State set to see sharper economic recovery due to speedier lockdown exit, Davy says

New report predicts Covid-19’s effect on economy will be less severe than feared

Taoiseach Leo Varadkar. The Government has announced that it will accelerate its phased reopening plan from June 29th. File photograph: Dara Mac Dónaill/The Irish Times

Taoiseach Leo Varadkar. The Government has announced that it will accelerate its phased reopening plan from June 29th. File photograph: Dara Mac Dónaill/The Irish Times

 

The Irish economy should see a sharper bounce back from the Covid-19 pandemic following the Government’s decision to implement a speedier exit from lockdown on June 29th, according to a report from Davy.

The Government has announced that it will accelerate its phased reopening plan from June 29th.

From that date all remaining retail outlets that are yet to reopen may do so, as can cafes, hotels, restaurants and businesses such as hairdressers, cinemas and music venues, albeit while still observing social distancing restrictions.

Schools will remain shut, but adult education facilities may restart. Restrictions remain on international travel, with a two-week isolation period for incoming passengers still in place.

In a report published on Monday, Davy said the accelerated end of the lockdown, implemented in March to slow the spread of coronavirus, should mean the economy will contract less than initially feared.

“Given that GDP rose by 1.2 per cent in the first quarter [of this year] and May’s tax figures indicate the damage in the second quarter was shallower than feared, we are likely to revise up our Irish GDP forecast from a 10.3 per cent contraction in 2020 to a mid/high-single-digit decline,” it said.

“Original conservative plans had envisaged retail, especially shopping centres, and hotels only reopening gradually from August, suggesting the rebound in the Irish economy would be delayed and at a slower pace to European peers.

“However, all sectors will now resume activity in July. Business and travel restrictions started to be relaxed from May 18th.

“Since that time, unemployment claimants have already fallen from a peak of 602,000 to 498,700 on June 15th, of which 33,000 indicated they were returning to work sooner.”

Davy said this suggests employment initially fell by 26 per cent amid the pandemic, but is now 20 per cent down on pre-Covid-19 levels.

“Irish GDP expanded by 1.2 per cent in the first quarter, whereas most European economies saw a contraction, demonstrating that the defensive character of the multinational export sector is providing some protection,” the report added.