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Recession a possibility as a result of virus; Davy

Stockbroker Davy has said the Irish economy could contract in 2020 as a result of the coronavirus pandemic.

In a range of possible scenarios outlined in a paper on the economy, chief economist Conall MacCoille describes the impact as ‘highly uncertain’.

He said the stockbroking firm was delaying revising downwards its forecast for growth in Gross Domestic Product of 5.5% for the year.

However, he said plausible scenarios could see GDP growth falling towards 1%, if the spread of virus can be contained quickly, or an outright contraction in less favourable circumstances.

In a ‘short, sharp shock’ scenario, Davy says GDP could contract by 3.6% in the second three months of the year.

On the basis of GDP bouncing back to the original forecasts by the end of the year, Conall MacCoille says GDP growth for the year could come in at 3.4%, a hit of two percentage points.

In a recession scenario, Davy’s chief economist assumes a larger than expected short term impact with an 8% fall in GDP in the second three months with a slow recovery thereafter.

“The level of GDP only regains its pre-COVID-19 level by mid-2021. GDP contracts by 1.3% in 2020 before 5.6% GDP growth in 2021,” he explains.

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