Recession Will Shrink Economy by 10.5% Bringing Record Unemployment

Paschal Donohoe T.D. - Minister for Finance. Credit: @IRLDeptFinance

New government forecasts today say GDP will fall by more than 10% this year with unemployment to peak at 22% with a warning that 220,000 jobs will be lost.

There will be a recovery in 2021 with a 5.5% increase in employment – but the economy will not return to where it was at the start of this year until 2022.

The predictions are based on restrictions lasting for three months – and GDP could fall by as much as 15% if they last until the end of the year.

Minister Paschal Donohoe says the response here to the economic crisis that has developed from Covid-19 has been ‘swift and forceful’. He also says a national recovery plan will be published to ‘chart a course out of this recession’

Mr Donohoe today published the Government’s Stability Programme Update 2020 (SPU), which sets out a macroeconomic and fiscal scenario for 2020 and 2021 and which now incorporates the impact of the Covid-19 pandemic.

“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,” Paschal Donohoe said.

Paschal Donohoe – Department of Finance Covid-19 Briefing – 21-4-20 via @IRLDeptFinance

-Stability Programme Update 2020-

  • Economic landscape fundamentally changed in Ireland and across the globe
  • Irish GDP to fall by 10.5 per cent this year
  • Labour market bears the brunt of the economic shock, going from full employment to a peak unemployment rate of 22 per cent in the current quarter
  • Recovery over the second half rests on successful virus containment
  • General government deficit of €23 billion (7.4 per cent of GDP) projected this year
  • Modified Domestic Demand, perhaps the best indicator of domestic economic conditions, is projected to fall by 15 per cent this year
  • Recovery in second half of year to gain momentum next year with economic growth of 6 per cent
  • Employment to grow in 2021, with numbers out of work to fall below 10 per cent
  • Debt-to-GDP ratio projected to rise to 69 per cent
  • Difficult journey ahead but Ireland faces it from position of strength