Dáil Éireann Debate, Thursday - 25 February 2021
57. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects the economy to recover in any six-month period after the relaxation of Covid-19 restrictions; and if he will make a statement on the matter. [10873/21]
View answerThe economic projections underpinning Budget 2021 in October last, were based on a number of key assumptions, including that there would not be a widespread national lockdown this year and that vaccines for Covid-19 would not be widely available before the end of the year. For the purpose of prudent budgetary planning, it was also assumed that bilateral trade with the UK would take place on WTO terms from January. Based on these assumptions, my Department projected GDP growth of 1.7 per cent for the year. However, the public health and economic situation has evolved significantly since the Budget forecasts were published. The recent Trade and Cooperation Agreement between the EU and the UK and the earlier than anticipated rollout of vaccines are both positive developments that will improve the economic outlook for this year. On the other hand, the ongoing Level 5 restrictions will likely have a contractionary effect on the economy.
While the process of rolling out vaccines will undoubtedly take time and restrictions will be required in the near term, Covid related restrictions will gradually be eased and an economic recovery can then take hold. The speed of this recovery will depend on the pace at which we are able to safely re-open the economy and society. In the near-term after Covid-19 restrictions are relaxed, the recovery in the domestic economy should be supported by the release of pent-up demand financed by the unwinding of historically high levels of household savings. By continuing to support household incomes and thereby minimising the potential for longer lasting damage to the labour market, I am optimistic that a sustained economic recovery will take hold.
Nevertheless, there still remains considerable uncertainty surrounding the economic outlook as it will depend on many factors, including the speed at which Covid-19 vaccines can be rolled out and the time it takes to suppress the current wave of the virus. My Department will continue to closely monitor and analyse these economic and epidemiological developments and will publish updated forecasts as part of the Stability Programme Update in April.
