The ESRI has published its Winter Economic Commentary this morning, laying out the prospects for Ireland in 2021. It takes a cautious assumption that there will be a further six weeks of restrictions in the early part of the year following a rise in cases around Christmas.
It also assumes a wide scale roll out of a vaccine by third quarter, which one hopes will prove to be overly cautious. It lays out two sets of forecasts depending on the outcome of the Brexit negotiations.
In a Brexit deal scenario, it expects GDP to grow by 4.9% in 2021. It had previously forecast 6.3% GDP growth, but the base is now much higher as a result of very significant upgrades to the 2020 estimate (up from -1.8% to +3.4%).
The expected growth in 2021 is propelled by a rebound in consumer spending, which is expected to grow by 12%. This is despite an unemployment forecast of 14.5% in 2021. Goodbody Stockbrokers say this looks overly pessimistic, but possibly stems from the assumption of an additional lockdown in the first quarter and very slow resumption of normal activity.
According to Goodbody Stockbrokers, "The outlook painted by the ESRI points to a V-shaped rebound in the domestic Irish economy in 2021. A no-deal Brexit would take the shine off this performance, with growth expected to drop to just 1.5% in that scenario. Given the very unique nature of the 2020 downturn, we agree with the prognosis for a V-shaped rebound in 2021, with an unleashing of savings being key to this performance. Key to this will be an efficient roll-out of the COVID-19 vaccines."