It could take up to three years for Ireland’s economy to return to pre-crisis levels of activity, an Oireachtas committee has heard.
Sebastian Barnes, acting chairman of the Irish Fiscal Advisory Council, said the health crisis will have a lasting effect on the economy.
He told the Oireachtas special committee on Covid-19 that there are “huge uncertainties” for the economy in Ireland.
As the economy exits lockdown, a sizeable stimulus would help the recoverySebastian Barnes, Irish Fiscal Advisory Council
Mr Barnes presented three different economic scenarios because of the “exceptional uncertainty” surrounding Covid-19 and the possible health and economic outcomes.
He added: “Activity falls sharply in all scenarios before recovering.
“The scenarios imply it would take two to three-and-a-half years to return to pre-crisis levels of activity.
“By contrast, the Irish economy took 11 years to recover after the financial crisis.”
Ireland’s coronavirus death toll rose to 1,709 after a further three deaths were announced on Tuesday.
There were 14 new confirmed cases of the virus, taking the total to 25,334 since the Covid-19 outbreak began.
Presenting evidence on behalf of the council, which is an independent body, Mr Barnes said that broad phases of the crisis and recovery are relatively clear.
“As the economy exits lockdown, a sizeable stimulus would help the recovery,” he said.
“However, some adjustments are likely to be needed down the line to get the debt ratio on a safe downward path again.
“To safeguard the funding of public services and supports in future, while addressing future challenges, the incoming government should set a credible path for a prudent fiscal policy and take steps to reinforce its budgetary framework, including meaningful debt ratio targets and more effective medium-term budgeting.”
Fine Gael’s Jennifer Carroll MacNeill pressed the council on its estimated economic recovery time frame.
How we recover this depends on things that are very hard to ascertainMichael McMahon, Irish Fiscal Advisory Council
Michael McMahon, a member of the council, said: “The key thing to think about when trying to assess what type of economic slowdown or recession we are experiencing now is to recognise the recession is itself a public health measure.
“Lockdown has been done with the objective of protecting public health. As a result, it is a different form of recession to ones we have seen in the past.
“The points we would stress about why this would be a recovery that is faster than the financial crisis, is that Ireland went into this crisis, both in terms of household and corporate balance sheet, but also in terms of the fiscal position, in a much healthier place.
“How we recover this depends on things that are very hard to ascertain.
“At what rate do people decide they will be confident to go back to shopping in non-essential shops, and at what rate will people engage with the entertainment industry, like pubs or restaurants.
“These behavioural responses will depend on lots of different things that are difficult to ascertain.
“With some fiscal stimulus in the recovery phase after the initial health impact has been mitigated, Ireland could be back in some two and a half years to three years.”
Mr Barnes also said that its estimated 10 billion euro stimulus package may need to increase to meet the changing economic landscape.
Sinn Fein’s Pearse Doherty said that it is believed the figure should be 30 billion euro.
Mr Doherty also said the council’s projections do not take into account the issue of Brexit at the end of the year.