Quarterly Bulletin 2021:1 - Recovery anticipated in second-half of 2021 picking up momentum in 2022

22 January 2021 Press Release

Central Bank of Ireland

  • Activity to remain weak in the first half of 2021, with recovery starting in the second half of the year assuming widespread vaccine deployment
  • Recovery expected to pick up momentum in 2022 supported by improving business and consumer confidence and the high level of savings in the economy
  • New Brexit trade frictions will affect growth but much better than a no-deal outcome

Today the Central Bank of Ireland published the first Quarterly Bulletin of 2021. The outlook for the economy will continue to depend on the future path of the virus and, in the near-term, on the measures to contain its renewed spread. Beyond that, it is assumed that economic activity will benefit from the accumulating positive impact of successful and widening deployment of vaccines. While the EU-UK Trade and Cooperation Agreement (EU-UK TCA) will introduce new trade frictions which will impede growth in the Irish economy, the outlook, both for exports and for overall economic activity, has improved compared to the prospects under a no-deal Brexit.

On the publication of the Quarterly Bulletin, Mark Cassidy, Director of Economics and Statistics, said “Reflecting the recent resurgence in the pandemic, the near-term economic outlook has deteriorated and become more uncertain but, further out, the prospect of widespread deployment of vaccines offers hope for a path out of the crisis and an improved economic outlook. However, recovery may not be even across all sectors or demographic groups, as the crisis may have a lasting impact on some activities, for example, through shifts in the delivery of services or changing consumer preferences”.

Mark Cassidy also noted “The new trade frictions arising from Brexit will affect growth and household consumption and will have both short-term and longer-term negative economic impacts. However, the new agreement has averted the threat of a WTO Brexit and is much better than a no-deal outcome”

The recent resurgence in cases and necessary re-imposition of strict containment measures weakens the near-term outlook and makes it more uncertain. However, looking ahead, assuming successful deployment of vaccines by the second half of the year, domestic economic activity should begin to recover and pick up momentum in 2022. On this basis, modified domestic demand is forecast to grow by 2.9% in 2021, while GDP is projected to grow by 3.8%, although the recovery in the labour market is likely to lag somewhat until the broader economic recovery becomes more well established.

A further pick-up is projected in 2022, supported by improving business and consumer confidence, with modified domestic demand forecast to grow by 3.6% and GDP projected to grow by 4.6%. While uncertainty and a subdued labour market are likely to keep precautionary savings elevated in 2021, these restraints should ease next year. The unwinding of the large stock of savings accumulated during the pandemic should support a strong recovery in consumption in 2022. However, recovery may not be even across all sectors and there is the potential for more persistent effects from the pandemic in some sectors.

The labour market response to the output recovery will see unemployment increase to an average rate of 9.3% in 2021, reducing to 7.8% in 2022. The second half of 2021 is projected to see a gradual but sustained pick up in employment growth. However, the delayed impact of more than a year of closures on some sectors will mean that employment will remain below its pre-Covid levels throughout the forecast horizon.

Covid-19 related expenditure programmes had a significant impact on Ireland’s budget balance in 2020. The general government balance recorded a deficit of 8.8% of GNI* last year. Though this deficit is lower than forecast, it is a significant deterioration from the 0.9% surplus run in 2019. This deficit is expected to remain unchanged in 2021, which should represent its peak.

The Bulletin presents a baseline scenario representing the Central Bank’s view of the most likely outlook for the economy, contingent on assumptions regarding Covid-19 developments, which are subject to exceptional levels of uncertainty.


The Quarterly Bulletin contains a signed article written by David Cronin, entitled ‘Whither Cash in Payments’. The article explores the decline in the use of cash to make payments and the rise of the use of cards as a substitute method of making payments. It is to be expected that the move to using electronic payment methods over cash will continue in the years ahead, including through the effects of the current pandemic. This does not mean that demand for banknotes and coin will disappear. Looking ahead, there will remain a preference among many people, including the elderly and socially disadvantaged and those who value the privacy and anonymity that comes with cash, to continue using physical banknotes and coin. The Central Bank of Ireland is committed to the Eurosystem vision to ensure that all citizens have access to euro banknotes and coins across the euro area and that cash will remain reliable, acceptable and attractive to the public.