After avoiding a decline in output in 2020 thanks to buoyant exports of Ireland-based multinationals, real GDP is projected to grow by 4.2% in 2021, despite stringent sanitary measures introduced early in the year. As vaccinations are rolled out and restrictions are gradually eased, domestic demand will strengthen, even though uncertainty will continue to weigh on firms’ investment decisions. Pent-up consumer spending, as households unwind pandemic-induced excess saving, is projected to lift growth to 5.1% in 2022.
Public support for employees and businesses, which cushioned the impact of the crisis and masked the surge in unemployment, will be progressively pared back as the economy reopens. However, in light of persisting health and Brexit-related risks, policy needs to remain supportive. Increased targeting of fiscal measures on workers most at risk of long-term unemployment, as well as a simpler examinership scheme for debt-saddled SMEs, would facilitate the reallocation of resources and limit potential scarring effects from the pandemic.