DESPITE THE EMERGENCE of the Omicron variant of Covid-19 Ireland’s economy has proven resilient with demand growing and unemployment falling, the Central Bank has said.

Published this morning, the Central Bank’s latest Quarterly Economic Bulletin suggests the economy has largely shaken off the worst effects of the Covid-19 crisis.

The report notes that the economy is already back to its pre-pandemic level and forecasts that gross domestic product (GDP) will grow by 8.7% this year and modified domestic demand will grow by 7%.

Employment is also predicted to grow strongly, with the unemployment rate on track to be below 5% through 2024.

However, it’s not all good news as some aspects of the economy – notably hospitality and entertainment– are still suffering significant costs due to Covid.

The rate of inflation is also set to get higher in the near term due to disruption to global supply chains, surging demand and the rise in energy prices.

The Central Bank anticipates it will then ease as acute pandemic-related effects and energy price growth diminish in importance.

The economy continued to pick up momentum during most of the second half of last year, with strong employment growth and domestic spending.

The disruption caused by the emergence of Omicron failed to derail this momentum and the quarterly update sees a more rapid reduction in the unemployment rate over the coming years than in previous forecasts. 

The bulletin notes that the resilience of the economy through the pandemic and better-than-expected corporation tax revenues, has resulted in a marked improvement in the outlook for the public finances.

Mark Cassidy, Director of Economics and Statistics at the Central Bank, cautioned that some aspects of the economy are in a better position than others.

“With strong growth in employment and activity, the economy is already back to its pre-pandemic level, and we expect it will reach its potential level of activity over our forecast horizon to 2024.

“The aggregate data mask the fact that some parts of the economy, particularly hospitality and the arts, are still bearing significant costs arising from Covid,” Cassidy said.

The Minister for Public Expenditure and Reform, Michael McGrath, yesterday informed the Cabinet that total overall gross voted expenditure last year was €87.5 billion.

This was €1.4 billion (1.5%) below the full year allocation and €2.3 billion (2.6%) ahead of the 2020 end year position. 

“Notwithstanding the improving Covid situation, Government recognises the importance of not having a cliff edge in terms of supports,” McGrath said.

“We have taken a prudent approach to Budget 2022, providing €3.1 billion additional funding for measures to address the challenges of Covid in the department’s estimates for this year.

“A further €3.9 billion is being held in reserve to be allocated during 2022 as needed. This has ensured that the necessary resources are available to extend the key support measures in response to Covid,” McGrath added.