Sharon Donnery: Beyond the aggregates - the diverse effects of Covid-19 on employment, income & savings

Address (virtually) by Ms Sharon Donnery, Deputy Governor of the Central Bank of Ireland, to the National University of Ireland, Galway, 30 March 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Accompanying slides of the speech.

Good afternoon, it is a pleasure to join you (virtually) at the Whitaker Institute, National University of Ireland, Galway.

It is over a year now since COVID-19, epidemiology and zoom became staples of our conversations, our routines, our day to day.

We have seen how the COVID-19 pandemic has had devastating effects on lives, livelihoods and lifestyles.

In economic terms, we have seen the worst peacetime global contraction since the Great Depression.

And while the world economy is expected to grow by 5.6% in 2021 according to the latest projections, due to the partial nature of the rebound, over 150 economies are expected to have per-capita incomes below their 2019 levels in 2021.

In Ireland, a striking feature of the pandemic had been that Gross Domestic Product (GDP) actually grew by 3.4% in 2020, in stark contrast globally and to other European countries [Slide 2].

The GDP growth figures do point to a strong export performance in 2020 – due to multinational-dominated pharmaceuticals and computing services.

However, the issues of using GDP to measure economic activity in Ireland are well known, and aggregate economic statistics can only provide a high-level overview of how an economy is performing.

GDP growth masks a large fall off of 5.4% in domestic demand, reflecting the devastating impact of the pandemic on underlying domestic activity, and consumption in particular, which was down by 9% in 2020 [Slide 2].

Looking beyond the aggregate numbers, we saw last year how, while almost half of workers had their incomes directly supported by the State at one point, thousands of firms were shuttered for most of the year, and yet household savings increased by the largest amount ever.