Unemployment to remain above pre-pandemic level until at least 2025

Some form of Covid-19 restrictions on personal freedoms will remain in place until the end of the year and well into next year, Finance Minister Paschal Donohoe has said. Picture: Moya Nolan

Some form of Covid-19 restrictions on personal freedoms will remain in place until the end of the year and well into next year, Finance Minister Paschal Donohoe has said.

Speaking as he published his latest economic projections, Mr Donohoe and Public Expenditure Minister Michael McGrath outlined a stark picture relating to the public finances and the national debt.

As revealed by the Irish Examiner earlier on Wednesday, the State is likely to need to borrow €18bn this year in order to pay its way, on top of the €18.5bn it borrowed last year.

As a result, the national debt is projected to rise to €239.3bn this year, the equivalent of 111.8% of the country’s economic output. This would put the Irish debt-income ratio amongst the highest in the developed world.

This is up from the €218bn in national debt recorded at the end of last year.

Corporation tax

Mr Donohoe has been forced to factor in about €2bn in lower annual revenues from corporation tax by 2025.

The Government expects corporate tax revenues to continue to increase over the next few years but at a much slower pace than seen in recent years.

Unemployment is to remain above pre-pandemic levels until at least 2025 thus placing a greater burden on tax revenues by way of welfare supports.

Presenting new economic forecasts in the Stability Programme Update, sent every spring to Brussels, Mr Donohoe and Mr McGrath sought to present a positive tone by saying stronger growth could help return the budget to close to balance by 2023 or 2024.

Covid-19 support payments

Mr McGrath said so far Covid-19 support payments to workers and companies have totalled €28bn with a further €12bn committed this year. He said as of now, the level of Covid-19 supports will drop to about €4bn in 2022, but insisted October’s budget will not be one devised on an austerity basis.

I am certainly not lining people up for an austerity budget in 2022,” 

he said.

Mr McGrath said that while the numbers presented in the SPU are on the basis of the wage supports and the Pandemic Unemployment Payment (PUP) ending in June, he restated that there will be “no cliff edge” in terms of payments stopping and indicated that the Government will continue to extend supports while restrictions remain in place.

Mr Donohoe, in response to the Irish Examiner, said that this year’s figures are based on what he called “a moderation of restrictions” occurring in 2021 and moving to a lower level of restrictions in 2022.

He did not specify when such restrictions will come to an end but made clear that Ireland will remain under some form of limitation well into next year.