By Padraic Halpin
DUBLIN (Reuters) -Ireland’s domestic economy fell into a technical recession in the final quarter of 2022, Central Statistics Office data showed on Friday, but still grew by 8.2% for the year as a whole while the broader but unreliable measure of GDP powered further ahead.
With Ireland’s large multinational sector often distorting gross domestic product (GDP), officials prefer to use modified domestic demand to gauge the strength of the economy and it fell 1.3% quarter-on-quarter, following a 1.1% decline in the third quarter.
Modified domestic demand, which strips out some of the ways multinational activity can inflate economic activity, was still much higher in 2022 than in 2021 due to strong investment growth in the first half linked partly to employees returning to their offices that fell back very sharply in the second half.
GDP growth slowed to 0.3% quarter-on-quarter from October to December, following growth of 2.8% in the previous three months, and stood 12% higher than in 2021 for the year as a whole.
Irish GDP growth was again higher last year than any other euro zone economy, but so too was modified domestic demand when compared against GDP growth of other countries.
Friday’s data showed personal spending grew by 1.1% quarter-on-quarter, again driven by services activity with higher inflation meaning consumers had to spend a lot more in order to get slightly more goods and services.
Finance Minister Michael McGrath said last week that his department expected the domestic economy to “effectively move sideways over the coming months”, before returning to growth from the second quarter of the year.
In its last forecasts in September, the finance ministry saw modified domestic demand slipping by 0.6% in the first quarter of 2023 before expanding by 0.8% from April to June and averaging 1.2% for the year as a whole.
Data so far this year has painted a more encouraging picture with unemployment down slightly, PMI surveys showing service and manufacturing sector growth picking up and tax revenues continuing to climb from record levels.
(Reporting by Padraic Halpin; Editing by Christina Fincher and Shounak Dasgupta)
