New official forecasts to be published today by the Irish government in the Stability Programme Update predict that the Irish economy is set for significant recovery, the bulk of which will occur in 2022.
Goodbody Stockbrokers say the timing of this recovery will be dependent on the stuttering vaccine rollout programme, which was hit by further uncertainty yesterday. The report will point to GDP growth of 4.5% in 2021 and 5% in 2022, according to the Irish Times.
Goodbody say the devil is in the detail with the Irish data. When looking to Modified Domestic Demand, they say a better gauge for economic activity in domestic sectors would be more subdued growth of 2.5% forecast for 2021, before a significant bounce-back is expected in 2022 with growth of 7.5% as the economy is expected to have fully reopened by that stage. However, the document is clear in stating that the forecasts rely heavily on the success of the vaccine rollout.
Since the ramp-up in government spending due to labour market support schemes has continued into 2021 and will likely continue for much of the year, the document is forecasting a government deficit of 4.7% of GDP, not too dissimilar to the 5% of GDP posted for 2020. However, as activity rises and people return to work, the government expect this to fall to 2.8% of GDP in 2022.
Furthermore, on the labour market, it is expected that the unemployment rate including those in receipt of the Pandemic Unemployment Payment (PUP) will sit at 16.2% by the end of 2021 before dropping to 8.2% in 2022 as people return to work.
According to Goodbody Stockbrokers, "The Irish economy is set for a significant rebound in 2021, however, the bulk of the economic recovery is expected in 2022 when the economy is fully reopened and a return to work for those in receipt of support is possible. While this morning’s numbers are undoubtedly positive for the Irish economic outlook, the reliance on the vaccine rollout adds a layer of uncertainty to how strong the recovery will be in 2021 at least, particularly when considering the news of vaccine postponements in recent days. However, the rhetoric of a 2022 bounce-back is highly likely as any delays in the vaccine rollout are likely to only move us further into 2021."