Exempt housebuilders from any new Covid clampdown, urges ESRI's Prof McQuinn

ESRI economics professor Kieran McQuinn: 'I still think unless you brought in significant restrictions and kept them for a long period of time, the economy will grow strongly next year.'

The Government should do its utmost to protect housebuilding from any new Covid economic restrictions, as fears grow across Europe that a new wave of clampdowns will be required as cases flare, a leading expert has said.

Economics professor at the Economic and Social Research Institute (ESRI), Kieran McQuinn, said over the last two years housing was among the worst-hit parts of the economy and any new health clampdown for homebuilders could threaten to make house price inflation and rent increases even worse.              

His comments come as financial markets brace this week for potential new federal measures in Germany by the outgoing administration of Angela Merkel, after Austria delivered a surprise by announcing on Friday a lockdown after Covid cases shot up there. 

Germany's populous state of Bavaria also late last week took strong measures to protect hospitals from further Covid cases by cancelling its Christmas markets. 

New restrictions anticipated

Stock markets across the globe slid sharply late Friday as investors anticipated new restrictions by European governments that would affect hospitality, airlines, and tourism before Christmas.                

Prof McQuinn told the Irish Examiner there should be "little to no" economic fallout this year to the State's finances from the measures the Government announced last week to curtail the opening hours of some hospitality businesses. It was, however, all the more important for the Government to boost housebuilding as detailed in its recent plan, he said, as housing shortages are stoking house price and rental inflation.    

Amid the fallout from the pandemic, the housing market this year will miss 6,000 or 7,000 new houses that otherwise would have been built. Over the two years, up to 13,000 new homes won't be built because of the crisis, said Prof McQuinn. 

Unemployment had already fallen more rapidly than the ESRI had predicted in early October. It will be revising down its 2022 unemployment forecast in its report next month, he said. 

The CSO has reported that unemployment, including people on the pandemic unemployment payment (PUP), had fallen below 8% in October.      

"We are still very confident that the economy will perform very, very strongly this year and even if there were restrictions imposed, I don't think it will change the overall picture in terms of the economy, the labour market, or public finances," said Prof McQuinn. 

Economic hit

However, if the restrictions brought in were to be similar to those introduced after last Christmas, there would be an economic hit in terms of the growth outlook next year, he said. 

"If you bring in significant restrictions it would have some effect on the domestic growth drivers of consumption and to some extent investment," said Prof McQuinn. 

"I still think unless you brought in significant restrictions and kept them for a long period of time, the economy will grow strongly next year,", he said, as people and businesses find ways to cope with the Covid restrictions. 

However, hospitality and tourism would be hit. An upsurge in Covid cases across Europe is particularly troubling for the parts of Irish tourism industry that rely on North American travel agents booking hotels and airlines for transatlantic summer holidaymakers at this time of the year. 

Prof McQuinn said reintroducing the PUP was "a complex issue". "It is more of a political issue rather than an economic one at this stage," he said.