The central bank said the economy was performing better than predicted during the epidemic but the impact on jobs was worse.
In it Latest quarterly bulletin, The bank warns that the recovery will remain uneven and that the ‘non-trade deal’ Brexit will hamper any growth next year.
Ireland recorded the smallest drop in GDP across Europe due to the epidemic, but it suffered the highest drop in consumer spending.
In today’s bulletin, the central bank highlights the difference between the continued strength of the export sector in a drug-dominated economy and the recession that Kovid-19 has imposed on the labor-intensive domestic sector, which is losing jobs.
This means that unemployment will remain in double digits for next year.
The bank also warns that if there is a non-commercial transaction, Brexit will have the biggest impact in the first three months of next year. Food exporters reduce the demand for their goods by up to 75%.
The “partial and unequal” regulator describes the recovery held in recent months.
This differentiates the re-establishment of export growth, which mitigates the overall decline in GDP – a 16 per cent decline in domestic demand to the second quarter.
It now predicts an overall decline in GDP of 0.4 percent by 2020 – a significant increase from the forecast of a 9 percent decline earlier this year.
But in the years to come, the central bank will revise its outlook.
Its basic forecasts are that the containment of Covid-19 will have only partial success and that some regulatory measures remain in place and that trade between the EU and the UK will move to WTO terms from next January.
“The transition to a WTO trading relationship is likely to pre-load losses from Brexit, reducing GDP growth by 2 percent in 2021 and 0.3 percent in 2022, compared to our previous forecasts based on a free trade agreement,” states.
GDP growth of 3.5% is now expected in 2021, and by 2022 it has risen to 4.7%.
Based on the impact on the domestic economy, domestic demand is forecast to grow by 1.6 per cent in 2021, up from 4.8 per cent next year.
Unemployment is projected to rise from 5.3 percent in 2020 to 8 percent in 2021, to 7.5 percent in 2022, up from 5 percent before the crisis.
“The outlook is very uncertain, it will depend not only on the economic impact of the Kovid-19 pandemic and its regulation, but also on the nature and impact of future trade arrangements between the European Union and the UK,” said Mark Cassidy, director of economics and statistics at the Central Bank.
“Assuming that control measures are targeted and tougher than in the spring and that consumers and businesses continue to adapt, Covid-19 added that while the basic forecast function in response to the shock is to slowly recover from its previous low, Cassidy added.
The central bank acknowledges that the increase in the deficit-to-debt ratio is “demand and demand” and is now affordable.
However, it warns that the path to lower and more stable floors will have to be gradually adopted.
He said the policy should continue to focus on supporting the productive capacity of the economy and avoid scars like long-term unemployment.
Additional reporting from Brian Finn