Weekly COVID-19 Economy Update – inaugural post- March 16-22, 2020 takes Ireland as a focus for this struggle

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by GUEST COLUMNIST Marc Coleman

Fear, like viral infection, can have devastating consequences. Having seen as an author and Economics Editor during the last crisis how sensationalist and headline grabbing commentary made a bad situation worse, I am convinced that the sooner we establish a regular monitoring, analysis and response to this crisis – both its health and economic
implications – the better.


Preservation of human life is the most overriding priority at this crucial time in world history. At the same time there is a responsibility to minimise unnecessary economic impacts of the crisis beyond what is necessary to save lives. Octavian Economics will shortly publish a comprehensive Economic response to the crisis, addressing its immediate impact and medium to long-term implications and identifying the policy strategies to minimise and mitigate its economic impact.


In the meantime, this is the first of a series of weekly bulletins that will be produced as data emerges.This first version begins with an assessment of Ireland’s “battle-readiness” compared to the last economic crisis. Subsequent editions will update on available and related financial and economic data as this becomes available (data on the economic
impact is just beginning to emerge) including job losses and company closures, key policy pronouncements of government EU and global institutions as well as major jurisdictions, and indicators of business and consumer confidence. Each will also contain a one page synopsis of the latest published official World Health Organisation Covid- 19 Situation Reports.

The bulletin will be underpinned by principles of responsible, balanced and recovery-oriented comment, it will aim to inform and provide insight.
A caveat must be entered about economic statistics that are reported. The Central Statistics Office has noted the limitations we can expect in terms of collection, reportage and reliability of data. Issues relating to the interpretation of data will be relayed as far as possible.
Suggestions to improve and enhance the usefulness of this briefing are welcome and, as far as resources permit, will be taken on board. Please feel free to contact me on the number below. I hope you find this briefing useful and informative.

Marc Coleman BA M Econ Sci ASP MBA
Founder, Octavian Economics marc.coleman@octavian.ie +353 86 8094193

Ireland: A “Battle-ready” Economy ?


Compared to the onset of the last crisis in 2008, the preparedness of the Irish economy for a crisis is mixed. The obvious challenge is a significantly higher level of debt as a share of the overall economy. For prudence, the debt burden is expressed in Figure 1 below as a share of Gross National Income, a more domestic and reliable indicator of the economy’s capacity to sustain debt payments.

Covid-19    The State of Play as of 21 March 2020

Figure 1 provides the total number of cases reported in the latest World Health Organisation Situation Report (number 61). The key findings here are

  • Over a quarter of a million cases reported globally as of Saturday 21 March
  • One third of these are in China (Population 1,400 million)
  • One quarter are in Italy (Population 60 million)

Figure 1             Cases and deaths reported as of 21 March 2020

                                                          (Source: World Health Organisation Situation Reports (SR))

  Global China Italy Ireland Germany UK
Cases 266073 81416 47021 683 18323 3983
Deaths 11184 3261 4032 3 45 177

Figure 2 provides the weekly growth rates for both cases and deaths. The key findings here are

  • An 86.7% rise in the number of global cases
  • Italy’s growth rates are 166.3% for the number of cases and 218.0% for the number of deaths
  • Growth rates for Ireland, Germany and the UK need to be interpreted with care given the numbers of cases are still comparatively low as share of population and increases in reporting will necessarily lead to large percentage rises.

Figure 2             Growth in Cases and deaths reported: Week-on-week

                                 (Source: World Health Organisation Situation Reports (SR))

  Global China Italy Ireland Germany UK
Cases 86.7% 0.5% 166.3% 658.9% 498.4% 396.6%
Deaths 107.4% 2.1% 218.0% 200.0% 650.0% 1670.0%

Figure 3 compares the rates of death for selected countries. The key findings here are

  • The global average is a rate of 4.2% of reported cases resulting in death
  • Italy’s death rate is more than twice this average at 8.6%
  • While the number of cases reported for Ireland, Germany and the UK are low relative to their populations they are large enough to be statistically significant for this metric. Ireland and Germany have, thus far, very low rates of death.

Figure 3             Rate of deaths per reported case.

                                                          (Source: World Health Organisation Situation Reports (SR))

  Global China Italy Ireland Germany UK
Deaths 4.2% 4.0% 8.6% 0.4% 0.2% 4.4%

Ireland:        A “Battle-ready” Economy ?

Compared to the onset of the last crisis in 2008, the preparedness of the Irish economy for a crisis is mixed. The obvious challenge is a significantly higher level of debt as a share of the overall economy. For prudence, the debt burden is expressed in Figure 1 below as a share of Gross National Income, a more domestic and reliable indicator of the economy’s capacity to sustain debt payments.

Battle Ready? The Irish Economy before the last and current crisis*  **

Source: CSO, Central Bank 2018 data is used to enable consistent comparison of full year data except for Labour market

*Data for Labour market statistics taken for Q4 2007 and Q4 2019. Private sector credit data for Dec 2007 & Dec 2018

2007 2018 Change % Change
  Economy and Government Finances
  GNI 170,509 254,183 83,674 49.1%
  Govt Debt % GNI 27.7% 81.0%
  Govt Deficit % GDP 0.3% 0.1%
Private sector credit
  Total lending to private sector 148,136 89,948 –    58,188 -39.3%
  of which for House purchase 123,722 75,722 –    48,000 -38.8%
  of which for other pers. use 24,414 13,993 –    10,421 -42.7%
  Total Deposits 78,687 98,083 19,396 24.6%
  Lending as % Deposits 157.2% 77.2%
  Structure of economy & external balance
  Personal consumption % GNP 55.5% 42.3%
  CA Bal % GNP -6.5% 10.6%
  Net X-M % GNP 9.6% 42.4%
  Net govt current spend % GNP 17.3% 12.7%
Labour Market
  Employment 2,233,900 2,361,200 127,300 5.7%
  of which Part time 415,300 492,000 76,700 18.5%
  Unemployment rate 5.3 4.7  

On the positive side, private sector indebtedness is significantly lower now than compared to 2007. As a share of bank deposits (which have risen €20 billion or 24 per cent since 2007), total lending to the private sector has halved from 157% to 77%, a fall of €48 billion. Personal lending (non-mortgage) is down €10 billion, a fall of 42.7%. Overall, the private sector is in a better financial position to withstand the crisis.

The economy is also far less dependent than in 2008 on domestic credit growth and personal consumption. In 2008 personal consumption accounted for over half of GNP. As of 2018 this had fallen to 42.3 per cent. From just 9.6 per cent the balance of exports over imports, 9.6 per cent of GNP, has risen to 42.4 per cent reflecting the increasing success of Ireland’s export oriented economic model in recent years.

Notwithstanding the higher level of government indebtedness Net government spending plays a significantly lower role in the economy now than in 2008, accounting for 12.7 per cent of GNP compared to 17.3 per cent in 2008. Combined with the low level of public investment and the need for housing, this would suggest a strong case for stimulating the economy through greater public investment (public investment has yet to be restored to levels prevailing in 2008 and remains well below the 5% of GDP level sustained in the years leading up to the last crisis). The higher level of public indebtedness would seem to present an obstacle.

Here it must be remembered that a key reason for this was the assumption in February 2013 of €38 billion debt of the Irish Bank Resolution Corporation, relating to the bail out of corporate bondholders via the Exceptional Liquidity Assistance lending facility to Ireland’s banks.

The subsequent agreement by the European Council to the Single Resolution Mechanism recognised the principle of “bailing in “ of bondholder debts. But this was not retrospectively applied to Ireland’s bail out.

Given the obstacle presented by high government debt, an alternative stimulus to the economy may lie in the way of tax cuts which may generate additional domestic demand and in doing so generate revenue increases as in several occasions during past crises and recoveries.

The author is preparing a comprehensive strategy report on tackling the economic implications of the Covid-19 crisis and this will be published in the next two weeks.