The March Economic update also considers domestic demand, based on Modified Final Domestic Demand (MFDD) for Ireland. This metric indicates that the economic impact of the pandemic on Ireland was more in line with other European countries and, in fact, average growth of MFDD over the pandemic period actually fell by 0.6 per cent. Other countries with a negative rate include Spain (-2.7 per cent), Italy (-2 per cent), Germany (-1.5 per cent), the Netherlands (-1.2 per cent), Slovakia (-1.2 per cent), Austria (-1.1 per cent), Belgium (-0.9 per cent), Portugal (-0.8 per cent), France (0.7 per cent), Czechia (-0.7 per cent), Cyprus (-0.4 per cent), and Croatia (-0.2 per cent).
The EU27 average was an average decline of -1.4 per cent. Taking just the annual change to the year Q3 2021, Ireland ranks 16th out of the EU27.
The Parliamentary Budget Office attribute this slower rate of growth, or decline, in domestic demand to changing patterns of personal consumption and investment having a similar impact across European countries.
While in Ireland Government spending helped to mitigate the worst impacts of the pandemic restrictions early on, from Q2 2021, consumer spending had increased considerably.
Compared to the financial crash of 2008, employment in Ireland has returned to its pre-crisis level considerably faster. It took just 7 quarters for the return post-Covid, compared to 37 quarters followign the 2008 recession.
According to the CSO Labour Force Survey Q4 2021, the number of hours actually worked in 2020 represented a decrease of 6.7 million hours per week on the previous year. Between Q4 2020 and Q4 2021, the number of actual hours worked increased by 6.8 million per week, indicating a return to pre-Covid levels. However, not all sectors have returned to their pre-crisis levels. A breakdown by sector indicates that some 5.1 million hours per week were worked in the Accommodation and Food Sector in Q4 2019. Due to health restrictions, this decreased to just 2.4 million in Q4 2020, and has increased to 4.1 million in Q4 2021 - the sector is still experiencing a loss of one million hours per week. Wholesale & Retail Trade have also yet to return to pre-crisis levels, decreasing from 9.5 million hours per week in Q4 2019 to 9.1 million in Q4 2020, and again to 8.9 million hours worked per week in Q4 2021.
The Information and Communication Sector and the Professional, Scientific and Technical Services Sector have actually surpassed their pre-Covid weekly hours. Actual hours worked in the former increased from 4.6 million per week in Q4 2019 to 4.8 million in Q4 2020 and again to 5.7 million hours per week in Q4 2021. The latter experirenced a slight decrease from 4.9 million hours per week in Q4 2019 to 4.8 million in Q4 2020, before increasing to 5.6 million hours per week in Q4 2021.
So, higher paid jobs have rebounded faster, and harder, than those in lower-paid sectors.
Reliance on Foreign Investment
According to the Parliamentary Budget Office data, dependence on foreign-owned MNEs has increased since the onset of the pandemic. At the beginning of 2019, foreign-owned MNEs accounted for 43 per cent of Gross Value Added (GVA), while other sectors excluding foreign-owned MNEs accounted for 57 per cent. In Q1 2020, the two aligned briefly, each accounting for 50 per cent, before diverging steadily to Q3 2021. Foreign-owned MNEs now account for 57 per cent, while other sectors account for 43 per cent.
Inflation in Ireland and across the Euro area has increased steadily since late 2020. The Parliamentary Budget Office publication puts overall inflation in Ireland at 5 per cent in January 2022. Analysis by the Central Bank, however, indicates that the rate is as high as 6.1 per cent for households in the bottom 20 per cent of the income distribution, while those in the top 20 per cent experienced an increase of 5.3 per cent. Older households, aged 65+, also experienced a higher rate of inflation (6.1 per cent) than younger households (5.2 per cent for those aged <35).
Heatmaps produced by the Parliamentary Budget Office indicate that Transport, Communications, Clothing and Footwear, and Furnishings and Household Maintenance were key commodity groups driving inflation.
Ireland was also found to be the second most expensive country in the EU27 (40 per cent above the EU average), in terms of comparative price levels of consumer goods and services.
Social Justice Ireland has long argued that GDP is not a suitable measure of growth. With exponential growth in GDP post-pandemic, we continue to see the impact of inequality - jobs in lower-paid sectors have not yet recovered, a reliance on foreign investment, and inflation that disproportionately affects lower income households.
We need a fairer recovery for all.