Paschal: 300k extra jobs by end of 2022
AN EXTRA 300,000 jobs are expected this year and next as the economy bounces back from Covid, the Department of Finance is forecasting. But it is also warning employment will stay below its pre-crisis peak until 2023.
Coping with the pandemic led to a Government debt of €18.5billion last year, with a similar deficit forecast for this year.
However, economic growth is expected to hit 4.5% this year and 5% next year, while modified domestic demand, which is a more useful indicator of domestic economic conditions, is projected to grow by 2.5% this year and 7.5% next year. However, both figures depend on the success of the vaccine rollout and an assumption of an easing of public health restrictions.
After recording a general government deficit of 5% of GDP last year, a further deficit of 4.7% is likely this year before falling to 2.8% next year.
In his Stability Programme Update (SPU), Finance Minister Paschal Donohoe said yesterday: ‘The publication of these economic and fiscal projections means that we now have a medium-term trajectory against which Government can assess and benchmark the evolving situation and calibrate policy accordingly. The speed at which the economy can recover will depend on the success of our vaccination programme.’
He said the jab rollout ‘will allow for a substantive and sustainable recovery to begin’, adding: ‘My department is projecting that modified domestic demand – the best indicator of economic trends – will increase by 2.5% this year, accelerating to 7.5% next year, as pent-up consumer and business demand is released. Excess household savings, built up during the pandemic, will be partly unwound, further supporting spending.’
In fact, household deposits were at a record high of almost €128billion at the end of Febthe ruary, increasing by €15.7billion or 14% from a year previously – the highest annual rise in household deposits in the history of the State.
The Central Bank credited the growth in household deposits to the fact people had little chance to spend.
The Department of Finance is projecting an average unemployment rate of a massive 16% this year, before dropping to 8.25% next year as the economy is fully reopened.
The level of employment is projected to increase by around 80,000 this year and 225,000 next year, although the level of employment will still remain below its precrisis peak until 2023. Minister Donohoe added: ‘The impact of the pandemic on the domestic economy and the public finances has been severe.
‘However, the acceleration of
vaccination programme means that the beginning of the end is, hopefully, now in sight. The strength of our economic model, and more importantly our people, clearly demonstrate that we should face this current period with optimism. We can and we will rebuild our economy, get our people back to work and safely emerge from the pandemic.’
Minister for Public Expenditure and Reform Michael McGrath said: ‘We have provided over €28billion for Covid-related spending programmes, nearly half of which are direct income supports via the Pandemic Unemployment Payment and Wage Subsidy Schemes.’
Michael Taft, economist with the Siptu union, said yesterday
Pandemic impact ‘has been severe’ ‘Unsuitable to the challenges’
that projections of continued ‘low-tax, low-spend’ policies by the Government will undermine the economy’s growth prospects.
He said: ‘While today’s projections are based on a “nochange” policy, the underlying path is to return to pre-pandemic normality, which is unsuitable to the challenges society faces.’ However, he added: ‘On a positive note, the SPU suggests that, without any tax increases or spending cuts, the deficit will disappear by 2025.’