The presentation of the Chief Economist of the Finance Department describes the collapse of the economy in the second three months of this year as the ‘biggest economic contraction on record’.
It also warns that a ‘good path’ must be struck between budget policy support and fiscal stability.
Chief Economist John McCarthy’s presentation to the Tax Strategy Group explains how revised domestic demand fell 16 percent in the second quarter of this year, eliminating the multinational sector.
He said GDP had fallen by only 6 per cent as multinational companies continued to export.
McCarthy also draws attention to the extra savings of employees between $ 5 billion and $ 6 billion.
Unemployment rose to 28 percent in April. This is twice the highest level recorded during the financial crisis.
However, after an initial ‘bounce back’ over the summer, the economy is making a comeback.
Although the number of people on the Live Register, PUP and Wage Subsidy Scheme is high, it received 800,000 support till last week.
Much of this year’s ‘heavy lifting’ of the economy, which will help mitigate the adverse impact from domestic demand, has been described by the multinational sector.
For the next year, the future EU-UK trade relationship is in question, with threats of tariffs and disruption of supply chains.
The newspaper on public finance notes that our national debt is the highest among developed countries.
Debt is expected to rise further next year, highlighting the tax base corporation tax exposure.
It is hoped that the debt we are currently borrowing will have to be refinanced at a higher cost in the future and that ECB support will end in June next year.
Due to the impact of COVID-19, the economy is in a ‘balanced state’ with a disproportionate impact on labor-intensive sectors.
It says there has to be a better way between support for budget policy and what is described as financial stability.