The State may find itself footing a bill of up to €25bn in the economic war on Coronavirus, according to KBC’s Austin Hughes.
Mr Hughes, who is KBC’s Chief Economist for Ireland, had initially put the budget cost of Covid-19 at around €15bn but has now dramatically increased his estimate, saying that the virus will lead to a sharp economic downturn.
“In much the same way as policy now seeks to ‘flatten the curve’ in terms of health outcomes by limiting the Covid19 surge, economic policy should be focussing on ‘correcting the curve’ in terms of economic outcomes by ensuring scope for a solid rebound in activity after implementing an initial health related shutdown of output and spending,” Mr Hughes wrote in a report published today.
So far, the Government has earmarked €6.7bn for wage support and other measures, a number that is equivalent to 1.9pc of economic output here and which is just below the European Union’s average.
Although Mr Hughes said that demand in the Irish economy would recover, the speed and spread of a pick-up in spending will be hurt by elevated uncertainty.
“We previously suggested that fiscal costs could amount to up to €15bn but it now seems likely that ‘respite’ measures and the broader shortfall in in tax revenues could readily exceed this figure.”
“Our sense is that ‘reboot’ measures on a scale likely to ensure a strong and speedy rebound could amount to a further €10 to 15 bn, implying the overall fiscal impact for Ireland of Covid19 could be comfortably in excess of 10pc of gross domestic product,” Mr Hughes wrote.
The United Nations today called for 10pc of global GDP to spent and said poorer nations needed to be helped.