Dáil Éireann Debate, Tuesday - 15 June 2021
412. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which the reopening of the economy is in line with previous expectations with particular reference to the maximisation of opportunities through small and medium-sized enterprises; and if he will make a statement on the matter. [32094/21]
View answerWhile the reintroduction of restrictions at the end of last year led to a further contraction of the domestic economy in the first quarter of 2021, the decline in activity was not as severe as that seen during the first lockdown last spring. Modified Domestic Demand, which provides the best measure of domestic economic activity, fell by 5 per cent on an annual basis in the first quarter of 2021. This compares with a fall of 15½ per cent in Q2 last year, with both of these ‘covid quarters’ compared to non-covid quarters. Within this, consumer spending fell by 12 per cent year-on-year in the first quarter, which compares to a fall of over 21 per cent during the first lockdown in the second quarter of 2020. Given that the level of stringency in the first quarter of 2021 was in line with that of the first lockdown last year and among the most stringent across advanced economies, these figures point to a weakening in the relationship between stringency and economic activity, and likely reflect adaptation by firms, particularly by small and medium-sized enterprises (SME).
In addition to our economy becoming more resilient, the vaccination programme is also having a positive effect. The number of Covid-19 infections have fallen by more than 90 per cent from the peak in January and the incidence among all age groups has declined. As a result of this progress, the Government began easing restrictions in April with a further relaxation of restrictions in May for sectors incorporating small and medium-sized enterprises in non-essential retail and personal services like hairdressers.
In-line with this easing of restrictions the economy started to recover in the second quarter. Various indicators confirm this recovery including a range of business and consumer confidence indicators, daily card payment data, as well as May’s tax receipts. Encouragingly an improvement in the labour market can also be seen from the PUP figures which have fallen from a high of 481,000 in February to 285,000 as of June 7th with further falls expected in the coming weeks. Alongside this recovery, many SME dominated sectors experienced significant declines in PUP numbers. Wholesale & Retail Trade & Repair of Vehicles has fallen by 46 per cent from its peak in February, while over the same period, Accommodation & Food Services are down 24 per cent and Arts, Entertainment & Recreation is down by 26 per cent.
These developments are broadly in-line with my Department’s macroeconomic forecasts in the Stability Programme Update, published in April. These forecasts assumed that the vaccine roll-out would ramp-up over the second quarter and accelerate thereafter. Wider vaccine coverage is still expected to allow for a further gradual relaxation of containment measures and a modest pick-up in economic activity, with the recovery gaining momentum from the summer onwards.
