Ibec: Vaccine rollout means 'light will begin to creep in' in second half of 2021

Ireland is primed for a return to normality and a surge in economic activity after most adults are inoculated

An efficient vaccine rollout — with centres such as Cork's Páirc Uí Chaoimh stadium being pressed into service — will lead to a more normal rhythm to society and commerce later this year.  Picture: Larry Cummins

Despite the continued lockdown and concerns over vaccine supply, the Irish economy will grow by more than 3% this year, business group Ibec said.

Publishing its quarterly economic outlook this morning, Ibec said that with an efficient rollout, most adults will be vaccinated by the end of June, and there was potential for society and commerce to take a more normal rhythm in the second half of the year.

Optimism despite protracted lockdown

“From there, light will begin to creep in,” the group’s chief economist Gerard Brady said. 

“Lockdown measures in the first part of the year have been tough and protracted, placing additional pressure on the economy, with particular disruption to the labour market. 

There are currently over 650,000 people unemployed, with a further 310,000 reliant on wage subsidies. The current restrictions mean that most will remain there well into the second quarter.

“While the impact of this has been significant, there is cause for optimism,” he said.

Some sectors will be slow to recover

However, the Ibec report said normal trading and employment in all sectors will not return to normal due to ongoing social distancing and public health requirements, and it was vital that Government supports for households and businesses remain in place for those worst affected.

The Ibec report also points 2021 as a possible significant year for the tax element of Ireland’s business model and its 12.5% corporate tax rate. The new Biden administration in the US has backed efforts by the OECD for an international accord on taxations.

Ibec said that any change to our corporate tax rate would close the competitiveness gap to other EU competitors and impact our global brand. “This is particularly the case given corporate tax, at 14% of the total tax take, is now far north of twice the European average,” Ibec said.

Tax and competitiveness

“From an Ibec perspective, we have been clear for several years that we will need to meet this competitiveness challenge by investing in other growth levers such as education, research and development and critical infrastructure. 

"Whilst the post-Covid debate may increasingly be about the distribution of wealth, Ireland will need to take concrete and significant action to guarantee the continued creation of that wealth in the first instance.”