Electric.ie July/ August 2020

54 ELECTRIC.IE • The Magazine & Website for the Irish Electrical Industry • Uncertain economic outlook for 2020 T he widespread shutdown of businesses caused by the pandemic triggered sudden and large-scale job losses and, allied to extreme uncertainty, gave rise to a severe negative shock to both consumer spending and investment. While the impact of labour market developments on household incomes has been mitigated by the provision of large-scale income support by the State, the pandemic has had a severe impact across the economy. Given the scale of uncertainty surrounding the economic outlook, two different scenarios are outlined in the Quarterly Bulletin. In the “baseline” scenario, the gradual reopening of the economy would allow for an initial rebound in economic activity over the near term. Some containment measures would remain in place meaning that activity would be constrained in some sectors for a longer period. Beyond the initial rebound, recovery is expected to be gradual, in line with a projected gradual recovery in employment and incomes and a slow unwinding of precautionary behaviour as the effects of the shock on consumers and businesses lingers. The unemployment rate is set to decline from its second quarter peak of about 25 per cent as the year progresses and is projected be around half that level by the end of this year, before averaging just over 9 per cent next year and 7 per cent in 2022. ‒ July : The Central Bank of Ireland has just published its third Quarterly Bulletin of 2020, which focuses on the impact of the Covid-19 pandemic and the potential impact of a disruptive Brexit. The baseline scenario sees output recovering to its pre-crisis level by 2022. However, the level of activity will be significantly below where it would have been had the economy grown in line with expectations before the outbreak of the pandemic. In the “severe” scenario, the strict lockdown period is assumed to have a more damaging impact on economic activity and is not successful in effectively containing the virus. Stringent containment measures would remain in place, or would be re-instated, albeit not as severe as before, based on an assumption that there would be a resurgence of the virus at some point over the next year. In this scenario, there is a subdued economic recovery with a larger permanent loss of output. Unemployment remains higher for longer in this scenario and would average just below 17 per cent in 2020, while consumer spending is projected to fall by around 14 per cent and GDP by over 13 per cent this year. In this scenario, the projected recovery in growth in 2021 and 2022 would not offset the loss of output this year, leaving the level of GDP in 2022 about 5 per cent below its pre-crisis level. Both of these scenarios assume that a Free Trade Agreement (FTA) between the EU and the UK, with no tariffs and quotas on goods, takes effect in January 2021. Industry news