The latest economic forecasts from the Department of Finance are, on first reading, reasonably encouraging in the circumstances , envisaging a sharp rebound later this year and particularly moving into 2022. Forecasting with any precision is well nigh impossible of course, with uncertainty remaining over vaccine supply and news changing by the day.
The Stability Programme Update (SPU), the document submitted to Brussels with the updated forecasts, contains a more pessimistic scenario, based on a slower vaccine roll-out and further lockdowns in the second half of this year. Although it is impossible to predict how the roll-out will progress, this does show how high the stakes are not only for public health but also for the economy.It is not a question of a trade-off between the two, but rather the need to get enough people protected to ensure that reopening can happen safely and – let's hope – irreversibly.
A general reopening of much of the consumer-facing parts of the economy is anticipated to lead to a rebound in GDP growth to 4.5 per cent this year and 5 per cent next year. The unemployment rate, including those on the Pandemic Unemployment Payment (PUP), is expected to average more than 16 per cent this year and still be around 8 per cent in 2022. Dealing with this will be a huge political task.
Faster growth is expected to lead to a fall in borrowing, leading to a drop in the deficit from 4.7 per cent of GDP this year to 2.8 per cent next year. This is not a target – it is the expectation of what will happen if current policies are pursued.
Many questions remain about the Government's longer-term funding plans and how they will be financed. The Irish Fiscal Advisory Council has estimated that some €5.4 billion in additional spending in the budget for this year was recurring spending, not directly related to the pandemic.
Vaccine delays would worsen the outlook by delaying reopening – increasing borrowing and endangering the future of more businesses. For both lives and livelihoods, the pace of the vaccine roll-out is now central.