Ireland’s economy will grow by 3.1% this year, employers’ group Ibec is predicting, down from the 5.3% it said it was anticipating for 2021 just three months ago.
Although lower than previously forecast, the organisation thinks expansion will still be driven by an acceleration of the roll-out of the Covid-19 vaccine through the second half of the year and continued export growth.
That recovery will gather pace into 2022, with GDP set to increase by 4.3% buoyed by the release of a large volumes of savings into the economy, the body has forecast.
“An efficient vaccine roll-out might see the start of our recovery in the second half of 2021,” writes chief economist, Gerard Brady, in Ibec’s latest quarterly economic outlook.
“2021 will not see a return to normal trading in all sectors due to ongoing social distancing and public health requirements but there is potential for life and commerce to take a more normal rhythm.”
But continued and enhanced supports from the Government will be needed for the sectors that won’t see an immediate return to normal trading, Ibec states.
“The Brexit Adjustment Fund will also need to be used judiciously to boost our long-term ability to sell abroad,” Mr Brady says.
Severe restrictions mean the first three months of the year have been some of the most difficult the Irish economy and society has experienced since the pandemic began, the report claims.
“Lockdown measures in the first part of the year have been tough and protracted, placing additional pressure on the economy, with particular disruption to the labour market,” Mr Brady said.
There are currently over 650,000 people unemployed, with a further 310,000 reliant on wage subsidies, he points out.
But there is cause of optimism, he adds, with vaccine supply set to increase rapidly from April onwards.
“Vaccine roll-out will allow us to return to a more normal rhythm in the second half of 2021,” Mr Brady forecasts.
“We won’t, however, see a return to normal trading and employment in all sectors due to ongoing social distancing and public health requirements.”
Despite the potential for a return to more normal conditions from July to December, Ibec thinks unemployment will remain high at 15.6% in 2021, before easing back to 9.3% next year.
Exports will stay strong though, driven by renewed global demand and the strength of sectors such as BioPharma, Medtech, ICT and Food that Ireland majors in, the report claims.
While the release of pent up demand will fuel a leap in consumer spending of 9% this year and 5.5% next.
But the pick-up in spending and overall growth could fuel a rise in inflation to 0.8% from -0.3% last year, Ibec estimates, growing to 1.5% in 2022.