Irish economy to suffer mildest shock to output from Covid-19, OECD says
Paris-based think tank suggest impact of shutdown will reduce activity here by 15%
Consumer spending could drop by a third in most countries because of the shutdowns, the OECD said.
The Irish economy will be the least impacted by the coronavirus pandemic, the Organisation for Economic Co-operation and Development (OECD) has said.
The Paris-based think tank estimates that the shutdown to slow the spread of the virus could reduce economic activity here – in gross domestic product (GDP) – by 15 per cent.
While this is significant, it is the mildest hit predicted for any OECD country.
GDP is, however, considered a poor barometer of Irish economic activity because of the presence of so many big multinationals, which skew the headline numbers.
This suggests the OECD’s forecast may significantly underestimate the economic fallout here.
The organisation’s report suggests businesses that rely on face-to-face contact such as airlines, accommodation and food services, tourism, retail services, and even real-estate agents will be worst hit.
“In all economies, the majority of this impact comes from the hit to output in retail and wholesale trade, and in professional and real-estate services,” it said.
“There will also be some variation in the timing of the initial impact on output across economies, reflecting differences in the timing and degree of containment measures. In China, the peak adverse impact on output is already past, with some shutdown measures now being eased,” the OECD said.
The OECD said the shutdowns would have an even bigger impact on consumer spending, finding this could drop by a third in most countries.
For each month a shutdown is in place, a country’s GDP would be cut by 2 percentage points.
“Changes of this magnitude would far outweigh anything experienced during the global financial crisis in 2008-2009,” the OECD said.
It also cautioned that its estimate only covered the initial direct impact in the sectors involved and did not take into account any additional indirect impacts that may arise.
“ The implications for annual GDP growth will depend on many factors, including the magnitude and duration of national shutdowns, the extent of reduced demand for goods and services in other parts of the economy, and the speed at which significant fiscal and monetary policy support takes effect,” the group said.
“Nonetheless, it is clear that the impact of the shutdowns will weaken short-term growth prospects substantially,” it added.