Warning over two-speed Covid recovery with 100,000 more unemployed

Picture: Sasko Lazarov/RollingNews.ie

The Irish economy will stage a gradual recovery this year but as many as 100,000 people already among the worst hit by the pandemic will not get their jobs back anytime soon, the Central Bank has warned.

Predicting a two-speed recovery, the Central Bank has, for the first time, put numbers on the long-term scar from the Covid crisis on unemployment. 

It warns that the sectors worst affected by the health restrictions could take years to recover.

Mark Cassidy, director of economics at the Central Bank, said most of the 445,000 people who currently rely on pandemic unemployment payments will get back to work, but many face longer-term unemployment, even when the Covid restrictions end.

The Central Bank estimates that 100,000 people who were working before the onset of the pandemic will not get back to work this year, and 80,000 people who otherwise would be working will still be unemployed in 2022.

Unemployment, currently at 24%, will average 8% next year but it will be 2023 "at the earliest" before it returns to pre-crisis levels of 5%, the Central Bank predicts.

Mr Cassidy also outlined the two-speed nature of the Covid crisis in which some parts of the economy have continued to expand and accumulate savings, while “younger workers, part-time workers, female workers, and non-Irish workers” in the most exposed parts of the economy have been disproportionately affected.

The Central Bank said that with consumption levels already back at pre-crisis levels, some €5bn of overall “excess savings” could be unleashed to support consumption in the coming years. 

It cautions, however, that the domestic economy may not likely tap the full bounty of the savings.

On paying for Covid, the Central Bank hasn’t ruled out the Government needing to hike taxes in the coming years, if some debt-financed spending increases become permanent.