The outbreak of the coronavirus is set to lead to shortages of goods such as computers, phones, pharmaceuticals and cars because of the disruption to the global supply chain, Cabinet ministers heard.
A confidential memo prepared for ministers warned the unprecedented nature of the global Covid-19 outbreak makes it "simply not possible" to define a worst-case scenario for the Irish economy.
It said the decline in production in China has already "transmitted rapidly" around the world given its key role in the global supply chains.
China is a key producer of intermediate goods, particularly those used in computers, phones, pharmaceuticals and cars.
Ministers were told that the impact of the slowdown in China is already affecting the production of cars in Germany and Italy.
"A slowdown in the Chinese economy will have a major impact elsewhere," the memo said.
The outbreak is described as a "supply-side shock" with disruption to supply chains leading to possible factory closures, quarantined workers, delays with inspections, transport issues and additional customs controls. It also identifies a "broader contagion scenario" which would take 1.5 percentage points off the growth rate, but said this is not the worst-case scenario.
"Because this is an unprecedented event, it is simply not possible to define a 'worst case'," the memo added.
The impact could also compound current difficulties in the euro area economy and would be a "shock" to the already "extremely fragile" global economy.
Ministers were also told several large global firms, including some that have significant operations in Ireland, "have already announced that trading conditions have deteriorated and that profit expectations for this year are being revised downwards".
Ministers were told consumers and businesses in many parts of the world were likely to take a more cautious approach.
The financial stability of the eurozone may also be affected, the briefing states.
While it said "Ireland is less directly vulnerable to a slowdown in the Chinese economy", it added the up to €80bn in annual contract manufacturing exports could potentially be adversely affected.
Contract manufacturing exports are goods recorded as exports from Ireland, but produced in, and exported from, other countries, notably China.
"If the lost output and sales are not recovered by year-end, it could also affect corporation tax receipts," the briefing added.
While the Department of Finance will prepare updated macroeconomic and fiscal forecasts over the next month, the memo warned "in the current environment, there is much more uncertainty than normal attached to any set of forecasts".
I write as a consultant specialist in maternal medicine with 30 years of experience in caring for high-risk pregnant mothers. I have never written to the media nor made public comment on matters of policy in relation to healthcare. I do so now out of grave concern.
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