The ESRI has upgraded its economic forecasts for Ireland significantly in its latest Quarterly Economic Commentary this morning. It is anticipating GDP to decline by 1.8% in 2020, with growth of 6.3% expected in 2021. In May, the ESRI forecast that GDP would decline by 12% this year.
The reasons for the upgrade are familiar, with growth in multinational exports offsetting weakness in the domestic economy. That said, Goodbody Stockbrokers say the consumer picture has also been somewhat better than originally expected.
For 2021, the ESRI is assuming that a Free Trade Agreement (FTA) will be struck between the UK and the EU. If does not happen, growth would be some three percentage points lower.
According to Goodbody Stockbrokers, "Huge uncertainties remain around economic forecasts currently, with the biggest uncertainty being around the labour market outlook. Even with a Brexit agreement, the economic impact on the services sector in Ireland means that employment will remain below its no-pandemic baseline level until 2023, 2024 and 2026 in the ESRI’s Recovery, 2nd Wave and Delayed Recovery scenarios. The scarring effects from the pandemic on the labour market will depend heavily on the scale and duration of government supports to keep businesses alive."