Davy Stockbrokers has forecast a deep and lingering impact of Covid-19 on the Irish economy and warned that the outlook looks very uncertain.
Davy's new economic outlook predicts that the economy will contract by 10% in 2020 and rebound by 7% in 2021.
It has pencilled in a contraction of 20% in the second quarter of the year, with the economy still precdicted to be 10% below pre-Covid-19 levels by the end of 2020 and 5% below by the end of 2021.
The country's unemployment rate is predicted to peak at 25% in the second quarter of the year before falling to average 12% in 2021.
Davy also forecast that consumer spending will slump by 12.5% in 2020 and will then grow by 7.3% in 2021.
Investment spending will also fall sharply, partly due to homebuilding declining to 13,800 units, accompanied by a 5% drop in house prices.
The export sector should perform better but the stockbrokers still expect a 7% contraction, with world trade set for a double-digit decline.
It is also forecasting a government deficit of 9.2% of GDP in 2020 and 5.3% in 2021.
In today's report, Davy cautioned that there is clearly "enormous uncertainty" around its forecasts as there is still limited information on the size of the initial hit to the economy.
"We assume the economy re-opens through the third quarter of 2020 along the lines of the Irish Government's roadmap," the stockbrokers said.
"Clearly, another Covid-19 outbreak with associated business and travel restrictions could derail this recovery," they said.
"We also assume the UK does not opt for a cliff-edge exit from the EU single market, with an extension of the transition period still the most likely outcome," Davy added.
