DUBLIN: The Economic and Social Research Institute (ESRI) predicts that the economy will grow by 3.4% this year, despite rising unemployment. Although exports of pharmaceutical and IT companies remain strong, the impact of COVID-19 will have a short-term impact on the domestic economy, according to ESRI’s new quarterly economic review. The ESRI said the forecast was “somewhat surprising” given the government’s estimate of a 2.4% drop in GDP.
The economy continues to grow on exports of pharmaceuticals and IT services. Consumer spending is also rising again. But ESRI says this is an uneven picture. The unemployment rate will be 20% this year. After the Brexit trade, it will fall to an average of 14.5% next year.
The company expects unemployment to fall as sectors such as hospitality art and retail sales return in the second half of next year. Pharmaceuticals and chemicals together account for about two-thirds of the value of Ireland’s merchandise exports. Demand for these products has increased by 18% over the previous year. Demand for computer services from abroad is also strong. Computer services account for about half of the value of service exports. The ESRI also states that the value of exports will have a major impact on GDP.
Despite a sharp drop in consumer demand (up to 20%) as a result of COVID restrictions and unemployment, the economy continues to grow as GDP estimates. It also contributed to a huge jump in consumer spending over the summer.
ESRI points out that the Irish economy is subject to the fortunes of a small percentage of companies in a small segment of industry. This also applies to corporation tax. This accounts for around one-fifth of our tax.
Earlier this year, a revenue analysis confirmed that only 10 companies accounted for 40% of the acquisitions and 77% of them were foreign multinationals. In this case, the agency warns against the Biden administration’s tax policy. The Biden administration in the US may make changes to international corporate tax laws. The ISRI also warns that this will reduce tax revenue here.
US economist Brad Setser, who has written extensively on the tax practices of US multinationals in Ireland, is reported by Bloomberg to have joined the Biden transition team. ESIR expects Biden to adopt a more globalized approach than the Trump administration.
ESIR predicts that the economy will grow by 4.9% next year. The company estimates that there will be a six-week level 5 lockdown in the first half of 2021. The COVID-19 vaccine is not expected to reach the general population until the second half of next year. That is why the agency says unemployment will remain high.
However, the average unemployment rate is 14.5%.The post-Brexit trade agreement is expected to be approved. If not, ESRI says growth could be as high as 1.5%. The review also shows that the prices of goods that consumers buy will go up.