Irish GDP data is notoriously volatile and distorted by the impact of multinationals, and the latest forecast by the Economic and Social Research Institute (ESRI) of an 11 per cent rise this year needs to be seen in this context. Nonetheless the ESRI is predicting a broad-based surge in growth, driven by a rebound in parts of the economy which are reopening and continued strength in multinational-dominated sectors.
While GDP was supported last year by sectors like pharma, medical products and digital services, the domestic parts of the economy took a hard hit. The ESRI estimates that as much as €24 billion in output may have been lost in 2020 and 2021. Notably, the latest quarterly commentary sees a 7.5 per cent rise in consumer spending this year, following a 9 per cent fall last year. This is based on reopening progressing reasonably smoothly, despite doubts over the timetable as a result of the Delta variant.
It will be a long way back. The latest unemployment figures show that almost 22 per cent of the workforce depended on unemployment or PUP supports in the first quarter of 2021. While there has been an encouraging fall in PUP claimants in recent weeks, significant numbers will not be able to return quickly to work. Encouragingly, the ESRI believes a strong recovery can continue in 2022, though it will be bumpy and uneven.
The pandemic leaves many problems in its wake and has worsened some which were pre-existing, especially the housing crisis. The ESRI points to the need for a sustained drive to accelerate house building. This is also reflected in a report from Davy Stockbrokers, which estimates that as many as 200,000 houses may be needed over the next three years. ESRI research professor Kieran McQuinn argues that some increase in State borrowing is justified over the next few years to undertake the required investment. The Government promises a new housing strategy in a few weeks’ time. Ministers should realise that this is now all about how to deliver, rather than setting yet more new targets with little indication of how they will be met.