Irish domestic economy returns to growth in first quarter

Ireland’s domestic economy returned to growth in the first three months of the year after a shallow recession, data showed on Friday, and the finance minister said momentum was set to continue as the country hits full employment.

Modified domestic demand, the preferred gauge of the Irish economy due to the distorting effects of large multinationals on GDP, saw quarterly growth of 2.7% in the first three months of the year after two quarters of mild contraction.

Construction grew 12% and agriculture 15.9% in the quarter, the Central Statistics Office data showed. Personal spending on goods and services grew 1.7% in the period.

In a sign of the continuing strength of the economy, Ireland’s unemployment rate hit an all-time low of 3.8% in May, dipping below the previous low of 2001 in the early days of the country’s so-called Celtic Tiger boom.

“Incoming data suggest that momentum has continued into the second quarter, bolstered by a record low unemployment rate of 3.8% registered in May,” Finance Minister Michael McGrath said in a statement.

“Our economy is now clearly at full employment and it is important that budgetary policy is calibrated so as to avoid adding to inflation.”

Modified domestic demand, which strips out some of the ways multinational activity can inflate economic activity, grew 8.2% in 2022 as a whole, faster than gross domestic product (GDP)growth in any euro zone economy.

The finance ministry in its last forecasts in April said annual modified domestic demand growth was set to slow to 2.1% in 2023.

GDP shrank 4.6% in the first three months of the year, compared to a decline of 0.1% in the last quarter of 2022 as the CSO’s measures of Globalised Industry contracted 18.2%. GDP was 5.5% higher than in the first quarter of 2022.

The government has forecast GDP growth is likely to slow to 5.6% in 2023 from 12% in 2022.