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Irish economy to shrink by between 0.4% and 1.1% this year, says Central Bank

The latest forecast is buoyed by the ‘resilience’ of Irish exports.

THE IRISH ECONOMY has somewhat rebounded since the start of the pandemic but the recovery has been “partial” and “uneven”, according to the Central Bank.

Published this morning, the Central Bank’s fourth and final Quarterly Economic Bulletin for 2020 highlights the fact that in many parts of the economy, activity remains well below pre-pandemic levels. 

Consumer spending and construction activity have recovered strongly since the reopening of the economy.

The Covid-adjusted unemployment rate is now expected to average out at 15.1% of the labour force this year — down from 29% in April — before falling to 11.1% in the first quarter of next year.

But the Central Bank the Central Bank noted a “strong divergence” between general demand levels at home and the performance of Irish exports abroad.

On the one hand, it expects domestic demand to fall by at least 7% for the full year.

On the other, the Central Bank said that the resilience of Irish export growth has buoyed economic output overall and “significantly mitigated the fall in GDP” experienced in the first half of the year.

“The resilience of exports reflects strong growth in high-value exports of pharmaceuticals, computer processors and business services,” according to the Central Bank.

Consequently, it has dramatically revised upwards its full-year forecast for Irish GDP from a contraction of at least 9% predicted in its July bulletin to just 0.4% in its most recent bulletin.

Irish GDP is then expected to increase by 3.4% in 2022 and 4.7% in 2021 in the Central Bank’s baseline scenario.

Mark Cassidy, Director of Economics and Statistics at the Central Bank said that this would mean just one year of lost GDP growth, representing “a better performance than any other advanced economies that I’m aware of”.

This baseline scenario assumes that efforts to contain the virus are only partially successful over the coming months and that some targeted “containment measures” have to be put in place.

Screenshot 2020-10-05 at 17.26.03

“The type of additional restrictions imposed in a number of counties during August and September broadly fit with this assumption,” the report says.

In a more severe scenario, the Central Bank “envisages a strong resurgence of the pandemic, leading to the restoration of widespread and stringent containment measures for a more prolonged period.”

It also assumes a general decline in international trading conditions as a result of a resurgence of the virus abroad.

In this scenario, GDP is projected to fall by 1.1% this year and a further 0.3% next year.

Asked if the containment measures referred to in the model were similar to the Level 5 restrictions recommended by the National Public Health Emergency Team (NPHET), Mark Cassidy, Director of Economics and Statistics at the Central Bank, said that it was impossible to speculate what restrictions will be put in place by the government.

But he said that while a reintroduction of more stringent measures would likely lead to the shutdown of parts of the economy, “we do think that experience shows it would recover quite quickly after that.

“So in comparison with our severe scenario, we think that the outlook for this year will be somewhat between the baseline and the severe scenario. But we think for next year, we will still be much closer to the baseline.”

Brexit

Both the Central Bank’s baseline and severe scenarios assume that Britain and the European Union fail to reach a post-Brexit free trade agreement deal before 31 December.

This would mean, the Central Bank explained, “a sudden and disruptive transition to a World Trade Organisation trading relationship,” which could shave 2% off Irish GDP in 2021.

This default arrangement would result in new tariffs being applied to goods imported from the EU to the UK from 1 January, 2021.

“Although the share of Irish goods exports to the UK has declined over time and currently stands at around 10 per cent, the agri-food sector is still heavily reliant on the UK market,” the report explains.

“Estimates suggest that applying the UK’s global tariff schedule to Irish exports to Great Britain would result in a tariff cost of between €1.35 to €1.5 billion. The imposition of tariffs of this magnitude would substantially reduce, or possibly eliminate, Ireland-UK trade in some products.”

Exports

According to the Central Bank, Irish exports “remained remarkably resilient throughout the second quarter, and the peak of the pandemic.”

The latest data reveals that Irish exports fell by just 0.2% in the second quarter of the year, despite an expected 19% decline in global demand.

However, this figure “masks significant divergent trends”, the Central Bank warns.

Exports of Irish goods increased by 7.6%, while exports of services fell by 8.1%.  

The strong performance in the first category is chalked up to the increased demand for pharmaceutical goods produced in Ireland.

Screenshot 2020-10-05 at 17.24.06

According to the Central Bank, “pharmaceutical products alone accounted for 38% of total merchandise exports in the second quarter of 2020.” 

“One product type — ‘immunological products, put up in measured doses or in forms or packings for retail sale’ — accounted for approximately 12% of total merchandise exports.”

Overall, exports of those products increase by 41% in the second quarter of the year, compared to the same period last year.

Sales of computer services also remained resilient, 58% of total services exports in the second quarter. 

Without this, the 8.1% decline in services exports would have been even greater, according to the analysis.

Consumer spending

“Compared to our previous bulletin in July,” Cassidy said, “we now have quite a lot of official and real-time data to inform our assessment of how the virus has impacted the economy and the extent to which we have already rebounded.” 

That data reveals that consumer spending fell by 22.8% in the second quarter of the year during the national lockdown.

Cassidy said that real-time indicators such as retail sales and card payment data show a significant improvement in the second half of the year so far.

In August, spending on transport and accommodation remained far below pre-Covid levels but some sectors had recovered fully or even experienced an increase.

Having fallen in April by 38% following the closure of all non-essential shops, hardware sales were 34% higher in August than before the pandemic.

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    Mute Marcas Ó Callanáin
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    Apr 25th 2016, 1:17 PM

    That’s a nice touch, fair play to them.

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    Mute Michael League
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    Apr 25th 2016, 1:11 PM

    Makes we wonder why they had a fake 1916 anniversary a few weeks ago. The dates were all wrong FFS!

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    Mute Ger Comings
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    Apr 25th 2016, 1:15 PM

    FFS = ?

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    Mute Boganity
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    Apr 25th 2016, 1:17 PM

    You have heard of a characterization Michael ?

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    Mute Damien McCormick
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    Apr 25th 2016, 1:18 PM

    For feck sake or Fianna Fáil are shite

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    Mute Eyepopper
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    Apr 25th 2016, 1:20 PM

    Enda was worried that he wouldn’t get to play chief at the celebrations so he shifted it forward 6 weeks.

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    Mute Conor O'Callaghan
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    Apr 25th 2016, 1:31 PM

    @Michael – It is commonly known as the EASTER rising. Last month was the 100th EASTER since the EASTER rising. Hope this helps you, and the 500 billion commenters that have already pointed that out.

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    Mute Gerry Ryan deG
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    Apr 25th 2016, 1:41 PM

    It’s a bank Holiday weekend

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    Mute TheBull
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    Apr 25th 2016, 2:00 PM

    It’s celebrated at easter every year. Some people just love moaning though.

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    Mute Michael League
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    Apr 25th 2016, 3:52 PM

    Maybe the anniversary of something should be on the date it actually happened. But f*ck logic, right?

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    Mute Raymond Power
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    Apr 25th 2016, 4:05 PM

    Just as well known as the 1916 rising or even the Dublin rising.It happened to be at easter time but easter had no significance whatsoever. Maybe the “500 billion” are unaware of the significance of 100 years to the day..At 17:30 listen to the beeps..close your eyes and let math do the rest.

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    Mute Tom Gleeson
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    Apr 25th 2016, 6:11 PM

    Easter had no significance? So your telling me they planned the rising for 24 April and it just happened to be Easter, silly Pearce not spotting that calender clash.

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    Mute Concerned Citizen
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    Apr 25th 2016, 1:27 PM

    Any chance of a list of stations so I don’t miss it?

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    Mute RandomAct Of Kindnes
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    Apr 25th 2016, 2:16 PM

    “Irish Republic declared in Dublin today. Irish troops have captured city and are in full possession. Enemy cannot move in city. The whole country rising,” Written by James Connolly. transmitted by Marconi operator David Burke.

    If you miss it. this is the message that will be played

    https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/260318263%3Fsecret_token%3Ds-x9qEZ&color=ff5500&auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false

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    Mute Fiona Fitzgerald
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    Apr 25th 2016, 5:23 PM

    Radio Nova’s going to play it. Thanks, Google, for captioning group photos. Thanks, The Journal for the news!

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    Mute Eyepopper
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    Apr 25th 2016, 1:19 PM

    Sick to the back teeth of all the 1916 stuff now, can’t help but feeling it’s all totally disingenuous… while we have 100′s on hospital trollys, 500 kids in care who don’t have a social worker handling their case – we could go on & on.

    And all the while a bunch of ‘politicians’, more concerned with saving face and feathering nests than forming a government, who have the gall to present themselves as representatives of the people and of the state at these commemorations.

    It’s slightly ironic that on the 100 anniversary of independence, never before was the saying that the Irish can’t be trusted to govern themselves more true.

    Lets be honest, the men and women who gave up their lives in 1916 did it in vain, the only thing that really changed were the faces of the pigs at the trough weren’t they?

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    Mute Les Behan
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    Apr 25th 2016, 1:25 PM

    Well said Eyepopper!

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    Mute Brendan Walsh
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    Apr 25th 2016, 1:26 PM

    And yet in the Human Development Index, we are rated 6th best country in the world to live in. We all know it could be better but we’ve come a long way since we gained partial Independence.

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    Mute Ger Comings
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    Apr 25th 2016, 1:32 PM

    Maybe Brendan – but not a good place to be ill in….

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    Mute Eyepopper
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    Apr 25th 2016, 1:35 PM

    Whereas the British mainland has stalled, still stuck with the same living conditions and quality of life they had in 1916?

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    Mute Eyepopper
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    Apr 25th 2016, 1:37 PM

    Tell one of those kids that was left in an abusive foster home that it’s one of the 6 best countries in the world to be abused.

    Tell the people on waiting lists and on trollies its the 6th best country in the world for medical treatment.

    Then tell them if they have enough money they can buy their way to the solutions to these problems.

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    Mute Sam Glynn
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    Apr 25th 2016, 1:42 PM

    Completely concur Eyepopper, my relatives definitely died in vain :-( very sad but very true comment.

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    Mute Gerry Ryan deG
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    Apr 25th 2016, 1:43 PM

    It’s better to be screwed by a politician called Paddy than a lad called Clive

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    Mute Eyepopper
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    Apr 25th 2016, 2:52 PM

    I’ll bow to your experience Gerry, although I’d rather not be screwed at all if it can be helped.

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    Mute Shane Molloy
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    Apr 25th 2016, 6:00 PM

    There you living, the Isle of Man ?

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    Mute Shane Molloy
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    Apr 25th 2016, 8:53 PM

    Well then do your bit to deliver on the Proclomation !

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    Mute THE BIG LAD
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    Apr 25th 2016, 1:38 PM

    No Govt for the 100th Anniversary ….the lads will be up in arms at the pearly gates!!!

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    Mute Kieran OKeeffe
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    Apr 25th 2016, 1:28 PM

    Nicely put eyepopper..every true word of it..hard to believe,that out of the hundred years since the rising..Enda Kenny has been hiding in the dail for 40 of them..accidental Taoiseach was never more apt..

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    Mute Tweed Cap
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    Apr 25th 2016, 1:42 PM

    I agree with you Eyepopper. I’m all nineteen sixteen’ed out myself at this stage. To think it was the forerunner to the two ar$ehole parties that were spawned not long after. They still can’t agree on anything right up to this very second.

    They are a disgrace to this nation despite the well intended and expensive commemorations. They’ve taken the gloss of the whole thing.

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    Mute Charles Mount
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    Apr 25th 2016, 7:12 PM

    Marconi broadcast from Ballycastle to Rathlin Island in 1898 and live broadcast the Kingstown Regatta the same year. He established a transmission station at Rosslare Strand and Clifden in 1901 and established a regular radio service at Clifden in 1907.

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    Mute Leo Lowe
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    Apr 25th 2016, 4:17 PM

    What a load of tripe.

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    Mute Shane Molloy
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    Apr 25th 2016, 6:10 PM

    Don’t worry “normal” will resume for you soon

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