Irish GDP grew 5.5% in 2019 ahead of potential coronavirus hit

DUBLIN (Reuters) - Ireland’s gross domestic product grew by 5.5% in 2019, likely making it the EU’s fastest-growing economy again, although it was lower than the 6.3% predicted by the finance department as it braces for the potential impact of the coronavirus outbreak.

FILE PHOTO: Construction cranes are seen in the Irish Financial Services Centre in Dublin, Ireland April 24, 2017. REUTERS/Clodagh Kilcoyne

GDP, which in recent years has become an incredibly volatile way of measuring Ireland’s open economy, expanded by 1.8% on a quarterly basis from October to December, data from the Central Statistics Office (CSO) showed on Friday.

Greater Brexit clarity convinced Ireland to nudge up its GDP growth forecasts for 2019, 2020 and 2021 in January but Finance Minister Paschal Donohoe said this week that Ireland’s highly integrated economy will inevitably be impacted by the expected global slowdown related to coronavirus.

Donohoe said it was too early to predict the extent to which growth would be impacted but that weaker global growth will affect the country’s short-term outlook. The economy is forecast to grow by 3.9% this year.

“Early indications suggest solid growth in the first quarter this year,” Donohoe said in a statement on Friday, pointing to strong data on employment, tax collection, retail sales and from purchasing managers’ indexes.

“Of course, we are now heading into a precarious trading environment as a result of the spread of coronavirus. While primarily a public health and well-being issue, the economic impacts have the potential to be significant.”

Ireland has so far reported 13 coronavirus cases, including the first community transmission of the virus on Thursday.

The country's two largest banks, Allied Irish Banks AIBG.I and Bank of Ireland BIRG.I, said on Friday that they would seek to support businesses affected by coronavirus, including offering emergency working capital and payment flexibility.

The volitile nature of Irish GDP is due to the large cluster of multinational companies operating in the country, and the relevance of the headline figure has, as such, diminished over the past years.

While such distortions have inflated growth to 8.2% in 2018 and 8.1% in 2017, a range of other more stable data points to very strong growth in the real economy throughout the period.

Unemployment has fallen to 4.8% from a peak of 16% in 2012, when the country was midway through an international bailout following an economic crash a decade ago.

The statistics office has phased in new measures which strip out some of the distorting globalised activities. One such measure, modified domestic demand, expanded by 3% last year.

Reporting by Padraic Halpin; Editing by John Stonestreet and Alison Williams