Paschal Donohoe has warned of the dire effects on the economy the Coronavirus could have.
He said that this will mean the Irish economy is going to fall and he is going to have to revise down our forecasts in the Government’s latest review next month.
The caretaker Minister for Finance gave the stark warning at a Chartered Accountants Ireland speech in Dublin last night.
He said that he needed to address urgently “what is rapidly becoming the single-most important near-term challenge facing the world economy.”
He explained that this would have serious implications for Ireland too and that we must brace ourselves for the potential crash.
“While primarily a public health and well-being issue, the outbreak has already caused severe disruption to economic activity in China.
“Because of its sheer size – China accounts for nearly one-fifth of world GDP and, crucially, because it is deeply integrated into global supply chains, the economic fall-out is no longer confined to China.
“It is, of course, impossible, at this stage, to accurately predict the economic cost of the outbreak. However, it is safe to say that global GDP growth will be impacted in the first quarter of this year.
“The actual cost – in terms of lost global GDP – will depend on the duration of the outbreak and the containment measures put in place.
“But many, including the OECD, outline that this outbreak has the potential to slow global growth to its lowest rate since the financial crisis just over a decade ago.”
Mr Donohoe warned: “It follows that weaker growth will affect our short-term outlook and my Department will update its projections in April through the Stability Programme Update.
“But it is important to recognise that the public finances are in a strong position to cushion whatever impact may arise.
“This is because we have eliminated the deficit and have run surpluses for the past two years.
"Because of this, we can allow budgetary policy to play a counter-cyclical role in the event of a large pass-through to the Irish economy.
“The best way of doing this is by allowing the surplus to fall through taking in less tax revenue from a lower level of economic activity and paying out more by way of social transfers to those who may be in need.
“Maintaining control of current expenditure and running a surplus means we have been able to maintain a high level of investment in capital projects, such as schools, hospitals, public transport and broadband.”
He added: “I will continue to monitor the situation and will work with my Government colleagues on appropriate responses.”
