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AUSTERITY MEASURES COULD worsen the economic downturn caused by the Covid-19 pandemic if undertaken too soon, according to Kieran McQuinn, a research professor at the Economic and Social Research Institute (ESRI).
In its Quarterly Economic Commentary, released this morning, the ESRI sketches the likely impact of the virus across a range of Irish economic indicators, through three scenarios.
In its ‘baseline’ scenario, the most realistic of the three, ESRI researchers assumed that there will be some recovery towards the end of the year but that ongoing public health restrictions, such as social distancing, will remain in place, blocking an immediate return to pre-Covid levels of activity.
Gross Domestic Product (GDP), the total monetary value of all goods and services produced in the country, is projected to fall by 12% in this scenario with unemployment levels reaching 17% of the total labour force for the year, up from 5% last year. Unemployment figures should reach their peak of 24% in the current quarter, according to the report.
Government spending is projected to increase by 11% in the ESRI’s baseline scenario and to cover the cost of unemployment supports and public health measures, borrowing will have to be ramped up. This could result in a government deficit of €28 billion, around 9% of GDP, a “significant deterioration”, according to the report.
Speaking to the media ahead of the launch of the report, McQuinn warned policymakers that stabilising the economy through a “broad-based fiscal stimulus” programme should be their first priority.
This might, however, necessitate a “fiscal adjustment” — ie austerity measures — down the line, he said.
I think the incoming government needs to be aware that at some stage there will be a need for some fiscal adjustment down the road but I think the key point is that if you manage the stabilisation phase well over the short to medium term that will ultimately minimise the scale of adjustment that’s required in the longer term.
“If on the other hand, you start to enforce the fiscal adjustments too soon that will compound the shock and compound the downturn in the overall economic activity which, ironically, will mean you need a larger adjustment over the longer term. So I think that’s the key balancing act that has got to be achieved,” McQuinn said.
A more severe situation outlined by the ESRI, in which Ireland is hit with a second wave of infections that force strict lockdown measures to be reimposed, could result in GDP falling by 17% and unemployment hitting 19, according to the report.
A third, ‘benign’ scenario considered by the think-tank assumes that the government’s reopening of the economy continues as planned and that the virus will be suppressed to such an extent that pre-pandemic activity returns by the end of the year. Under these circumstances, the researchers believe that GDP will fall by just 9% for the year with unemployment levels hitting 15%.
Detailed breakdown
By comparing figures from the final quarter of last year with a detailed breakdown of the numbers of people claiming the government’s Pandemic Unemployment Payment (PUP), the ESRI was able to provide some insight into the demographics and geography of the “unprecedented” decline in employment levels.
According to the report, “claims for the payment amongst younger workers represent a far greater share of employment than for other age categories.”
Nearly 27,000 18-19-year-olds are claiming the PUP, close to 60% of the total number of workers in that age bracket who had a job last year. Over 93,000, or around 47%, of those formerly-employed workers aged between 19 and 22 are in the same situation.
The border region has been the worst-hit with nearly 30% of the labour force claiming the payment, followed by South-East with 28% and the Mid-West with almost 27%.
Consumer boom
One novel impact of the shutdown measures, according to the research conducted for the report by Professor John Fitzgerald, is that Irish households “have money that they could not spend” and have effectively “rationed”, which could result in a consumer boom down the line.
While households could spend their income on the unrestricted goods and services, they are clearly not doing so, but saving instead. The last time consumers in Ireland found themselves in this position was during the Second World War.
“If household behaviour today were similar to that of the 1940s, the ‘forced’ saving by households could result in a consumer boom if and when the crisis is perceived as being fully over, possibly in 2022.”
Meanwhile, the Banking and Payments Federation of Ireland (BPFI) has just released a new guide on payment breaks as new figures show that 140,000 breaks have been issued, nearly 80,000 of them for mortgages.
Brian Hayes, chief executive of BPFI said: “With the initial three-month payment breaks issued in mid-March lenders are now undertaking a significant process of engagement with those who have availed of a break and those customers are now being contacted about their options once the current payment break ends.
“These include the availability of a payment break extension of up to an additional three-month period for those that continue to be directly impacted by the fallout from the COVID-19 pandemic.”
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It’s not rocket science lads, season ban for anyone hiring undocumented workers. Simples.
@canuckandgo:
Undocumented? Illegal workers
@Just Some Guy: Same thing – but yeah, let’s call a spade a spade. Presumably these boat owners are being prosecuted though? Right?
Pendency at it’s best…
@canuckandgo: but sorry i thought controlling your borders was racist and we were all supposed to feel sorry for US businesses without a supply of illegal immigrants? So it happens in ireland and now it is bad?
how can our fishermen make any money with dutch spanish and huge russian factory ships taking all our fish? we got severly screwed by the Eu.
@gregory: And the solution to that is modern slavery?
I wondered how long it would take for someone to make it their fault.
@Tony Canning: the solution is that our politicians stop giving all our fish for free to foreign countries. We’re losing huge money because our politicians don’t stand up for us. At least Norway told the Eu to take a hike and they’re making huge money as a result.
@gregory: Making excuses is worse than just being an apologist.
@Tony Canning: Address the point. This stealing of our fish is costing this country huge money since we joined the Eu. Our politicians are not representing our National Interest.
@gregory: at least acknowledge that hiring illegals and working them like that is wrong .. I agree with your other points though.
@Suzie Sunshine: how much are the russian and spanish factory ship workers getting paid?
@gregory: I am addressing the point. You’re advocating for slavery and using the big bad EU as an excuse.
@Tony Canning: the big bad eu just facilitated the transfer of irish jobs to romania avg salary €500/mth. post below. the Eu doesnt’t give a damn about Ireland.
@Suzie Sunshine: suzie, true but we cant compete w slave wages on russian spanish factory ship. lets get our fisheries back – it should be a billion dollar industry here and pay fair wages to all. The Norwegian system is an excellent example!
@gregory: pathetically conflating a low wage economy with slavery now….
Irish fishing industry worth 850million a year. Irish fishing industry worth 9billion a year to Eu This is the real problem.
@Sinbad the sailor: 100% and why the hell Irish people don’t protest about this issue is beyond me. Our politicians are useless. Look how many jobs we could have created a major industry like the Norwegians. It is time our politicians were held to account instead of the people lying down like sheep.
@Sinbad the sailor: I heard someone describe fish in Irish waters as European fish as due to migration they may only be passing through Irish waters. Don’t know if that is a fair comment?
@Finn Bowe: if this is true leave them wait till said fish have migrated through Irish waters.
Modern day slave galleys
@Tony Hardwicke: speaking of slave wages….over 200 workers lost their jobs in longford recently at a key supplier of components to the oil and gas industry-Cameron who was based in ireland for nearly 40 years . the workshop workers in ireland were getting around €3k/month. The manufacturing operation was moved to another Eu country where the workers get paid about €3/hour or €500/month all aided and abetted by the Eu with Infrastructural Grants to offset the over €100mln cost of building a state of the art factory. So dont talk to me about the Eu or a level playing regarding wages. the Eu represents big business not equality.
@gregory: it was moved to Romania.
I am a fishermen and last year we were broken down we had two lads on contract and 5 Irish lads so for 3 months the contract lads got there money every week but we get nothing can’t even get the dole we are self employed but yet we can get sacked I started a new job and we are having problems with boat so I have not made a wage in 6 weeks I was on a boat when Mr Fleming came aboard check on out crew so he went to the foreign lads first and ask were they be treated OK and everything was and then I asked Mr Fleming how come you didn’t ask the Irish crew men which was five men and his answer was there Irish and they are OK it’s a total joke we work big hours and some times we don’t even make a wage cause of weather or other problems who is there to look after us
You get paid by what you catch. If it’s a poor week fishing wages will be poor , if it’s a good week fishing wages will be good simple science, if the don’t like it no one is stopping them from quitting their not chained to the boats like slaves, it’s a tough industry as it is without all this bolloxology .
@Sinbad the sailor: ‘simple science’, Russian for, ‘I’m trolling from St. Petersburg’.
@Sinbad the sailor: True that. I know of three Filipino fishermen doing prawns in The Porcupine all year round. Rarely come off the boat. £1200/month paid into the bank for herself and the family, and all are delighted.
@Grotmaster: no doubt they’d be even more delighted if their wages reflected the hours they work.
If we’re going to even try to pretend that we live up to the most basic standard of decency, we have to give these fishermen a decent working wage. It’s not all about dangling a line over the bow of a boat, or dropping a net in the water, it’s a very dangerous job at times, and I’m speaking from personal experience from when I was younger.
We have all of these big brave comments from people hiding behind keyboards, giving out about immigrants, and the same people probably cream their pants trying to get a slice of toast out of the toaster with a fork. It’s pathetic.
@Grainne Abdulaziz: there illegal they should be stopped by the authorities long before the even get on a boat.
@Sinbad the sailor: There was never a time when illegal fisherman haven’t been on fishing vessels. I don’t think the general public give a damn how the fish on their plate is caught. I also notice a lot of syntax errors in your comments which strongly indicate you are not, yourself, an Irish-born fisherman. This doesn’t bother me personally, but can I ask are you operating on a valid licence and registered vessel in Irish waters?
@Grainne Abdulaziz: Grainne: our rescue services were out twice to rescue russian workers on factory ships recently – address that why we are giving our fish away. If you’re so worried about honours English i suggest you avoid this site and logic dictates foreign fishing interests are not going to support any of the arguments he posted which are to stand up for our National Interest which I would suggest is more important than your policing of the English language idem you are missing the point entirely. Look at the big picture.
@Grainne Abdulaziz: I’m Irish born, a fisherman of 20 years . Own my own boat employ only Irish crew. The industry has been good financially to us . In my 20 years I’ve only worked with Irish crew. Yes there is greedy fishermen who did or do employ illegal workers. But let not that tarnish the vast majority of good genuine Irish fishermen who work in this hard industry with the little quota we’re giving .
@Sinbad the sailor: You’re about as Irish as a pineapple, yourself and gregory are trolski trolski from Petrograd, dobra!
@Grainne Abdulaziz: well with a surname like yours I think the odds of me been more Irish than you are in my favour, plus we’re involved in the industry so if all you can question how Irish we are you know very little on the issues in the fishing industry
Load of old carp.
Fishing is always tough no matter where you are from.
Undocumented, illegal, or with work permit anyone not being paid for their labour is a slave. Slavery was abolished many years ago. Let’s not reintroduce it by sleight of hand.
@John Campbell: How much are the workers on those russian and spanish factory ships being paid ?
Construction ask restaurant trade is no different but it was OK for I phone Joan to do it through Jobs bridge.
Remember it was 39 hrs per week for €50.
have your say