Moody’s says pace of vaccine rollout a key risk for Irish economy

The pace of Covid-19 vaccination remains a key source of risk for the Irish economy, Moody’s said on Wednesday.

The warning came as the Government overhauled the framework for how the inoculation programme is set to continue.

The influential credit ratings agency said in its annual sovereign report for the Republic that it expects gross domestic product (GDP) to grow by 3 per cent this year, with the multinational sector continuing to perform better than the domestic economy.

“Pandemic-related developments and the pace of vaccinations are key sources of uncertainty, and pose downside risks to the economic recovery,” Moody’s said.

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"Beyond 2022 we expect growth to continue to hover around 3 per cent. While this is lower than during the pre-pandemic period, Ireland will continue to outperform most of its euro area peers, supported by the high competitiveness and productivity of the multinational sector as well as favourable demographics."

More than 15 per cent of the Republic’s adult population have received at least one dose of a Covid-19 vaccine, compared to more than 50 per cent in the UK, as the rollout across the EU has been beset by problems.

Taoiseach Micheál Martin said on Tuesday that the Government was changing the rollout to base it on age once the most vulnerable and people aged over 70 have been inoculated, rather than following the current priority list. He said the move would simplify and accelerate the programme.

Mr Martin also said that close to 3 million vaccine doses would be administered by the end of May, rising to nearly 5 million doses by early July, and 6 million doses by the end of that month.

Loan defaults

Meanwhile, Moody’s said that while loan defaults have not spiked since the onset of the pandemic, the full scale of problems “has yet to emerge as the Government starts to phase out pandemic-related support measures”.

“Positively, the majority of borrowers that opted for repayment holidays in 2020 have resumed full repayment, easing pressure on problem loan formation. Furthermore, banks largely front-loaded their provisioning cost [for expected loan losses].

“Asset quality is, therefore, likely to remain a source of vulnerability for Irish banks in the coming years. However, we believe the system has sufficient buffers to absorb the shock of the pandemic.”

Moody’s said it expects a contraction of housing supply as a result of the pandemic is likely to keep “upward pressure on housing prices to continue in the coming years”.

A report from property website Daft.ie on Wednesday found that house prices rose an average of 7.6 per cent in the first quarter of the year compared to the same period in 2020.

Daft.ie said the total number of properties available to buy on March 1st this year was just under 12,000, the lowest level in 15 years. The headline figure was down 40 per cent on this time last year.