The Irish economy is expected to record substantial growth in 2021 as public health measures are lifted, according to the Quarterly Economic Commentary, Summer 2021.
Assuming the continued easing of public restrictions, and the planned delivery of the vaccine rollout, GDP is expected to increase growth by just over 11 percent in the present year.
Growth in Exports
The strong performance of the Irish export sector is driving much of this growth. Exports grew by 17 percent in the first quarter of 2021 year-on-year and, while trade disruptions due to Brexit are likely to impact specific sectors, overall exports are still expected to grow 13.3 percent for the year as a whole.
Domestic demand is also expected to rebound strongly. As the economy reopens, we expect consumption to grow by 7.5 percent in the present year. Like consumption, investment is expected to grow significantly throughout the latter half of 2021 as economic activity resumes, growing by 5.8 percent overall.
In terms of the labour market, the pandemic adjusted unemployment rate decreased from a high of 30 percent in April 2020 to 22.4 percent in April 2021. We expect unemployment to fall to 9 percent by the end of 2021 as economic activity resumes and to average 7.1 percent in 2022.
In a box to the Quarterly Economic Commentary, Bergin, Garcia-Rodriguez, and McQuinn quantify the cost in output terms to the Irish economy of COVID-19. Between 2020 and 2021, they estimate that the cost is approximately €24bn in terms of lost output. However, by 2022 the economy is set to be back to where it would have been if the pandemic had never occurred.
In another box, McQuinn outlines the potential for borrowing by the Irish Government over the medium-term under plausible and conservative assumptions. The research argues that €5bn to €7bn per annum could be raised in a sustainable manner by the Government under such a policy.
Commenting on the report, author Kieran McQuinn of the ESRI stated:
“The Irish economy is set to experience substantial growth rates in both 2021 and 2022 as it emerges from the pandemic. However, COVID-19 has had a significant impact in terms of the loss of output.”
Author Conor O’Toole of the ESRI stated:
“If public health measures continue to be eased, the Irish economy will grow very strongly this year. While the export performance may tip the economy into double-digit growth, domestic demand is also expected to rebound strongly with household spending and investment recovering.”
The Quarterly Economic Commentary, Summer 2021, is available on the ESRI website.