Ireland’s economy is forecast to shrink by more than 10 percent this year and unemployment will jump to 22 percent by June. Finance minister Paschal Donohue said he expected GDP to contract by 10.5 percent in 2020 after the government locked down large parts of the economy to curb the spread of COVID-19. Dublin has also been forced to deal with 584,000 people being signed up to special welfare payments after losing their jobs during the lockdown in just five weeks.
Mr Donohue said: “The Irish economic landscape in common with elsewhere, has been turned on its head in recent weeks.
“The necessary restrictions to limit the transmission of the COVID-19 virus have resulted in a severe recession and unprecedented levels of unemployment.”
His forecast signals an abrupt end to years of economic growth after the most recent global financial crash in 2008.
Mr Donohue has predicted a “gradual recovery” to begin in the second half of the year, but the rebuild would depend on whether the government can successfully contain the virus and implement a phased lifting of the current restrictive measures.
He said the economy could grow six percent in 2021 and an unemployment rate of below 10 percent, with activity expected to reach pre-crisis level in 2022.
Interim prime minister Leo Varadkar has announced his draconian lockdown measures will remain in place until at least May 5.
He is yet to offer any clarity on when or how they restrictions will be lifted in the coming months.
Mr Donohue’s forecasts, which were set out in a document sent to Brussels as part of a Eurozone member state update, said the severity of the recessions depends on how quickly Ireland can ease the lockdown.
The dossier warns if Ireland’s recovery is delayed beyond the third quarter, GDP would shrink by 13.8 percent in 2020.
If the lockdown is kept in place until the start of 2021, GDP would slump by 15.3 percent.
Ireland entered into the crisis with strong public finances and a 4.8 percent unemployment rate.
Mr Donohue expects to run a €23 billion budget deficit, around 7.4 percent of GDP, this year if the recovery phase begins in the third quarter.
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But this figure could dramatically increase to €30 billion, or 10 percent of GDP, if the recovery does not start until the fourth quarter.
Mr Varadkar has said his government is preparing to set out plans to reopen the Irish economy.
He told RTE: “There won’t be any chance to the restrictions until May 5, but at the moment we are preparing a plan which we’ll have ready before then which will set out in a step-wise fashion, how we will reopen our economy, how we will reopen our society.”
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He confirmed the plans are not finalised but said they hope to reopen areas with the most benefit to society as well as the least risk to public health.
However, Mr Varadkar warned that some countries have been forced to backtrack on their plans to lift measures and reimpose restrictions instead.
“We need to bear that in mind,” he said.
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