Ireland risks being an outlier in Europe again if there is a major extension to the current lockdown, Goodbody stockbrokers has warned.
Amid speculation that the Government plans to push back the reopening of the economy until April or even May, or until there is a sustained period of low case numbers, Goodbody chief economist Dermot O’Leary said fatigue – with the current measures – was setting in.
Lockdowns
“Ireland had one of the most stringent lockdowns in Europe through 2020 and such a decision would make Ireland an outlier once again,” he said in the group’s latest economic health check report.
The current lockdown will lead to another significant fall in domestic demand in the first quarter, but the accelerating vaccine roll-out raises the prospect of a rapid rebound in the second half of 2021, he said.
Mr O’Leary highlighted Ireland’s “rather slow progress” on vaccine rollout, noting that while Ireland was doing “quite well” in EU terms, the bloc remains a significant laggard in the process globally.
Goodbody is forecasting core domestic demand - often viewed as a better meaure of domestic activity - will grow by 5 per cent this year and 3.5 per cent in 2022.
It said the “ unleashing” of €13 billion of resources built up over the past 12 months will play a large role in this trend.
The brokerage estimates that the Irish economy may have grown by 2.8 per cent in gross domestic product (GDP) terms last year, one of the few countries globally to register positive growth, and forecasts growth of 3.5 per cent this year and 3 per cent in 2022.
This contrasts with the UK economy, which suffered a record 9.9 per cent contraction in 2020.
Deficit
In its report, Goodbody noted that Ireland had deployed one of the largest fiscal packages in the world to help impacted workers and businesses through the crisis with up to 36 per cent of the workforce on some form of support. This had widened the budget deficit to €20 billion.
“Given the vulnerabilities, wage supports should only be removed carefully, while incentives for rehiring and retraining should be part of the policy mix,” Mr O’Leary said.
On housing, he said the market has been “surprisingly resilient”, with prices remaining firm and demand bouncing back strongly.
“With the supply of properties for sale at a record low and robust demand, we now expect prices to grow by 4 per cent in 2021 (up from -2 per cent previously),” he said.
