Jim Power: The least we deserve is the opportunity to look forward with some hope
It’s fair to say 2020 was a very strange year for the Irish economy.
Unlike the bulk of the EU economy, it entered the year with a strong momentum, and looked set to benefit further from the projected rebound in global economic activity.
Alas, when stringent Covid-19 restrictions were introduced in March, and prevailed to varying degrees over the remainder of the year, the whole scenario changed in dramatic fashion.
Ireland in 2020 was very much a story of two economies. In the first nine months of the year, GDP expanded by 3%, and it looks set to be one of only a very few countries globally that is set to deliver positive growth in what was a very difficult year.
However, as we all should well know at this stage, Ireland’s version of GDP always needs to be treated with extreme caution, as it is a grossly distorted metric for judging the Irish economy.
The CSO has sought to iron out the distortions created by activities such as aircraft leasing and intellectual property transactions that only geeks could possibly understand.
We have all lived through the effects of the only strategy that our weak government and dubious health policymakers seemed willing or capable of pursuing – namely an ongoing series of rolling lockdowns.
Unfortunately, as we enter 2021, we are being subjected to the latest stringent set of restrictions.
We should just accept that the only strategy that we have to deal with Covid-19 is recurring significant restrictions until a safe and effective vaccine programme is rolled out.
One can only hope that we manage to do this better than we did with our management of the health crisis, particularly back in July.
The foreign direct investment – or FDI - part of the economy continued to perform very strongly. Exports of chemicals and pharmaceuticals expanded by 11.9% in the first 10 months of the year, and accounted for almost 66% of total merchandise exports.
At a more general level, if one works in the FDI sector, the public sector - where an actual pay increase was granted in October, with the promise of more to come – professional services, or financial services, then 2020 was a relatively good year financially.
However, if one is involved in accommodation and food services, non-essential retail, personal services, the airline industry, or any tourism-related activity, then 2020 was a very difficult year.
Unfortunately, the first half of 2021 looks set to be equally difficult for those unfortunate workers.
Just before the country exited the last level 5 restrictions in early December, 351,424 people were on the Pandemic Unemployment Payment – or PUP - scheme.
Furthermore, 48.2% of those in receipt of PUP were under the age of 34 and 25.4% were under the age of 25.
Young people, and those working in customer-facing businesses like retail and hospitality have been worst affected by the crisis.
Further damage will be done to these sectors as a result of the latest move to level 5. Many may never recover.
The pandemic and the associated restrictions had a detrimental impact on Ireland’s tourism sector in 2020. In the first 10 months of the year, there were 4.19 million arrivals into the country, which is 75.9% lower than last year.
For a sector that makes such a strong economic and financial contribution, and which is correctly regarded as one of Ireland’s most important indigenous sectors and supporters of rural employment, this is devastating.
Looking ahead to 2021, it is possible to be optimistic about some parts of the economy.
At some stage, possibly later in 2021, much of these savings will be unleashed into the economy, along with pent-up business investment. This should set the scene for a decent rebound in economic activity.
While I am optimistic about overall domestic economic prospects in 2021, we will have to be mindful of the Brexit impact, and the fact that it will take some time for tourism-related activities to recover.
In the context of Covid-19 and the latest set of penal restrictions introduced, it is essential that all of those businesses that were forced to shut down or seriously restrict their business activities in the public interest are fully compensated and get as much ongoing financial support as is necessary.
Otherwise, many of those businesses will just disappear or their beleaguered owners will understandably just raise the white flag.
This cannot be allowed happen, nor should we tolerate it.
Apart from the evolving Covid-19 situation and the implications for the health service, and the affected businesses, housing is likely to dominate political discourse in 2021, as it should.
We need to address the supply side of this problem and not distort the market by implementing policies that just fuel demand and house prices.
My new year’s wish is that the vaccines are administered to as many people as possible as quickly as possible, and that fiscal austerity does not enter the domestic lexicon for a long time to come.
It has been a tough year, and the least that we now deserve is an opportunity to look forward with hope.
