Exports drove Irish economy to growth of 13.5% in 2021

The Irish economy is estimated to have grown by 13.5 per cent last year, driven largely by growth in exports of goods and services, according to national accounts published by the Central Statistics Office (CSO).

The accounts show the impact of the pandemic varied across the sectors of the economy in 2021 as the levels of Covid-19-related restrictions changed over the year.

Several sectors focused on the domestic market experienced higher levels of economic activity in 2021, with the distribution, transport, hotels and restaurants sector growing by 6.2 per cent, and arts and entertainment increasing by 12.6 per cent.

However, the construction sector contracted by 4.7 per cent in the year and agriculture, forestry and fishing decreased by 1.4 per cent.

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Growth continued in the more globalised sectors of the economy, with industry increasing by 24 per cent and the information and communication sector growing by 14.1 per cent in the year.

Multinational strength

Overall, multinational-dominated sector growth was 21.9 per cent, and these sectors accounted for 56.2 per cent of total value added in the economy, compared with a 52.5 per cent share in 2020 and a 45.1 per cent share in 2019.

Looking at expenditure in the economy, Government spending on goods and services increased by 5.3 per cent, while personal spending on goods and services increased by 5.7 per cent in the year.

Personal spending reached €105.2 billion in 2021, a recovery compared to the 2020 result of €99.5 billion, but 5.3 per cent lower than the €111.1 billion of spending in 2019.

Personal consumption expenditures accounted for almost 25 per cent of gross domestic product in 2021, down from 26.4 per cent of GDP in 2020 and 31.1 per cent in 2019.

Overall, GDP is estimated to have increased by 13.5 per cent in 2021, driven largely by growth of 16.6 per cent in exports of goods and services in the year. Gross national product – a measure of economic activity that excludes the profits of multinationals – increased by 11.5 per cent.

Compared to 2020, investment in intellectual property products decreased by 56.1 per cent in 2021, driving a decrease of 16.6 per cent in final domestic demand in the year.

Balance of payments

Modified domestic demand, a broad measure of underlying domestic demand that excludes intellectual property products and aircraft-related globalisation effects, increased by 6.5 per cent.

In international accounts results, the current account of the balance of payments recorded a surplus of €58.8 billion in flows with the rest of the world in 2021, driven by improvements in the merchandise and services balances.

The improvement of €58.8 billion in the services balance between 2020 and 2021 reflects the lower levels of intellectual property products imports in 2021. Multinational profit net outflows were €90.7 billion in the year, an increase of €21.0 billion on 2020 levels.

There was a surplus of €17.5 billion for trade in goods and services with the UK, an increase of €6.2 billion on the 2020 trade balance. The surplus was offset by a deficit of €10.6 billion for net income flows, giving an overall current account surplus of €6.9 billion with the UK.

Russian sanctions

Minister for Finance Paschal Donohoe said the data showed growth in the economy was 7 per cent higher than it was immediately before the pandemic, but warned there would be an impact on Ireland from sanctions imposed on Russia.

“The post-Covid recovery is now taking place at a time of unprecedented geopolitical instability and uncertainty,” he said. “Ireland’s support for Ukraine’s sovereignty and territorial integrity is unwavering.

“The sanctions that Ireland, along with many other countries, has imposed on Russia will have a severe and lasting impact on the Russian economy. However, the sanctions and broader conflict will not be without cost for Ireland as well.

“While our direct trade links with Russia are limited, the Irish economy remains exposed to the recent spike in commodity prices and other spillover effects.

“Indeed, some of our key trading partners are highly reliant on Russia and Ukraine for certain goods and Russia plays an outsized role in global energy and commodities markets, which is likely to lead to higher inflation in the short term.”