Unemployment will return to its pre-Covid-19 levels in late 2023 and only then if there is no new outbreak of the disease, while house building will be severely disrupted for a number of years, the Central Bank has predicted.
Its latest report also sees the budget deficit swelling to over €23bn this year before the additional costs under the stimulus measures planned by Finance Minister Paschal Donohoe this summer are taken into account. And the deficit will top €30bn if the pandemic makes an early return, according to a worst-case outcome.
However, the Central Bank said the build-up of debt will be manageable over the coming years, although the debt pile will make the State vulnerable to any other future shocks.
On unemployment, Mark Cassidy, the Central Bank’s director of economics and statistics, told reporters the number of unemployed has risen from its pre-Covid level of 110,000, or around 5%, to 600,000 currently, and will likely fall to around 220,000 towards the middle of next year. It will only return to the pre-crisis level in late 2023.
The Central Bank said the Covid-19 fallout could deepen the urban-rural divide and will require policy responses.
The new coalition, however, got good news over funding its planned stimulus package as June’s exchequer returns showed corporation tax receipts had swelled for a second successive month, helping offset declines across other tax sources.
Nonetheless, the exchequer posted a deficit of €5.3bn for the first six months of the year, reflecting the costs of unemployment supports and the spending on healthcare during the crisis so far.
On housing, the Central Bank sees the restrictions hitting output of new homes, with only 15,000 new units likely to be built this year, instead of the 26,500 it had forecast before the onset of Covid-19 shock.