Thursday, 1 April 2021
Department of Finance
66. To ask the Minister for Finance the extent to which the economic fundamentals remain stable here notwithstanding the impact of Brexit and Covid-19; and if he will make a statement on the matter. [17645/21]
Prior to the pandemic Irish economic fundamentals were very strong, with robust growth, a labour market close to full employment, and dual surpluses in the current account of the balance of payments and the public finances. The outbreak of the pandemic turned the economy on its head in the space of a few weeks, with the introduction of Covid-19 restrictions resulting in a sharp contraction in domestic economic activity last year. However, in keeping with the pattern seen in other countries, the economy rebounded as restrictions were eased.
My Department, along with the ESRI, conducted an analysis of the sectoral overlap between the Covid-19 and Brexit shocks to help us plan accordingly. The key finding of the analysis is that there is limited overlap of the sectors exposed to the different shocks. No sector was found to be severely affected by both shocks. While the analysis was based on the assumption of a ‘disorderly’ Brexit, this general conclusion is still applicable today. Nevertheless, there still remains considerable uncertainty surrounding the economic outlook as it will depend on many factors, including the speed at which Covid-19 vaccines can be rolled out which is itself a function of supply.
As the vaccine programme steps up throughout the second quarter this year and beyond, Covid related restrictions will gradually be eased and a sustained economic recovery can then take hold in the second half of the year. The recovery in the domestic economy should be supported by the release of pent-up demand financed by the unwinding of historically high levels of household savings.
While the effects of Covid-19 have been severe, our resilience and strength comes from being an economy that remains open to investment and facilitates trade across our borders. This has proven to be the fundamental strength of the Irish economy over decades and is still the case today.