Last week, the latest Treasury data showed that the general government deficit was 7.4 billion euros in July. Compared to the same period a year earlier, the Irish budget had a surplus of € 896 million.
In total, the Irish economy could have lost around € 8.3 billion. This is due to a significant increase in expenditure, which was necessary after the outbreak of the dangerous virus.
The sharp economic downturn could increase the need to borrow, so the huge financial shortfall will have to be offset by an increase in the share of international borrowing. Experts have already warned that loans could temporarily plunge Ireland into a deep recession.
The Organization for Economic Co-operation and Development (OECD) has warned that the additional debt to Ireland “will be an unpleasant ghost for a long time to come”. Ireland is already very heavily indebted. Ireland’s total debt now stands at more than € 110 billion.
The global pandemic is projected to shrink the global economy by up to five percent, making the 2020 recession the worst since the Great Depression of the 1930s.
Ireland exported around € 152 billion worth of goods last year, but exports could fall dramatically this year due to falling global demand. Given that neighboring Britain is experiencing a recession for the first time in 11 years, this has also raised concerns in Ireland.
This is because Britain remains one of Ireland’s most important trading partners. In 2019, Britain exported £ 38.3 billion worth of goods to Ireland, while imports were worth £ 24.4 billion. For example, new car sales are usually an indicator of the ‘health’ of the economy, but the sector is currently in economic downturn.
Brian Cook, director general of the Irish Engine Industry (SIMI), warned that the main reasons for the Irish economic downturn were both the proliferation of Covid-19 and the uncertainty about and around Brexit.
“We have Brexit, we also have Covid-19, and that is a big crisis overall. At the moment, we can say that the sales of new cars have decreased by 30% this year, ”said Cook.
Negotiations between the European Union and Brexit are also continuing under the guise of a pandemic, but it is not yet clear whether and when an agreement will be reached on further arrangements for cooperation between the United Kingdom and the European Union after the end of the transitional period on 31 December.
Whether an agreement can be reached is extremely important for Ireland, as it will have a direct impact on the country’s economy.
The Irish head of government, Michael Martin, who met with British Prime Minister Boris Johnson, said “there are still opportunities for both sides to speak out to reach an agreement.”
“I would like to say that there is a common understanding that we do not need another big economic shock, so we could succeed in reaching a mutually optimal agreement that will not deepen the consequences of the Covid-19 crisis,” said Martin.
It was reported on Wednesday that the British economy “has entered difficult times, as the economy is experiencing the deepest recession in history” – the British economy shrank by 20.4% in the second quarter.
“I have said it before, but today’s figures also confirm it – hard times have already begun. Hundreds of thousands of people have already lost their jobs, and unfortunately a similar fate will befall several thousand workers. In the future, we will have to make very difficult choices, but we will get over it and we will have hope and opportunities to build a better future, ”said Chancellor of the Exchequer of the United Kingdom Rishis Sunaks.