Exploring the impact of COVID-19 and recovery paths for the economy

We provide a model-based update of the potential impact of the COVID-19 pandemic on the Irish economy, originally published in the Autumn 2020 Quarterly Economic Commentary. The update reflects more recent data, the evolution of the pandemic including the third wave of early 2021 and uses early indicators to anticipate the evolution of the economy in the short term. The analysis focusses on the same channels, mainly an internal shock with a considerable impact on the non-traded (domestic) sector, with reduced consumption, investment, employment and output. We also provide three new alternative paths for the Irish economy, which depend on many potential factors including the vaccine rollout, the need for continued public health measures and new lockdowns, the emergence of new virus strains and differences in the behavioural responses of economic agents.