish economy had notably stronger momentum coming into the Covid-19 crisis than most others as the removal of the immediate threat of a cliff-edge Brexit served to boost a growth trajectory already underpinned by solid growth in employment and earnings, a positive FDI pipeline and a step-up in construction activity.
With multinationals based in Ireland significantly focussed on Pharmaceuticals, Medical devices and Information Technology, many may not be markedly impacted by a generalised fall in global trade. As a result, we continue to envisage that the prospective decline in Irish GDP in 2020 will be in the region of 5%. However, it is important to repeat the caveat that GDP is often unrepresentative of the conditions facing the majority of Irish businesses and households. In this context, our expectation that unemployment will still be in double digits at the end of this year, more than twice the pre-Covid19 level, gives a truer sense of the scale of the adverse impact of the pandemic on the Irish economy.