Irish economy could contract by 13% if shutdown lasts until August
EY Ireland paints grim picture of economic fallout from prolonged period of disruption
If the State is subjected to a period of disruption lasting until the end of August, the economy could shrink 13.1%, with potentially 318,000 people losing their jobs. Photograph: Getty Images
The Irish economy could contract by as much as 13 per cent this year with 318,000 people losing their jobs in the event of a prolonged period of economic restrictions due to the coronavirus, EY Ireland has warned.
In an assessment of the potential economic impact of the pandemic on the economy here, the firm lays out two possible scenarios.
The first “base case scenario” envisages a high level of disruption until the end of May, with normal business activity resuming after that point.
This would result in 177,000 jobs losses and gross domestic product (GDP) falling by 7.3 per cent in 2020. Up to 450,000 people could potentially lose their job or be furloughed before a bounce back period later in the year in this scenario, EY said.
However, if the State is subjected to a more prolonged period of disruption lasting until the end of August, the economy could shrink by 13.1 per cent, with potentially 318,000 people losing their jobs. In this scenario up to 675,000 people – nearly a third of the workforce – will either lose their job or be furloughed by the end of the summer before the economy improves toward the end of 2020.
“The human cost of the Covid-19 crisis is sadly rising every day, and the economic cost is rising as well,” said EY Ireland chief economist Neil Gibson.
“The effect of this pandemic will be felt for years, if not decades, due to the scale of borrowing required to see economies through the most virulent phase of the outbreak.
“Early estimates from the EY Economic Eye model suggest a recession is certain, and a depression is possible if the economic restrictions need to be in force for a protracted time.”
Last week the Economic and Social Research Institute (ESRI) predicted the economy could shrink by 7 per cent in 2020 as a result of the crisis but this was on the assumption that the virus would be contained by July.
Mr Gibson said there had been an encouraging level of engagement with businesses and business organisations to chart the best path through this once in a lifetime event.
“Sadly businesses will still be lost despite the best efforts of policy-makers and as the cost of interventions impact on future policy decisions for a generation,” he said.
Mr Gibson said after the crisis the economy is likely to be altered forever.
“The embedding of technology to allow remote working has been rapidly accelerated, as has the adoption of online ordering. This will create opportunities for businesses in the future, although increased home-working would clearly be challenging for the high street and transport companies.”