Ibec warns ‘conservative’ lifting of lockdown will make downturn worse

Ibec has warned that the Government’s “conservative” approach to lifting coronavirus restrictions will exacerbate the economic shock and prolong the downturn.

The employers’ group said the Government was reopening the economy at a slower pace than in other countries, and this would result in a bigger economic contraction, a higher rate of unemployment and a larger budget deficit by the end of the year.

The Government’s five-stage approach to unwinding the lockdown, which keeps a lot of the restrictions in place until August 10th, has been criticised as overly-cautious by business groups.

However, the State’s medical advisers insist keeping the restrictions in place for an extended period is necessary to prevent a renewed flare-up of the virus.

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"The length of the lockdown in Ireland, including a more conservative pace to reopening of the economy than our peers, will help determine the scale of the fall in economic activity," Ibec said in its latest quarterly outlook.

The group's chief economist, Gerard Brady, said the Government's schedule for reopening "put us about six to eight weeks behind the rest of Europe".

“While business will still be guided by public health officials, I think there needs to be a greater focus on why that six to eight weeks is necessary,” he said.

Ibec is advocating bringing forward the reopening to the end of this month, “basically collapsing the stages into the end of June”, Mr Brady said.

"That would still leave us four to six weeks longer of a lockdown than the rest of Europe and give us time to learn from the reopenings elsewhere."

Consumer spending

In its report Ibec paints a grim picture of the year ahead, suggesting the Irish economy will contract by 11 per cent in gross domestic product (GDP) terms this year, while consumer spending will fall by 14 per cent.

It also says that in a best-case scenario unemployment will fall from a current 26 per cent to 16 per cent by the end of 2020, and fall to 7 per cent by the end of 2021.

This is considerably worse than the Government’s projections, which forecast a faster recovery in employment.

According to Ibec, investment could fall by as much as 40 per cent this year as firms struggle to keep their businesses afloat during the crisis.

It also predicts that recovery of the economy to its 2019 level will not happen until 2022 at the earliest.

“We are currently living through the sharpest compression of economic activity in living memory,” Mr Brady said. “ Whilst many of the collapsing economic figures presented in this report are the result of necessary public health decisions, their impacts on incomes and balance sheets are no less real.”