A surge of economic optimism has engulfed the country on foot of the vaccine rollout. Consumer sentiment is at two-year high; household spending has surged back to pre-pandemic levels with the latest credit and debt data pointing to increases across the board; and now the Central Bank has weighed in with talk of a faster-than-expected recovery, predicated on a sharp rebound in consumption later this year.
This is while unemployment remains at a near-record level of 18 per cent – or 480,000 people; while thousands of businesses, particularly in the hospitality sector, remain perilously close to insolvency; and while the Delta variant of Covid-19 circulates widely.
The jump from deep gloom to net optimism about the economy in the space of a few months is almost certainly down to the vaccine programme.
In its latest quarterly commentary, the Central Bank upgraded its growth forecast for the economy to 8.2 per cent, nearly double the Government’s projection, noting the vaccine rollout “was proceeding at pace and therefore a faster recovery is now expected”.
Built-up savings
On of the key variables that will drive recovery is the unwinding of up to €12 billion in savings built up during the pandemic.
It estimated that €9-€12 billion of this was “forced or precautionary”. In other words, it was either forced on consumers who were restricted from spending or built up by consumers as a precaution amid the uncertain outlook. It is expected to flow back out into the economy in the form of additional spending. It may already be spilling out. Credit and debit card spending data – also from the Central Bank – pointed to big spending increases across the board, most of which was in-store as consumers returned to traditional patterns of consumption. The speed at which these savings are released will determine the speed of recovery generally.
The Central Bank’s report comes in the wake of a similar upbeat assessment from the Economic and Social Research Institute last week. There are warnings and caveats sitting alongside these forecasts, but for now, it seems things are pointing in the right direction.
