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Economic Growth

Dáil Éireann Debate, Thursday - 26 November 2020

Thursday, 26 November 2020

Questions (213)

Bernard Durkan

Question:

213. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he foresees a return to good economic performance if and when the Covid-19 crisis is brought under control; and if he will make a statement on the matter. [39462/20]

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Written answers

At the time of Budget 2021, my Department forecast a decline in GDP of 2 ½ per cent this year, with growth of 1 ¾ per cent in prospect next year. The projections assumed that trade with the UK would take place on WTO terms from next year and that a widespread vaccine for Covid-19 would not be available before the end of 2021. It was also assumed that targeted measures would be introduced in response to any increase in the Covid-19 incidence rate; crucially, that there would not be a second national lockdown.

However, in light of the rapidly deteriorating public health situation, the country moved to Level 5 of the Plan for Living with Covid-19 on October 22nd. A downside scenario analysis published in the Budget estimated that more stringent restrictions in the fourth quarter would see GDP contract by an additional percentage point this year and weaken the economic recovery next year. Although the fall-out from the latest restrictions will undoubtedly be significant, the economic impact is unlikely to be as severe as in this scenario or as that seen during the first lockdown earlier this year, as construction, education, childcare and most manufacturing activity remain open.

Looking beyond this year, as long as we continue to minimise any possible “scarring effects” through the provision of labour market supports, I am optimistic that the Irish economy will recover relatively quickly from the crisis. Indeed, assuming a vaccination can be rolled out over the short-term, the combination of policy supports, elevated household savings and pent-up demand should provide an environment for a sustainable economic recovery.

Moreover, it is possible that the pandemic may create opportunities as well as challenges. It is with this longer term perspective that the National Economic Plan, which will be published later this year, will set out the Government’s approach to bringing Ireland out of this economic downturn.

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