Ireland’s Multinationals-Dominated Economy in the Pandemic: Did Big Tech and Big Pharma Save the Day?

Similar to the Eurozone crisis, Ireland engineered a more successful bounce back from the COVID-19 shock than crisis-hit peers. This article argues that the Irish path is less of a product of a generalizable export-led growth strategy, but, rather, can be explained by a set of idiosyncratic features. Using a wide array of macroeconomic indicators, the analysis assesses the opportunities and risks associated with Ireland's distinct path. It shows how strong ties to the United States, and emergence as the European hub for the world’s fastest growing firms sets Ireland apart from European peers. The US is a reliable “spender of last resort,” countercyclically spending and borrowing, boosting growth prospects of trading partners. Irish sectoral specialization in pharmaceutical manufacturing and digital services was also a boon in this crisis. The pandemic created opportunities for health-related industries; reliance on digital technologies helped digital firms. The article also finds, however, that banking on tech and pharma giants has significant limitations. First, multinationals’ accounting tricks artificially inflate economic statistics, and these two sectors are most affected. Second, to the extent that there is job-sustaining activity, it is not straightforward how the success of these sectors is transmitted to the rest of the economy. In the aftermath of the Eurozone crisis, the hospitality industry played a significant role as a “‘transmission belt,” receiving spillovers from the high value-added export sector. Since lockdowns hit hospitality the most, the social insurance function of fiscal policy is of paramount importance to ensure a more broad-based recovery.