COVID hasn’t gone away and there is a €4 billion provision in the Budget in case the virus roars back at us with some as-yet unknown variant next year.
inance Minister Paschal Donohoe said: “The pandemic is still with us. To this end, a contingency fund amounting to €4 billion will be created.”
There is continuing provision for “temporary” supports, however, as society begins to emerge from the shadow of coronavirus. This will “provide certainty for those most impacted, and flexibility for the public finances, should the situation with the virus deteriorate unexpectedly over the coming year.”
As he went on to speak of a new phase of recovery from the pandemic and dealing with what Covid-19 left “in its wake,” his colleague Michael McGrath, Minister for Public Enterprise, was left to quietly salt away funds against its possible bitter return into particular allocations.
And meanwhile the virus will continue to act as a drag on the Health service next year, with continuing commitments on provision of expensive PPE and funding of viral containment measures.
A total of €1 billion will go on Covid-related health spending in 2022, including the continued operation of testing and tracing, the delivery of a booster vaccination programme, and other preventive and containment steps. Hospitals and frontline healthcare will gobble up half of it.
A further €200 million will be held as a contingency fund against current spending next year alone… although the Government denies perceiving any specific threat on the virus front.
But the detailed supporting documentation makes clear that there remains a possibility – however remote – that Covid-19 could devastate the economy again in 2022, just when it is climbing out of a trough of depression and inactivity.
The baseline scenario of the Budget, officials admit, “rests on the assumption that the high level of vaccination in Ireland allows for an easing of virtually all remaining containment measures” on October 22. And a return of mass infection would effectively halve our growth projections for next year.
The fiscal outlook report, incorporating Department of Finance forecasts, warns: “The Irish economy is not yet out of the woods. As the virus is constantly mutating, this raises the possibility of a ‘variant of concern’, i.e. a vaccine-resistant variant that is even more transmissible or virulent.
“This could potentially necessitate the re-introduction of public health restrictions to contain a new wave of the virus.” Any form of new lockdown would be disastrous both socially and economically, and would be likely much harder to maintain than heretofore.
On the other hand, the ‘excess’ savings accumulated by the household sector could give rise to stronger-than-expected consumer spending and domestic demand, the Department says, although this would create price pressures.
“However, there remains considerable uncertainty on the future path of the virus, including the impact of vaccine-resistant mutations.”
In its ‘stress-test’ of the threat, the Department believes that a growth projection of 6.4 per cent next year would be nearly halved to 3.8 per cent.
The analysis does not assess the probability of such a return-of-Covid scenario, which it says would be an impossible undertaking. Instead it “aims to quantify the economic fallout in the event of further containment measures.”