Ireland will slide into a recession this year as large parts of the economy that depend on people spending money in the now-shuttered shops dries up, with thousands out of work and the incomes of many others falling, the Economic and Social Research Institute (ESRI) predicts.
In a detailed analysis, the think tank estimates that the Irish household weekly spend of €837 will slump to €631 for each week of the duration of the 12 weeks of the lockdown and climb to €914 in the week after the lockdown is lifted.
However, despite food grocery spending soaring, overall spending will nonetheless drop in 2020 as a wide range of consumption is lost, including on clothing, takeaway meals, public transport, and motor fuel.
In a normal week, the Irish household spends an average of €97 on food to eat at home.
That food bill in “a pandemic week” during the lockdown climbs by almost €100 to €194, and will likely fall back to its normal level in the “recovery week” after the lifting of restrictions, estimate the ESRI authors, research professor Kieran McQuinn and senior research officer Conor O’Toole.
“The scenario implies that [overall] household spending is 25% lower during the pandemic than normal, but recovers to 9% above normal following the pandemic to account for postponed spending,” according to their report.
Additional food spending fails to offset consumption which is lost on other goods and services
“The overall annual impact on consumption is therefore minus 4% with the recovery in spending in the 12 weeks following the pandemic,” according to the authors.
The fallout of thousands of job losses and the contraction of economic output may be out of the hands of the Government because a large part of Irish GDP is accounted for by world trade, which means the longer the health emergency goes on in Britain and the US, the greater the effect on the output of Irish factories and from the services industries.
The speed of any subsequent economic recovery here will therefore likely depend on the success of pandemic control measures elsewhere because “while the domestic authorities may be successful in limiting the spread of the virus, the performance of the recovery of the irish economy will now also depend on the effectiveness with which other countries deal with Covid-19”, warns the ESRI.
The outlook is based on assumptions and are not to be taken as forecasts such is the huge weight of uncertainty that the pandemic brings in its wake, the ESRI says. And the longer the restrictions last at home and abroad, the greater the hit will be to Irish public finances.
“It may be necessary to increase the deficit beyond this amount if additional health expenditure and-or social welfare payments are required,” the ESRI says. And they say that the ECB, other global central banks, and governments around the world have a heavy duty to ensure that the crisis does not get any worse.