DUBLIN — The novel coronavirus pandemic and related restrictions could shrink the Irish economy by nearly 14 per cent in 2020, according to the country’s central bank.
In a report published on Friday, the Central Bank of Ireland said that a “widespread shutdown of businesses caused by the pandemic” led to “sudden and large-scale job losses” and a “severe negative shock to both consumer spending and investment.”
The worst-case scenario of a 13.8-per-cent recession is based on the virus lingering through the year and prompting some restrictions to be reimposed.
The bank’s best-case outcome would see Ireland’s gross domestic product (GDP) cut by 9 per cent, slightly better than the 10.5 per cent projected earlier by the finance ministry.
If the pandemic fades, Ireland’s economy is expected to slowly recover in 2021. But should Britain and the European Union fail to agree a free trade deal by January, growth “will be weaker” next year, the central bank warned.
Britain is Ireland’s second biggest trade partner after the US, with Irish agriculture exports highly vulnerable to what the bank terms “a disruptive Brexit.”
Ireland’s latest relaxation of curbs imposed in March to stem the pandemic saw businesses such as restaurants and hairdressers resume work on Monday.
On Friday, Ireland’s Department of Health announced two deaths related to the virus and nine new cases.
Many retailers and offices reopened a month ago as daily case numbers fell to low double figures. According to IHS Markit and Allied Irish Banks, whose Purchasing Managers Index survey of Ireland’s services sectors was published on Friday, the “most severe phase of the hit to business had passed in June.”
While retail and tourism have been hit hard by the pandemic and lockdown, some of Ireland’s other key industries – such as computer services, pharmaceuticals and chemicals – “appear to have been less affected,” the central bank reported.
Ireland depends heavily on international commerce, with World Bank data for 2018 show the country’s trade-GDP ratio topping 200 per cent. The central bank warned on Friday that because Ireland is “an open economy highly interconnected with the global system,” it is in turn vulnerable to the wider downturn which the International Monetary Fund believes could see global GDP shrinking by more than four per cent this year.Show