Ireland’s Chief Economist has stated that the Covid-19 pandemic will cause the deepest global recession since the Great Depression of the 1930s.
The recession will be so severe because this is the first global pandemic in more than a century, Chief Economist John McCarthy said, as he forecast that Ireland’s government deficit could reach €30bn in 2020 if restrictions are kept in place until the end of the year.
Ireland’s GDP will fall by 10.5 per cent this year and unemployment will reach an all time high this summer as a result of measures taken to combat Covid-19.
McCarthy says he is forecasting a ‘U’ shaped recovery for Ireland, rather than a ‘V’ shaped recovery.
The comments came today as Minister for Finance Paschal Donohoe published the Government’s Stability Programme Update 2020.
Minister Donohoe warned that 220,000 jobs will be lost in Ireland before a recovery in 2021, but the economic activity will not return to its pre-crisis level until 2022.
“The labour market is bearing the brunt of the recession, moving from effectively full-employment in the early part of the year to exceptionally high levels of unemployment now and in the coming weeks,” Minister Donohoe said.
“Unemployment of 22 per cent projected for the second quarter. We anticipate that total employment will fall by 9.3 per cent this year, with approximately 220,000 jobs being lost. Next year, employment is expected to grow by 5½ per cent (115,000 jobs), reducing the unemployment rate to below 10 per cent.”
The Minister stated that he was “absolutely confident” that the Irish economy can recover.
He said: “While the economic deterioration has been unprecedented in terms of speed and scale, so has the response from Government. This has been possible because of the prudent policies implemented in recent years. There is no doubt that, along with the rest of the world, Ireland is on a difficult road.
“However, we face into this journey from a position of strength. We can and we will rebuild our economy, continue to provide for society, get our people back to work and keep them safe while doing so.”