Wednesday’s Update: Ireland’s economy will shrink by over 10% this year & unemployment could push above 22% | New deal reached in US in congress
|Global Market Update|
(as at close of markets 21/04/2020 unless otherwise stated)
|Despite Congress in the United States reaching a deal for fresh stimulus on Tuesday, markets fell and treasuries rose as investors interpreted the troubles in the oil market as a sign that the economy is in worse condition than they thought. Tuesday’s trading session saw the fall in price of Mays futures contract for US crude oil Mays future contract extend to June’s contract, as the value of the Junes contract almost halved. It settled at $11.57. The international benchmark, Brent, the oil benchmark most relevant for Ireland, fell below $20 for the first time since 2002.|
Minister for Finance Paschal Donohue stated on Tuesday that Ireland’s economy will shrink by over 10% this year and by June, unemployment could push above 22%. Prior to this crisis Ireland’s unemployment rate stood at 4.8% – approximately the level that economists consider to be full employment. This equates to nearly 2.36 million people out of work for Ireland. Due to this crisis, the number of people receiving special welfare payments from the government has rose to 584,000. It is estimated that 220,000 jobs will be lost. However, if the staged reducing of lockdown restrictions is done right and a conservative approach is taken by the public when the restrictions are eased, to prevent a second wave of outbreaks, Minister Donohue expects the economy to grow by 6% next year with unemployment to fall below 10% again. These figures are dependent on a second outbreak not occurring. Based on economic forecasts, it is clear that when the restrictions are starting to be eased, it must be taken with extreme caution to prevent another outbreak, if there is complacency and a second wave of the virus starts, the economic effect will get worse. This applies worldwide.
Back in the US, a new deal has been reached in Congress, dependent on a recorded vote with each representative needing to be present in chamber, on a $484bn package with more than $300bn going towards replenishing the small business loans fund that ran out last week.This deal replenishes the small business loans, and broadens the scope to include funding towards hospitals. Fresh guidelines are to be provided to determine which companies are eligible for the loan as over 80 publicly listed companies have received funds from this programme, an outcome that has received heavy criticism. There have been calls for these companies to return the money, as despite the programme being available to specifically help small businesses, the small businesses could be wiped out if they cannot access funds with bigger companies taking a piece. As of today, due to heavy criticism, one publicly listed company has returned their funding received through the programme.