* Irish GDP set to rise by 1.4% in 2021 vs 6% prior estimate
* Unemployment to average 15.9% in 2020, 10.7% in 2021
* Estimates based on no-deal Brexit, limited vaccine (Adds details, quote)
DUBLIN, Sept 29 (Reuters) - Irish gross domestic product is set to fall by just 2.5% this year and not the 10.5% estimated in April, Ireland’s finance ministry forecast on Tuesday, after the economy entered a far shallower recession than most of the euro zone.
While Ireland’s large multinational sector shielded its public finances from the worst of the COVID-19 crisis, the unemployment rate is still set to average almost 16% this year and then drop to 10.7% during 2021, the updated forecasts showed.
Modified domestic demand, a measure that strips out some of the ways large multinationals can distort Irish GDP, is forecast to fall by a steeper 6.5% in 2020, though still far better than the 15.1% contraction seen in April.
“The dual nature of the economy has become more evident during this pandemic. The impact of COVID-19 in our domestic economy has been really severe,” Finance Minister Paschal Donohoe told reporters.
Boosted by the country’s large number of major technology and pharmaceutical multinationals, GDP fell by 6.1% quarter-on-quarter from April to June, half the record fall across the euro zone. Modified domestic demand collapsed by 16.4%.
But the rebound in both measures of economic growth in 2021 will not be as sharp as previously forecast, with GDP set to expand by 1.4% compared to the previous estimate of 6% and modified domestic demand forecast to grow by 3.9%.
The 2021 projections are based on neighbouring Britain -- a key trading partner -- leaving its Brexit transition period on less favourable World Trade Organization terms on Dec. 31.
They also assume a Covid-19 vaccine will not be widely available and the imposition of regional rather than national lockdowns to counter the virus.
Donohoe said GDP could grow by around 3 to 4% next year if Britain and the European Union strike a free trade deal before the end of this year. (Reporting by Padraic Halpin and Conor Humphries; Editing by Gareth Jones and Catherine Evans)
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