Ibec, the group that represents Irish business, has published its new Quarterly Economic Outlook Q2 2020, which forecasts a contraction in GDP of 11% in 2020 and for consumer spending to fall by 14%.
The Outlook says that in a best case scenario unemployment will fall from a current 28% to 16% by the end of 2020 and falling to 7% by the end of 2021.
Investment is expected to fall by almost 40% this year. Recovery of the economy to its 2019 level will not happen until 2022 at the earliest.
The length of the lockdown in Ireland, including a more conservative pace to re-opening of the economy than our peers, will help determine the scale of the fall in economic activity.
If we plan to have a significantly longer lockdown than most developed countries then we cannot, at the same time, plan to run a deficit which is at the lower end of that same group of countries unless we are providing lower relative supports for businesses.
Our view is that further significant measures will need to be taken over the coming months to protect households and business, get people back into jobs, and bring forward maintenance and investment projects from an extended capital plan.
Commenting, Ibec Chief Economist Gerard Brady, said:
“We are currently living through the sharpest compression of economic activity in living memory. Whilst many of the collapsing economic figures presented in this report are the result of necessary public health decisions, their impacts on incomes and balance sheets are no less real.
“The recent roadmap published by Government gives welcome clarity on when sectors may expect to be allowed re-open again, but it is also clear that normal conditions will not return for some time.
Contrary to early hopes, the public health and economic crises’ will not be temporary and will last well into 2021. Early signs in other economies are that consumer fear of the virus and ongoing social distancing will play a major role along the path to demand normalisation.
We now have to accept that the impact of living with the virus is likely to last a year or more.
“During this period, there is also a growing risk of a cliff-edge Brexit happening in December 2020, ongoing uncertainty about global tax reform, and a prolonged reduction in global economic capacity. Just like a decade ago, recovery will rely on Ireland’s export led growth model delivering to its full potential in the years ahead.”
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