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Q2 GDP down by 6.1% as domestic demand flatlines

GDP contracted by 6.1% in Q2, CSO Quarterly National Accounts show, while GNP contracted by 7.4% in the quarter.

Personal consumption of goods and services, a key measure of domestic economic activity, decreased by one-fifth in the quarter.

But spending by the Government on goods and services increased by 7.5%.

There was a contraction of 38% in the construction sector, while the multinational sector grew by 1.5% in the second three months of 2020.

The Balance of Payments’ current account recorded a surplus of €12 billion in transactions with the rest of the world in Q2 of 2020.

Lower levels 

Assistant director general Jennifer Banim said that the virus impact varied by sector, with the domestic market experiencing significantly lower levels of economic activity.

Distribution, transport, hotels and restaurants all contracted by close to one-third (30%).

Growth continued in some of the more globalised sectors, with industry growing by 1.5%.

However, the multinational-dominated information-and-communication sector contracted by 2% in the quarter.

The Q2 GDP contraction of 6% was partly offset by an increase of €38 billion in net exports of goods and services, largely driven by a fall in intellectual property product (IPP) Imports.

“Investment in IPP and in aircraft by leasing companies was significantly lower in Q2,” Jennifer Banim said.

“The traditional final-domestic-demand indictor – a measure of personal, Government and investment spending – contracted by 47% in the quarter.

Domestic demand

“However, the modified final-domestic demand, which excludes the globalisation effects of relocation of IPP and purchases of aircraft by leasing companies, [which is] an important indicator of underlying demand, decreased by 16% in the quarter.

“The current account of the balance of payments recorded a surplus of €11.7 billion in flows with the rest of the world in Q2.

“Royalty imports for pharmaceutical products and preparations decreased from €5.8 billion in Q2 2019 to €3.5 billion in Q2, 2020, and the accumulation of the IPP relocations to Ireland in recent years may now be leading to reduced quarterly royalty payments abroad,” Banim concluded.