Irish GDP jumps 9.7% q/q on tariff-beating pharma exports to US

By Conor Humphries and Padraic Halpin

DUBLIN (Reuters) -Ireland's gross domestic product grew by a hefty 9.7% quarter-on-quarter in the first three months due to a surge in pharma exports to the U.S. ahead of threatened tariffs, likely further distorting the average growth rate across the euro zone.

With Ireland's large multinational sector often distorting GDP, officials prefer to use modified domestic demand (MDD) to gauge the strength of the economy and it was up 0.8% compared with the previous three months, Central Statistics Office (CSO) data showed on Thursday.

GDP has at times diverged sharply from activity in the wider economy and an initial estimate of a much lower quarterly growth of 3.2% had already inflated the euro zone average, which grew by a faster than expected 0.4% in the first quarter.

More than a dozen of the world's biggest pharma companies have plants in Ireland, where many make medicines or active ingredients for the U.S. market and avail themselves of Ireland's low corporate tax rate.

Some U.S. drugmakers with a presence in Ireland have reported stocking up ahead of tariffs on the sector threatened by President Donald Trump.

Separate data last month showed exports of pharma products to the U.S. from Ireland rose by 243% year-on-year alone in March.

That surge was chiefly behind the larger than expected jump in Irish GDP, Christopher Sibley, Assistant Director General at the CSO said. He noted an "urgency" around some of the exports, citing conversations with the multinational companies concerned.

Total exports of 225 billion euros in the first quarter were the highest quarterly export figure on record, Mourad Mejdi, economist at business lobby Ibec, wrote in a note.

Ireland's finance ministry last month downgraded its growth forecasts slightly for modified domestic demand but marked up its estimate for GDP a touch - even in the event of EU/U.S. tariffs remaining in place.

"GDP growth is likely to be lumpy this year as swings in exports drive big changes in the headline number," said Thomas Pugh, economist at accountancy firm RSM

"But the underlying fundamentals of the domestic economy, such as low employment and inflation and strong consumer spending, should continue. The big risk is that tariffs and the associated uncertainty cause a slump in business investment."

(Reporting by Conor Humphries; Editing by Mark Heinrich, William Maclean)