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THE DEPARTMENT OF Finance has warned that it is too soon to predict the long-term impact of Covid-19 on the economy.
Publishing the Stability Programme Update (SPU) today, Finance Minister Paschal Donohoe said the report does contemplate a so-called “scarring” of the economy that could mean certain jobs do not return once the pandemic has passed.
The annual SPU is published each year for consideration by the European Commission and European Council under requirements under the Stability and Growth Pact.
The 2021 SPU is forecasting GDP growth of 4.5% for this year and 5% next year.
Modified Domestic Demand, which strips out the effect of multinationals, is being estimated to grow by 2.6% this year and 7.4% next year, following a decline of 5.4% last year.
The predictions for the growth of the domestic economy is largely based on estimates of pent-up demand, with the department estimating that there is between €11-12 billion in “excess savings” within the economy.
The Department of Finance’s chief economist John McCarthy said this afternoon that these savings are concentrated in “better off or middle or high income households”.
He added that the department expects that “about €3 billion” of these excess savings will be used for consumer spending.
The projections for the economic outlook assume that there will be a gradual relaxation of Covid-19 restrictions over the second quarter followed by even further relaxation in third and fourth quarters.
The SPU outlines that, should there be a “severe epidemiological scenario” whereby the current restrictions need to remain in place for a prolonged period, GDP growth this year would be almost one percentage point lower than forecast and 2.5 percentage points lower next year.
In terms of unemployment, the projections estimate an average unemployment rate of 16.3% over the course of this year, declining to 8.2% next year and then 6.7% in 2023.
Early last year, before the effect of the pandemic hit, the seasonally adjusted unemployment was 5.4% in March 2020 and 4.8% in February 2020.
Speaking to reporters this afternoon, the Finance Minister said employment is estimated to increase by 80,000 jobs this year and 225,000 jobs next year but that it would not be until 2023 that the country sees employment “comparable” with pre-pandemic levels.
He acknowledged, however, the potential for some jobs not returning:
The figures here do recognise that awful phrase which is ‘a degree of scarring’ within our economy, which translates to jobs that were there that are not coming back in the way that they were. And of levels of income that were there that might not be coming back in exactly the way they were.
This possibility is also noted within the SPU itself, which says that “a slow exit from social restrictions” raises the prospect of “deeper and wider scarring effects”.
“Some businesses would fail under the strain of a continuing lockdown, leading to more jobs being permanently lost,” the report says.
It must be stressed, however, that until the pandemic subsides, any assessment of scarring is highly tentative. Estimates are also time-sensitive and will be revised as additional information becomes available.
The SPU also notes that it is “extremely challenging” to predict how the economy might recover, noting a range of uncertainty surrounding Covid-19 variants, the roll-out of vaccinations and the unwinding of restrictions.
Government supports
Minister for Public Expenditure Michael McGrath said this afternoon that the amount spent on Covid-19 related supports last year and so far this year was “in excess of €28 billion” and that the amount allocated for such spending in 2021 was €12 billion.
He added that, while no decision has yet been taken on the extension of supports beyond the currently approved timeline of the end of June, there would be no “cliff edge” stopping the supports suddenly.
“We recognise that if there was a cliff edge on those supports it would in many respects be a false saving given the consequences that it would have for employment levels in the country,” the minister said.
“So I can’t be specific about what the impact will be over the course of the full year but we stand by the commitment that the supports will not end entirely at the end of June.”
He added:
“We will be very much guided by the evolving public health situation and we recognise that when it comes to the economic supports in particular, there is a need as they are being removed that it would be done in a careful and a gradual way.”
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‘‘Tis my money. I just didn’t want to fill out de forms”
Would it be too hard to put a gps tracking device into an ATM?
@artie kelly: Yes but what if the ATM just wanted to go for an evening stroll?
@artie kelly: exactly what I was thinking. And surely some sort of alarm notification once it has been “removed” from the wall. Banks love their money so much I’m surprised there isn’t that kind of setup
@Neil Mac: Banks love YOUR money. They’ve got none of their own, remember?
@Michael Lynch: well said.
Usually it’s the bank who rob the public.
Someone forgot their atm card again
The thieves got away with nothing as the ATM was empty of funds because the tight Caaaavan heures keep all their money under the mattress.
Matter of time before discount stores are selling diggers
‘Thieves rob ATM without using a digger’. Now that will be newsworthy!
Good news! With the corruption in this country from the top down, why not join the Frey and make the best of it.
Border rats. Hard Brexit is most welcome.
Will the hard border will put a stop to this?
Ha, makes a change though. Usually they just walked in and took it. Ffs that bank has been robbed 2 or 3 times in the last 10 years. Sure there used to be a another bank across the road from it. One year they robbed that one and then went across the street to the other and robbed it before getting away.
Do these people not realise that they have security features that destroy the money inside?
@Dan Skelton: ways around everything
@Dan Skelton: they actually open it under water and the ink is oil based and floats to the top then they wash the notes with vanish from the supermarket.
@Eoin Kenny: No, the container has no top and simply spills dye when the machine is moved over a certain degree. Banks deserve to be hit like this when they don’t install the dye in all machines.
Would it be too hard to put a gps tracking device on atms??
Why is there no automatic alarm built in to ATM machines or a GPS tracker??
So what’s new?
ATMs need to be removed from small towns and placed in Garda stations.
@Tim McCormack29: or Garda stations with permanent officers need to be placed in small towns. Having them in Garda stations would not suit a lot of people
@Tim McCormack29:
Would you trust the Gardai ?
@Barry Foster:
Far more than I would trust the banks.
@Tim McCormack29: is there not a Garda station in Kingscourt? Or is it one of those unmanned ones..
Election funding!
How about a self destruct charge which would go up 20 seconds after the atm was removed…..a nice big one!!
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