Economy

Nightmare scenario: Covid strain with Omicron spread and Delta severity

Department of Finance’s chief economist sets out chief risk to recovery from pandemic

The Department of Finance’s chief economist, John McCarthy. Photograph: Dave Meehan

Thu Jan 6 2022 - 06:07

What could puncture Ireland’s rapid rebound from Covid and the seemingly rosy public finances that go with it?

A new Covid variant with the transmissibility of Omicron and the severity of Delta. That’s according to the Department of Finance’s chief economist, John McCarthy, who, amid the positive exchequer numbers published yesterday, felt the need to paint the worst-case, potential nightmare sting-in-the-tail scenario that stands between us and the end of the pandemic.

In most areas of political discourse, the Government tends to play up the positives often in the face of negative outcomes or flak from the Opposition. However, when it comes to the public finances, which have be outgunning even the most optimistic forecasts for months now, it tends to sound a note of caution perhaps mindful of the clamour for tax cuts that might ensue if things get too frothy.

In that vein, McCarthy placed himself in the role of Christmas Grinch at yesterday’s press briefing, announcing the latest exchequer returns . The chief risk to recovery, he said, was “a further epidemiological shock”.

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“I think we all, at least think, that the Omicron variant is less virulent, but more transmissible. But if we were to get a variant as transmissible as Omicron and as virulent as Delta, I think there could be a shock to the economy,” he said. The last bit was something of an understatement. A volcanic shock not just to the economy but to society would ensue.

Predicting the end of the pandemic has – to date – proved a mug’s game. We are now in wave four of the virus with the outlook complicated by the emergence of new, potentially more transmissible strains.

The optimists among us suggest that with each phase the virus is getting less virulent to the point that having it, will – in time – not amount to much. This is how Spanish flu eventually died away, or so we’re led to believe.

Despite the ups and downs and the cycle of on-off restrictions, this seems to be path we’re on. McCarthy’s picture of a more virulent strain and the prospect of more circuit-breaker lockdowns is a notion that most of us don’t want to countenance.

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