Economy

How well will the Irish economy recover in 2021?

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2021 looks set to be game of two halves for the Irish economy. All the indications are that coronavirus restrictions are going to remain in place for some time – we will have Level 5 now until at least the end of January – after which we must presume the reopening is likely to be gradual as the numbers vaccinated slowly rise. But by the second half of the year, a fuller reopening – albeit with some ongoing rules and restrictions – should allow the economy to gather some momentum.

2021 will not be a normal year, as some sectors, like tourism, splutter slowly back to life. But with vaccines being rolled out and a worst-case Brexit scenario avoided, it will surely be better than 2020, the year when the domestic economy ran into a wall as coronavirus restrictions were introduced as the pandemic hit. What we don’t know is when the balance will shift, allowing consumer demand to start to rebound back and removing the threat of further heavy restrictions.

Just as the economics of 2020 was dominated by the path of the virus, so will 2021, but with a twist. The logistics of the vaccine rollout will be perhaps the most vital economic – as well, of course, as public health – project of recent times.

If we are three or four days later in starting vaccinations than many other countries, it won’t really matter. But if we are three or four months later finishing than others, it surely will. The average cost of State spending last year for the coronavirus response was about €2 billion a month. Even in cost terms, almost any investment is now justified if it accelerates the vaccine rollout.

Forecasts

Judging the prospects for 2021 depends to an extent on where you start from. The latest official forecasts – published with the budget – were drawn up on the basis of no wide availability of a vaccine and no trade deal being reached between the European Union and United Kingdom. This led to a forecast of modest 1.7 per cent GDP growth in 2021, as some sectors were hit hard by Brexit and rolling restrictions applied to combat the virus.

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