The Central Bank has warned that the Irish economy could shrink by an unprecedented 15 per cent if the coronavirus containment measures are kept in place for an extended period.
In its latest quarterly outlook, the bank said it expected the economy, in gross domestic product (GDP) terms, to decline by 8.3 per cent this year and for up to 500,000 jobs to be lost.
However, this was on the basis of containment measures and restrictions remaining in place for a three-month period before being rolled back, a scenario that is by no means certain.
"If the containment measures were to be in place for an additional three- month period, then our preliminary estimates suggest the decline in output could be closer to 15 per cent," Mark Cassidy, the Central Bank's director of economics and statistics, said.
This would involve more than than 500,000 job losses, he said.
In its report, the Central Bank said the Covid-19 pandemic was likely to have a severe negative impact on the Irish economy, suggesting the reduction in output in 2020 was likely to be greater than that observed in any year of the 2008-9 economic and financial crisis.
“If the public health situation improves quickly over the coming months allowing for a relaxation of the current containment measures and a resumption of economic activity, a rapid recovery in the economy could materialise from the end of 2020,” it said.
“In contrast, if the public health position requires that the current containment measures are implemented more broadly and for a longer duration, a more substantial and longer lasting downturn is likely.”
Containment measures to limit and delay the spread of the virus have resulted in the widespread shutdown of businesses, mainly in the market services sectors of the economy, with labour-intensive segments, such as retail trade, food and beverage activities and accommodation, tourism and travel, the worst affected.
The disruption has, in turn, caused a severe negative shock to domestic demand. The Central Bank also noted that the crisis had effectively stalled residential construction and said it was now predicting just 16,000 housing completions this year, instead of 26,000.
Mr Cassidy said the Government’s fiscal response to the crisis so far, centred around the introduction of income supports for laid-off workers, additional health care spending and supports for businesses, was the correct one, while noting direct cost of these measures is currently estimated at € 8.2 billion.