Ireland’s economy contracted by 6.1 per cent during the second financial quarter of this year (April to June), according to figures released by the Central Statistics Office (CSO) last week.
This major decline in Gross Domestic Product (GDP), a measure of the total output of an economy, is the country’s largest quarterly decline on record.
The economic fallout related to the Covid-19 crisis surpasses the 4.7 per cent decline which occurred during the 2008 financial crisis, according to the Quarterly National Accounts released by the CSO on September 7.
The CSO also corrected its initial estimate for the GDP of 2020’s first quarter to a fall of 2.1 per cent, meaning that the Irish economy is now officially in recession.
A recession is defined as two consecutive quarters of decline in economic activity.
Speaking at the launch of the Credit Guarantee Scheme last Monday, Minister for Finance Paschal Donohoe said that these new figures were “broadly as expected” but that the economy was still relatively intact.
“The hit was not as severe as many of our trading partners, for instance the UK, Eurozone and the US where GDP declined by over 20, 12 and 9 per cent respectively in the same period,” Mr Donohoe said.
He added that the Government is currently developing Budget 2021 and a National Economic Plan to guide the country through further financial challenges in the future.
The ratings agency Moody’s has warned that the economy could contract by as much as 8.5 per cent by the end of this year, largely due to a lack of spending by consumers.
The government has also taken on huge debts in order to pay for wage subsidy schemes, the agency said, but the continued activity of sectors like pharmaceuticals and technology would “mitigate” the damage to Ireland’s GDP.
The only sectors of the economy that contributed to economic growth during the three month period were Industry and government spending.
Meanwhile the construction industry decreased by 38.3 per cent as well as the Agriculture, Forestry and Fishing sectors seeing a drop of 60.6 per cent.
The Arts and Entertainment industry was hit the hardest, recording a fall in activity of 65.5 per cent.
The Distribution, Transport, Hotels and Restaurants sector fell by 30.3 per cent, likely due to the fact that so-called “wet pubs” were closed, while severe travel restrictions have mostly halted international tourism.