The impact of the Covid-19 crisis has been much “more severe” on the Irish economy than that of the global financial crisis, a new report has found.
The research from the Economic and Social Research Institute (ESRI) discovered significant disparity between the economic impact of the global financial crisis and the effect of coronavirus on the Irish economy.
The analysis showed hard indicators such as retail sales and unemployment experienced “unprecedented negative fallout” during the country’s initial lockdown in March, and consumer and business sentiment also plummeted.
But the findings also suggest the economy has “bounced back more rapidly” this year than during the global financial crisis where downward movement was more gradual and prolonged.
ESRI report author Petros Varthalitis said: “The scale and the rapidity of the negative impact are much more severe during the current crisis; while the recovery seems much swifter than that of the global financial crisis.
“These differences can be attributed to the nature of the two shocks but also to the significant differences in how policymakers have responded to both crises.
“The Irish Government immediately launched a large fiscal stimulus package to support the Irish economy. At the same time, ECB through its accommodative monetary policy, has facilitated this national fiscal expansion.”
He said national fiscal and Eurozone monetary policies (ECB) had coordinated in a timely manner to support the Irish and Eurozone economies. While the global financial crisis in Ireland was characterised by years of austerity in which government expenditure was severely cut back.
So far during the Covid-19 crisis the government has implemented large spending increases, he added. This has been facilitated by accommodative monetary policy from the ECB which has created extra fiscal space and kept Irish borrowing costs at record low levels.
The findings were outlined in a research document, entitled Comparing two recessions in Ireland: Global Financial Crisis vs COVID-19, which examined the evolution of key economic indicators across the two most recent recessions in the Irish economy.
It compared and contrasted three types of indicators, hard indicators which measure realised outcomes, soft indicators which measure sentiments and expectations and policy responses.
