Coronavirus: First glimpse of hit to Irish economy will emerge this week

The doomsday predictions have started. The Economic and Social Research Instiute (ESRI)last week forecast the Irish economy could shrink by 7 per cent in 2020 and that we could have 350,000 job losses as a result of coronavirus-triggered shutdown. However, this was based on the restrictions lifting within 12 weeks. EY Ireland upped the ante yesterday by suggesting the hit could be as big as 13 per cent if the shutdown extends over a more prolonged period to August. Under this scenario, up to 650,000 people could lose their jobs temporarily before the expected bounce back. That equates to nearly a third of the workforce.

No-one really has a handle on how big the economic hit is going to be because it is entirely dependent on how long the lockdown stays in place, which in turn depends on the infection rate and the relative success of our containment measures, which are unknowns at this stage.

The first real indications of what is actually happening economically , however, will arrive on Thursday when we get the Live Register numbers for March, which are expected to have surged forward on the back of mass layoffs in the hospitality sector and elsewhere. Up to 120,000 bar and restaurant staff have already been laid-off as a result of the shutdown, the Restaurants Association of Ireland claims. The number of benefit claimants on the register had fallen to a 12-year low in February but this was the quiet before the storm.

On the same day, we’ll also get the latest exchequer returns for March, which will give us the first glimpse of the crisis through the lens of taxation. Income tax and VAT are the two most obvious channels where this will manifest. Fewer people working means less income tax; fewer people out buying goods and services means a smaller VAT take. The scale of this reversal is unknown but it promises to be large.