ESRI: Risks of Covid-19 flare-up and no-deal Brexit haunt 'robust' recovery next year        

Only 20,000 new homes will be completed in 2021, reports Eamon Quinn

Kieran McQuinn, research professor, ESRI: "Support measures may have to continue into March."

Employment levels will take a few years to get back to their pre-Covid-19 crisis levels, while the risks of a second wave of the pandemic and a no-deal Brexit hugely add to an uncertain outlook, the Economic and Social Research Institute (ESRI) has forecast.

In its latest quarterly report, the institute projects GDP will grow at a “robust” 6.3% next year, under its “living with Covid” forecast that is based on no new lockdown being re-imposed on the existing local restrictions. However, a no-deal Brexit would derail the recovery meaning growth is halved to only 3.3%.

The ESRI forecast employment levels, which reached 2.3 million before the onset of the crisis, will fall back to over 2 million this year. At over 2.2 million in 2021, employment will still be below its crisis levels even under a relatively strong recovery. 

On unemployment, the ESRI sees a rate of 12.7% in this fourth quarter, depending on no return to a “strict” lockdown, but “should this occur the unemployment rate will most likely be higher”, it said.

It sees 246,000 people unemployed, or 9.9%, in 2021 but the forecast assumes the UK and the EU strike a Brexit trade deal. 

The Covid-19-hit economy has so far fared better than once feared, however. The ESRI forecasts a modest fall in GDP of 1.8% this year, as multinationals drive pharmaceutical exports sharply higher. However, the relatively benign outcome masks major variations, with other jobs-rich sectors hit badly.

“It is very clear that the domestic economy is continuing to struggle with the impact of Covid-19 with the adjusted unemployment rate of 15% in September and that is up dramatically on the pre-pandemic period”, senior research officer Conor O’Toole told reporters.

On the Government finances, the ESRI projects a budget deficit of €25.4bn this year and a deficit of around €15bn in 2021, under the assumption that support payments continue to the end of March. The 2021 deficit will grow if the fallout from the virus again weighs on the economy.

“If the virus and the impacts of the virus continue well into the new year, then there is a good chance that those support measures in some shape or form will have to be continued beyond March,” said research professor Kieran McQuinn.

And the ESEI forecasts that only 20,000 new homes will be completed in 2021, compared with a forecast of 28,000 before the pandemic.