Irish economy set to shrink 8.5% due to pandemic

The coronavirus will hit Europe with a deeper-than-expected recession, with the Irish economy set to shrink 8.5% this year, according to a new forecast from the European Commission.

“The economic impact of the foreclosure is more severe than initially anticipated. We continue to navigate rough waters and face many risks, including another major wave of infections, ”said executive vice-chairman of the committee, Valdis Dombrovskis.

Overall, the EU is expected to collapse 8.3% this year, a deeper-than-expected slowdown as the virus has shut down businesses, closed shopping streets and kept people in their homes longer than expected. initially thought so.

All EU economies are expected to return to growth next year, but the committee warned the outlook could darken. The current outlook was based on the assumption that there would be no second wave of the virus.

“The risks to the forecast are unusually high and mostly on the downside,” he warned. “The extent and duration of the pandemic, and any future containment measures that may be required, remain largely unknown. Forecasts assume that lockdown measures will continue to ease and that there will be no “second wave” of infections. “

The Irish economy experienced the highest growth of any EU country in the first quarter of 2020: it was up 1.2%, supported by pharmaceutical exports, investment in construction, manufacturing and the information and communications sectors. Almost all other EU economies have shrunk.

However, private consumption has been hit hard in Ireland due to its “long-lasting and far-reaching” measures to contain the virus, according to forecasts.

He added that the future was uncertain as UK and EU negotiators struggle to reach a deal on post-Brexit trade relations from January.

He said the Irish economy was also vulnerable to decisions by state-based multinationals and could be a victim of changes in the international tax environment.

Hardest hit

Among EU countries, the Italian economy is expected to be the hardest hit, contracting 11.2 percent this year, followed closely by Spain, Croatia and France.

The commission said the gloomy forecast underscored the urgency of agreeing on an economic stimulus package.

EU leaders are due to meet next week to discuss a € 750 billion stimulus package proposed by the committee, aimed at countering the economic damage from the pandemic. It is supported by opposition from member states who fear debts for their taxpayers.

“The political response across Europe has helped cushion the shock for our citizens, but it remains a story of growing divergence, inequality and insecurity,” said Economic Commissioner Paolo Gentiloni.

“That is why it is so important to quickly reach agreement on the stimulus package proposed by the committee – to inject both new confidence and new funding into our economies at this critical time.”

Pat R. Madsen