Cost of Covid-19 expected to reach €28bn by end of 2021

Minister for Public Expenditure and Reform Michael McGrath said the cost covers business supports, a rise in health spending, and wage subsidies.
Cost of Covid-19 expected to reach €28bn by end of 2021

By Cate McCurry, PA

Government spending on pandemic measures is to rise to €28 billion by the end of the year, the Minister for Public Expenditure and Reform has said.

Michael McGrath said the cost covers business supports, a rise in health spending, and wage subsidies across 2020 and 2021.

The Fianna Fáil minister told an Institute of International and European Affairs (IIEA) webinar that the spending was “entirely appropriate”.

“By the end of this year, my department estimates that we will have incurred up to 28 billion euro in direct Covid-related expenditure over 2020 and 2021,” he said.

“As a result of these measures, a general government deficit of 19 billion euro, or nearly 5.5%, is estimated for 2020 – a 21 billion euro swing from 2019.

“A deficit of a similar size is expected again in 2021.

“It is entirely appropriate that we have acted to support the economy in these circumstances and this has been greatly assisted by the approach taken by the European Central Bank in its response to the pandemic.”

Mr McGrath warned there are many dark days ahead as the country emerges from the pandemic.

On Tuesday, the Government announced the first plan to ease out of Level 5 restrictions in place since December.

From April 12th, two households will be able to meet outdoors for social and recreational purposes.

As of then, the 5km travel limit will no longer apply and people will be allowed to travel within their county for exercise and recreation.

“What we outlined yesterday is a sensible road map for the gradual reopening of the country over the months ahead,” Mr McGrath said.

“By mid-summer, certainly by July, we will have the prospect of a summer that was very similar to last year, where we had a lot of freedoms and were able to spend time in different parts of the country and avail of hospitality and do all of the things we like to do.

“We have a journey to get there; that’s why it has to be gradual and carefully managed.”

Mr McGrath said he is confident that the Irish economy is going to improve and that it will see a significant recovery in the second half of this year.

He added that the recovery will “gather momentum” over the course of 2022.

The minister also said that any phasing-out of business supports will be difficult, but that it will done in a careful and gradual way.

“We have committed to all the supports in place will remain there at the current rates until the end of June,” he added.

“Before the end of June we will signal what our plan is for beyond that.

“We recognise how valuable those supports are, and any rapid or sudden reduction or removal of those supports would simply result in a lot of those employees being paid in part through the Employment Wage Subsidy Scheme (EWSS) being let go and transferred on to the PUP (Pandemic Unemployment Payment).

“We need to think very carefully about that transition and ensure that, as we taper off supports over time, that it’s done in a very sensitive and gradual manner.

“Some of the supports we have in place will be with us for some time, perhaps in a different manner.

“There will be no cliff edge in June.”

Mr McGrath also warned that the pandemic has changed people’s spending habits.

“I think it’s too early to write off certain sectors and businesses – businesses that were viable up to a year ago deserve the benefit of the doubt,” he said.

“Undoubtedly our experience of Covid over the last 12 months will have accelerated certain trends and changes in consumption patterns and the way we purchase goods and services, and that picture is evolving and will reveal itself further over the months ahead.”

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