The Irish economy will be among the worst hit in Europe from the fallout of the global Covid-19 pandemic -- with unemployment climbing higher this year than in some parts of the eurozone, according to IMF forecasts.
The forecasts in its World Economic Outlook are the first comprehensive look at the severe economic pain the pandemic will inflict on the world.
The IMF calls the current economic shock “The Great Lockdown” and warns it will be the worst global slump since the depression of the 1930s.
- IMF: ‘The Great Lockdown’ global economic hit worst since 1930s Great Depression
- IMF: Urges world leaders to abandon ‘futile’ protectionist policies
- IMF: Calls for ‘survivor’ grants for frontline medical staff
- IMF: Irish GDP shrinks 6.8% this year; expands 6.3% in 2021
- IMF: Irish unemployment averages over 12% this year; at almost 8% in 2021
- IMF: UK GDP shrinks 6.5% this year; expands 4% in 2021
- IMF: UK unemployment at 4.8% this year; at 4.4% in 2021
- IMF: Eurozone GDP contracts 7.5%; expands 4.7% in 2021
- IMF: Italy GDP contracts 9.1%; expands 4.8% in 2021
- IMF: Italy unemployment at 12.7% this year; at 10.5% in 2021
- IMF: US GDP contracts 5.9% this year; expands 4.7% in 2021
- IMF: US unemployment at 10.4% this year; at 9.1% in 2021
The report from the Washington-based fund also represents a call to arms for world leaders to work together on developing a vaccine and also to avoid “futile” protectionist policies that could usher a return of a 1930s economic depression.
It calls for increased health spending and recommends governments pay generous “survivor” grants to medical staff and their families working on the frontline.
Amid the economic fallout, there will be huge strains on maintaining the “economic and financial infrastructure of society” and there are “severe risks” for even worse economic outcomes, it warns.
The IMF presents three scenarios for potentially outsized economic hits -- including what happens should the virus break out for a second time later next year.
In its central forecast, the Irish economy shrinks by 6.8% this year, but expands by 6.3% in 2021.
That compares with the 7.5% contraction across the eurozone as a whole, and is in line with the economic hit of 6.5% it sees for the UK.
However, the IMF projects the Covid-19 crisis will have an outsized effect on Irish jobs with unemployment averaging over 12% this year -- up from 4.8% in February -- and staying at an elevated level of almost 8% in 2021.
Its unemployment forecasts are annualised and therefore do not take account of the spikes in joblessness. Many economists here believe Irish unemployment will reach at least 25% by early summer and only recede slowly through next year -- with those forecasts based on the pandemic being brought under control.
Key consumer markets for Irish firms exporting to the world suffer severe shocks.
Across the eurozone unemployment rises to an average of 10.4% this year, the IMF projects.
However, it sees UK unemployment at 4.8% this year and at 4.4% in 2021.
Unsurprisingly, the individual eurozone countries enduring the highest numbers of deaths from the Covid-19 pandemic experience the worst economic outcomes.
The IMF sees Italy’s GDP slumping by over 9% this year and projects unemployment there of 12.7%, while Spain’s economy contracts 8% and unemployment rises close to 21%.
The US economy contracts 5.9% this year before expanding 4.7% in 2021.
However, American levels of unemployment climb to 10.4% and 9.1% over the two years, according to the forecasts.
“The crisis is like no other,” the IMF says,
It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.
The IMF nonetheless sees signs of optimism in the way governments have so far fought against the virus with measures of social distancing and “substantial” economic supports “to shield people and firms”.
But it warns: “When the world economy last faced a crisis of this magnitude in the 1930s, the absence of a multilateral lender-of-last resort forced countries to scramble for international liquidity, adopting futile mercantilist policies in that pursuit, which further worsened the global downturn.”