The COVID-19 (coronavirus) outbreak has significantly affected the global economy. First identified in Wuhan, China, the coronavirus has spread globally, with Ireland no exception. This article examines the impact of the coronavirus outbreak on the Irish economy.
The Irish government has reported 15,251 cases and 610 fatalities as of 19 April, significantly lower than over 103,000 confirmed cases across the United Kingdom. The daily rise in the number of cases has prompted a number of measures aimed at stemming the spread of the virus and easing the pressure on the Health Service Executive. In mid-March, less than a month after the first confirmed case in the country, the Irish government announced the closure of schools and non-essential businesses including pubs, bars and hotels. At the end of the month, measures became more stringent with all individuals told to stay at home unless for essential trips, such as food purchases and working for essential services. These containment measures implemented to limit the spread of the virus have led to severe economic shocks.
Unemployment spikes
The halt to a large proportion of economic activity has led to a sharp increase in the national unemployment rate, to 5.4% in March according to the Central Statistics Office (CSO). The same body also stated that the COVID-19 adjusted unemployment rate was as high as 16.5%. Some of the most-exposed sectors, including retail, hospitality and construction, are expected to report up to 500,000 job losses before the end of April. Restaurants and takeaways have been particularly affected. However, a large proportion of workers in the financial services sector have been able to switch to remote working, placing employees in this sector at a lower risk of losing their jobs. This is crucial for the Irish economy, with professional, financial and support services accounting for approximately 42% of Irish GDP, according to the CSO. On 24 March, the Irish government announced the introduction of the Income Support Scheme, which provides a temporary subsidy of up to 70% of wages, a COVID-19 unemployment payment of €350 per week for employees and the self-employed to help relieve the strain on both businesses and consumers.
Automatic decline
The Irish automotive sector has been profoundly affected by the lockdown measures. Prior to the crisis, sales were exhibiting a downward trend in the Motor Vehicle Dealers industry. The outbreak has decimated demand, with new vehicle registrations falling by 63.1% in March 2020 as just 6,150 vehicles were registered, down from 16,600 in the same month in the previous year, according to the Society of the Irish Motor Industry. As private consumption and consumer confidence decline sharply, expenditure on non-essential items such as new vehicles is anticipated to remain low in the short term.
Retail sales
Food supply in Ireland has been unaffected mainly because it is self-sufficient for much produce, and Irish supermarkets have reported a sharp uptick in demand as coronavirus case numbers have risen, leading to major players in the industry launching recruitment drives. Tesco and Musgrave have employed thousands of people to meet higher in-store and online demand. The lockdown measures also led to higher expenditure in the E-Commerce industry. IBISWorld expects higher online retail sales to represent a fundamental change in the way customers shop for groceries, with a higher proportion of customers projected to spend more online after the measures are eased.
Property and travel
Major commercial flight operators Ryanair and Aer Lingus have grounded majority of their fleets as many countries have closed their borders, leading to a significant short-term decline in revenue for the Passenger Air Transport industry. Evidencing this, on Easter Monday just 900 passengers passed through Dublin Airport, compared with over 100,000 in the previous year.
The Irish property market has also been adversely affected by the country-wide lockdown, with real estate agents forced to halt operations, though some agents have attempted to adapt by offering virtual viewings. According to the CSO, the real estate activities sector could contract by as much as 28% in 2020, primarily affected by inevitable decreases in household incomes and low consumer confidence. Major mortgage lenders have agreed to offer payment holidays for households affected by the economic crisis across Ireland.
Future pharmaceuticals
The Republic of Ireland is well placed in the global race for development of vaccines against the disease because of the presence of major pharmaceutical companies. The pharmaceutical industry has begun fast tracking its processes for testing of potential vaccines with the permission of the government and regulatory authorities. Nonetheless, those working in the industry are being encouraged to work from home where possible, while major conferences are being cancelled.
Ireland is a major exporter of pharmaceutical and medical supply goods, with several leading global biotech and pharmaceutical companies located in the country. Efforts made by countries such as the United States to repatriate pharmaceutical production due to the coronavirus could therefore have lasting impacts on the economy. While the highly regulated nature of the market leaves little scope for a sudden shift in production, such suggestions will present a worry for the sector in the long term.
Overall impact of COVID-19 on Irish Economy
The Central Bank of Ireland (CBI) estimates that GDP will fall by 11% in 2020, erasing gains made at the beginning of the year. However, the bank also stated that this percentage is contingent on the success of containment measures and the effectiveness of fiscal and monetary policies. In order to stimulate the economy, the CBI released a €940 million capital buffer in March, which is expected to facilitate between €10 billion and €16 billion in lending aimed at helping businesses. Despite these supportive measures, the Irish economy will be unable to avoid the lasting effects of the coronavirus crisis.
