Ireland’s GDP will drop 2.5%, but the drop is not as bad as predicted

FINANCE MINISTER PASCHAL Donohoe this afternoon published the economic forecast that will support next year’s budget.

The upheaval and uncertainty surrounding the EU deal with the UK on Brexit have led economists to estimate that our GDP will fall 2.5% this year. It is also expected to grow just 1.4% next year.

This is a huge departure from what was originally expected with economists earlier this year predicting that our GDP could fall by 10%.

This forecast, which was approved by the Irish Tax Advisory Council, was made using two fundamental assumptions; that trade agreements between the EU and the UK will be governed by the terms of the World Trade Organization and, second, that a widespread vaccine for Covid will not be available.

The report estimates that employment will fall 13.8% this year, which means that we will have an average unemployment rate of 16% by the end of 2020. It is estimated that it will drop to 10.7% next year.

Despite the gloomy forecasts, Donohoe said the expected decline has not materialized and is “less severe” than experts had originally thought. He also emphasized that this forecast is looking at our GDP and not our internal economy.

Ireland has had a significant upward revision from previous forecasts released in the spring, but this is largely due to strong performance by parts of the export sectors, most notably the pharmaceutical sector, where exports have increased this year by a statement from the Finance Department read.

Donohoe explained: “My department projects that GDP will fall 2.5% this year. While this headline figure is less severe than expected in the spring, it reflects the contribution to GDP of parts of the multinational sector.

“While the economic decline is expected to be less severe in 2020 than previously anticipated, there is no question that we have experienced significant shock since March and the onset of Covid 19. However, on the bright side, it is important to note that employment is expected to grow by around 7% or 145,000 jobs next year, which will have a very real impact on the economy and society in general.

“The pandemic, however, will, in all likelihood, result in some level of permanent damage to the economy – the so-called ‘healing effects.’ However, politics can help minimize them. ”