The ESRI has predicted this week that the Irish economy is set to grow 4.4% in GDP terms which they suspect will be driven by consumption growth of 6.7% once the economy reopens.
Meanwhile, the report is not optiistic about the labour market (unemployment to remain elevated against pre-pandemic levels until 2023) and the housing market (housing supply of 15,000 units expected in 2021).
The most recent Quarterly Economic Commentary from ESRI has concluded a downward revision of economic growth forecasts to 4.4% GDP Growth in its Spring edition from the 4.9% they forecast in their the fourth quarter 2020 Economic Commentary. This comes as a result of restrictions lasting until at least April 5th by assumption, with the vaccine rollout expected to facilitate reopening by the end of the June.
A strong recovery is expected once reopening begins with approximately €14 billion of pent-up demand to be released which is expected to lead to 6.7% growth in consumption in 2021. In addition, they expect unemployment to peak at 25% in the first quarter 2021 before tapering off to around 10% towards the end of the year, with their forecast for the full year now at 17%.
They expect this will fall to 7% in 2022. Notably, they are not expecting a return to pre-pandemic levels of unemployment until 2023 at least. Finally, the report also expects the current restrictions to have a strongly adverse effect on the housing market, with expectations that housing supply falls to 15,000 units in 2021, a decline of 6,000 from 2020 levels and significantly below pre-pandemic forecasts of 26,000 units for 2021. A reduction to this level of supply would likely lead to further acceleration in house price growth.
According to Goodbody Stockbrokers, "The key take-away is that despite longer than expected restrictions, a strong recovery is still expected to occur in the second half of the year. However, the suggestion of unemployment not returning to pre-pandemic levels until at least 2023 is rather sobering and serves as a reminder that the worst of the hit for the Irish labour market is yet to come. The reopening of the economy, whenever it does begin, will mark the beginning of what will be a welcome shot in the arm for the Irish economy."