Dáil Éireann Debate, Thursday - 25 February 2021
73. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which basic economic fundamentals continue to be recognised and applied in the economy; and if he will make a statement on the matter. [10890/21]
View answerPrior to the pandemic Irish economic fundamentals were very strong, with robust growth, a labour market close to full employment, and surpluses in the current account and the public finances. The outbreak of the pandemic turned the economy on its head in the space of a few weeks however, with the introduction of Covid-19 restrictions resulting in a sharp contraction in economic activity in the spring last year. However, in keeping with the pattern seen in other countries, the economy rebounded over the summer months as restrictions were eased.
According to the European Commission’s winter forecast, Ireland is now expected to be the only country in Europe to record positive GDP growth in 2020. However, we must be cognisant that GDP figures do not provide an accurate representation of domestic economic activity, given the size of our multinational sector. Indeed, the ‘dual-nature’ of the Irish economy – characterised by highly productive and mainly foreign-owned MNCs on one side and domestic-SMEs on the other – has become even more pronounced during the pandemic. Parts of the multinational sector, most notably pharmaceuticals and ICT, have performed strongly throughout the pandemic. In contrast, the hit to the domestic economy has been severe, with domestic-facing sectors, such as hospitality, leisure and education, bearing the brunt of the economic impact.
The impact of the pandemic on domestic economic activity is most evident in the labour market. The unemployment rate, which peaked at over 30 per cent in April last year, remains elevated and stood at around 25 per cent in January and there are currently over 1 million people in receipt of some form of State income support. While the impact on the labour market has undoubtedly been severe, government supports such as the Pandemic Unemployment Payment and the Wage Subsidy Schemes have helped cushion the impact on household incomes.
With the vaccine programme now underway, there is light at the end of the tunnel. While this process will take time and restrictions will be required in the near term, as the vaccine programme picks up speed and the public health situation improves, these restrictions will gradually be eased and an economic recovery will take hold. In the meantime, as we continue to live with the virus and manage the public health threat posed by Covid-19, it is crucial that we continue to support households and firms and get people back to work as soon as it is safe to do so in order to minimise any potential long-term damage to the labour market, thereby aiding our economic recovery. More broadly, as a small, open and adaptable economy, our resilience and strength comes from being one that remains open to investment and facilitates trade across our borders. This has been proven to be the strength of the Irish economy over decades and is still the case today.
