Minister for Finance and Public Expenditure and Reform Paschal Donohoe has published the Government’s Stability Programme Update 2020 (SPU), which revealed that GDP is projected to fall by 10.5% in 2020.
The SPU sets out a macroeconomic and fiscal scenario for the period 2020-2021 which incorporates the impact of the Covid-19 pandemic – with the agricultural sector projected to be among the sectors least impacted in terms of change to output.
Commenting on the figures, Minister Donohoe said: “The Irish economic landscape, in common with elsewhere, has been turned on its head in recent weeks.
The necessary restrictions to limit the transmission of the Covid-19 virus have resulted in a severe recession and unprecedented levels of unemployment.
“My department is projecting that GDP will fall by 10.5% this year, with measures taken to combat Covid-19 here and internationally resulting in a sharp contraction of both domestic and external demand.”
Minister Donohoe noted that the gradual recovery assumed in the second half of the year is projected to gain momentum next year, with the economy expected to grow by 6% and unemployment forecast to fall to below 10% next year.
It is expected that economic activity will reach its pre-crisis level in 2022, the minister added.
“The labour market is bearing the brunt of the recession, moving from effectively full-employment in the early part of the year to exceptionally high levels of unemployment now and in the coming weeks.
Unemployment of 22% is projected for the second quarter. We anticipate that total employment will fall by 9.3% this year, with approximately 220,000 jobs being lost.
According to the SPU, the losses of economic output vary widely from sector to sector, with services activities tending to be more adversely affected than manufacturing activities.
In particular, it is assumed that the loss of output will be greatest in the distribution, transport, hotels and restaurants sector and the arts and entertainment sector.
There will also be a substantial decline in professional administrative and support activities, real estate activities and in construction.
“Next year, employment is expected to grow by 5.5% (115,000 jobs), reducing the unemployment rate to below 10%.”
“There is no doubt that, along with the rest of the world, Ireland is on a difficult road. However, we face into this journey from a position of strength.
“We can and we will rebuild our economy, continue to provide for society, get our people back to work and keep them safe while doing so,” the minister concluded.