The Economic and Social Research Institute (ESRI) is working on scenarios that take account of significant hits to the Irish economy should the coronavirus crisis lead to the Government imposing long periods of quarantine.
ESRI research professor Kieran McQuinn said though difficult to quantify the economic effects, “it will likely to be significant in the first quarter”, while lengthy quarantines of over five or six weeks would bite into consumption and hit economic activity over the year.
He said that the economic effects would “adversely” weigh on annual output should outbreaks of the virus extend into the second quarter and the economy is hit by prolonged quarantines as the authorities attempt to control the virus.
The ESRI defines a quarantine as a dramatic move on a national level that would require people to stay indoors, in extreme cases.
Mr McQuinn said the think tank is building scenarios of the economic effects on the Irish economy based on the 2009 University of Oxford research by economist Simon Wren-Lewis and others on the economic hits of a severe outbreak of influenza on the UK economy.
That research showed that under a severe scenario there were significant economic shockwaves through absenteeism and prolonged school closures.
Mr McQuinn said at this stage, the ESRI would likely pare its forecast of 4% GDP expansion this year, based on events of recent weeks.
If the crisis lasts into the summer or longer, the ESRI is modelling the Oxford University data for the Irish economy, and policy measures that the Government may take to get a control of the virus outbreak.
“If there was a quarantine period it would depend on how long the quarantine would last. And of course, the effects get quite significant depending on how long it lasts,” Mr McQuinn said.
Economist Jim Power said economic forecasts were “shrouded in total uncertainty” because no one is sure how bad the crisis will get.
He said the global economy was already in a bad place ahead of the crisis, even though the Irish economy was performing strongly.
However, the sense of a growing crisis could lead to severe disruption to restaurants and tourism and travel in the coming weeks, Mr Power said.
“Businesses could be forced to do what they were forced to do in China and prevent staff coming into work,” he said.
He said that because there is no without a vaccine, that coronavirus is different from the Sars and Foot and Mouth outbreaks, which were “much more a known quantity”.
Richard Flood, director of investment management at Brewin Dolphin Ireland, said that a few weeks ago markets could have been accused of complacency.
Since then, the shares of travel and tourism firms have been hit, while because of disrupted supply chains from China, there could be shortages of goods, including pharmaceuticals and smart phones.
A short-term crisis would lead to a snapback in spending but “clearly a very prolonged crisis will create problems” for vulnerable private companies, he said.
Dermot O’Leary, chief economist at Goodbody, said that any prolonged crisis would hit the Irish economy because a significant portion of exports need intermediate goods and rely on supply chains of multinationals.
- The HSE have developed an information pack on how to protect yourself and others from coronavirus. Read it here
- Anyone with symptoms of coronavirus who has been in close contact with a confirmed case in the last 14 days should isolate themselves from other people - this means going into a different, well-ventilated room alone, with a phone; phone their GP, or emergency department - if this is not possible, phone 112 or 999 and in a medical emergency (if you have severe symptoms) phone 112 or 999