ESRI warns economy could shrink by 7pc due to coronavirus

Ireland’s economy could contract by at least 7.1pc, according to ESRI, with unemployment to surge as a result of the coronavirus pandemic.

The Economic and Social Research Institute (ESRI) has published its latest quarterly report, showing the enormous impact the coronavirus pandemic is expected to have on the Irish economy.

Describing the outbreak as the “single largest challenge to the Irish economy since the financial crisis”, the authors of the report said that if current physical distancing limitations continue for 12 weeks, Ireland’s economy would shrink by at least 7.1pc.

This is a significant reversal on trends forecasted prior to the outbreak, when it was predicted the economy would grow by 4pc this year.

ERSI said this figure is based on the assumption that spending ramps up significantly again in the latter half of the year. If this doesn’t happen, the ramifications on the economy will be even more severe.

‘Deficit could be higher’

Ireland’s unemployment rate is also predicted to surge, from 4.8pc in February of this year to 18pc in the second quarter. It is then expected to fall back to 11pc by the end of 2020. At the height of the financial crisis, Irish unemployment went from 5.3pc in 2008 to 14pc in 2009.

“The combination of the extra expenditure on health and social welfare allied to the sharp decline in certain taxation revenues means a deficit of nearly 4.5pc is now likely to occur in 2020 and could be higher,” the report said.

“Greater expenditure may still be required in order to meet this threat to public health.”

The Government’s overall balance was expected to be in surplus at the start of this year, but ESRI predicts that it will now register a 4.3pc deficit due to a significant fall in revenue from the exchequer.

According to the report: “[This] also reflects the significant increase in spending the government will implement in order to support workers who have lost their jobs, assist businesses facing declines in revenue and provide additional health expenditure needed to combat the virus.”