ROI GDP projected to contract by between 7.3% and 13.1%
- Base Case’ Scenario: A high level of disruption until end of May 2020 and then business begins to return to normal.
- ROI GDP estimated to be 7.3% lower in 2020
- ROI job losses of 177,000
- Up to 450,000 people will lose job or be furloughed before a bounce back period later in the year
- ‘Prolonged Disruption’ Scenario: A high level of disruption until end of August 2020.
- ROI GDP projected to contract by 13.1%
- ROI job losses of 318,000
- Up to 675,000 people will either lose their job or be furloughed by the end of the summer before the economy improves toward the end of 2020
Dublin, Tuesday, 31 March 2020: EY Ireland today announces results of two economic scenarios that it has developed in response to the ongoing COVID-19 crisis. Estimating the potential economic impact of the pandemic is extremely difficult due to the uncertainty around the length of the crisis and the evolving nature of the response, and the professional and consultancy services firm has modelled both ‘Base Case’ and ‘Prolonged Disruption’ scenarios.
Commenting on the projections, Professor Neil Gibson, Chief Economist for EY Ireland said:
“The human cost of the COVID-19 crisis is sadly rising every day and the economic cost is rising as well. The effect of this pandemic will be felt for years, if not decades due to the scale of borrowing required to see economies through the most virulent phase of the outbreak. Early estimates from the EY Economic Eye model suggest a recession is certain, and a depression is possible if the economic restrictions need to be in force for a protracted time.
“We estimate a contraction of 7.3% in ROI GDP in our base case scenario. A more prolonged period of economic restrictions lasting throughout the summer would result in a 13.1% contraction, which would qualify as a depression.”
Job losses are projected to be 177,000 in EY’s base case scenario, but over 450,000 jobs are expected to be either lost or furloughed during the most severe phase of the pandemic whilst businesses are shut. These numbers rise to 318,000 and 675,000 respectively in the prolonged outbreak scenario. This is in stark contrast to pre COVID-19 figures which forecast an additional 38,000 jobs in 2020.
Graham Reid, Partner, Head of Markets, EY Ireland commented:
“Businesses across the country are grappling with the challenge of making the right decisions in this time of huge uncertainty. The challenge we’re facing is unique and in stark contrast to previous recessions. We are now experiencing both a supply side and demand side shock. Very few businesses contemplated the impact a pandemic would or could have. How could they?
“We are hosting regular webinars to help support clients through this crisis. In one of the polls taken during a webinar we could gauge the massive financial strain that businesses are anticipating with a significant number telling us that their revenues will be impacted by more than 25%.”
The Government response across the island has seen an unprecedented fiscal stimulus package presented to help businesses to support their employees and to protect the business and employment base in ROI and NI.
Neil said, “There has been an encouraging level of engagement with businesses and business organisations to chart the best path through this once in a lifetime event. Sadly, businesses will still be lost despite the best efforts of policy makers and the cost of the interventions impact future policy decision for a generation. It is heartening however that during the most catastrophic economic conditions the ingenuity and resilience of Irish businesses has come to the fore once again. Businesses are adapting swiftly and effectively to working from home and many producers have switched production to items urgently in need during the crisis.”
After the crisis, the economy is likely to be forever altered. The embedding of technology to allow remote working has been rapidly accelerated, as has the adoption of online ordering. This will create opportunities for businesses in the future, although increased homeworking would clearly be challenging for the high street and transport companies.
“Many workers have seen meetings dropped from the diary or condensed into a shorter online format and there are stories of a resulting boost to efficiency and productivity. The need to socialise and the importance of face to face contact will remain but undoubtedly our ways of working will look different when the pandemic eases,” Neil concluded.