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IRELAND’S NATIONAL ECONOMY has felt the impact of the pandemic to a greater extent than most of its European peers, according to the latest quarterly economic commentary from the Institute for Economic and Social Research (ESRI).
Overall, the think tank has forecast that Ireland’s gross domestic product (GDP), the total monetary value of all goods and services produced in the state, will contract by just 1.8% this year.
This represents the third smallest decline of any European country, according to the analysis.
Meanwhile, consumer spending, a better metric for assessing national economic well-being, according to the report, is expected to fall 9.2% after falling more than 20% during the lockdown period.
Only the UK and Spain experienced worse drops, according to ESRI’s analysis.
However, consumer spending has since recovered and the think tank expects a return to growth next year.
Value added
While Irish GDP was inoculated by strong export performance, particularly pharmaceutical and computer services, two categories dominated by multinational companies, the impact on the ground has been much worse, especially in the construction and construction sectors. entertainment.
This, according to the report, is related to how strict the lockdown was from March to June compared to other countries.
Highlighting recent Oxford research on the stringency of public health restrictions implemented around the world in March, the ESRI report concludes that Ireland “had one of the tightest and longest lockdowns” in Europe.
In this context, construction was one of the most affected sectors within the economy.
The value added to the Irish economy by construction activity fell 38% in the first six months of the year as a result of lockdown measures related to the pandemic. This represents the worst decline in Europe.
On the other hand, the value added of the arts and entertainment sector collapsed by more than 70% in the first half of the year, again the most dramatic decline seen between the EU27 and the UK.
“Naturally, the closure measures that have limited the ability of households to travel far from their residence closed many public services, and restricted group entertainment activities will have a great impact on this sector,” the comment explains.
But the big decline was “much larger than any other country, with Romania and Denmark being the only other countries that also lost more than 50% of value added.”
“For Ireland, the duality of the economic impact is remarkable,” notes the expert group.
“The national economy has been greatly affected by the pandemic with very significant drops in consumption. However, the export channel has held up extremely well and this has led to a much lower GDP adjustment than would have been expected. ”
An uneven impact
In its latest comment, ESRI also highlights the “rapid and unprecedented” impact of Covid-19 on the Irish job market.
The Covid-adjusted unemployment rate is expected to average 16.8% of the total workforce by the end of the year, up from just 5% last year.
“In September, the unemployment rate was 14.7%,” the report says.
“This is an increase of 4.9% in February, but marks a significant decrease from a high of 30.4% in April.”
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Overall, the sectoral impact of the pandemic has been uneven, notes the ESRI.
The sectors with the highest incidence of underpaid and part-time workers have been the most affected by the virus’s march on the labor market.
According to the report, the food and lodging services sector suffered the worst damage.
In the first quarter of 2020, an estimated 173,900 people worked in the sector. But at the end of April, “127,000 people in the sector were claiming Pay for Unemployment due to Pandemic. This is 73% of those who work in the sector in the first quarter ”.
Recovery routes
In the context of Brexit, ESRI’s comment outlines a number of paths that recovery could take.
In a baseline scenario, the expert group assumes that the current level of public health restrictions is maintained and that a post-Brexit free trade agreement is reached between the UK and the European Union by December 31st.
In this scenario, ESRI researchers expect to see a strong recovery in 2021 with a 6.3% improvement in GDP thanks to “robust” growth in spending and investment.
“However, both exports and imports will grow on a more modest scale than in recent years, as the world economy will still experience low growth rates in the coming year,” the report said.
In the event of a “disorderly no-deal Brexit” on January 1, 2021, researchers believe there is “likely to be a significant short-term impact on the Irish economy.”
This could result, according to the analysis, in Irish GDP growth of just 3.3% next year.
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