The Irish economy contracted between July and the end of September, driven by lower activity in industries dominated by big multinationals.
Gross domestic product (GDP) shrank 1.8 per cent in the third quarter of the year compared to the previous three month period, according to preliminary data published by the Central Statistics Office on Friday. The economy shrank 4.7 per cent compared to a year ago. The economy has now contracted in three of the last four quarters.
The contraction was “driven by decreases in the multinational dominated sectors (the Industry and Information & Communication sectors) in Q3 2023,” Brian King, Senior Statistician in the National Accounts Data Collection and Quality Division,” said in a statement.
While GDP is seen as an unreliable measure of the Irish economic health given the influence of big overseas firms moving intellectual property and other intangible assets through Ireland, it is still widely used by investors as a short hand for the state of the economy. The preliminary measure itself can also be volatile as it is based on forecasting and data sources that are “limited in scope,” the CSO said, including the likes of retail sales and payroll data.
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Even so, Ireland will now fall into technical recession if the economy contracts again during the final three months of the year.
“While the CSO does not provide a breakdown of the drivers of the decline, it is likely reflective of ongoing weakness in production in key multinational-dominated sectors, a pattern we have seen throughout the year,” Minister for Finance Michael McGrath said in a statement. “I would stress that the flash GDP data are initial estimates, and have been subject to meaningful revisions in each of the releases throughout the year, while GDP itself is not a particularly meaningful measure of domestic economic activity.”
“More detailed information will be published in early-December, alongside my preferred measure for the domestic economy, modified domestic demand,” he added.
The economy is forecast to contract 1.6 per cent this year, according to estimates from Government funded think tank the Economic and Social Research Institute published earlier this month.
