Mr Martin, who only replaced Leo Varadkar as Taoiseach last week, has been told by the Irish Central Bank tentative signs of recovery still show the economy looks set to shrink by 9 percent this year if further stringent measures to contain the disease are avoided. But it warned a second wave of infections and the reintroduction of stringent lockdown restrictions could spark economic contractions of almost 14 percent.
Ireland, which has had the fastest growing economy in Europe in recent years, mostly completed a careful exit from lockdown this week.
But much of its services industry is still operating at limited capacity and travel from abroad remains severely restricted.
The central bank’s prediction is similar to the 8.3 percent drop in gross domestic product (GDP) it forecast in April and would see unemployment fall to 12.5 percent by the end of the year from 22.5 percent last month and an average of 7 percent in 2022 when output would recover to its pre-crisis levels
But a resurgence of the virus at some point over the next year could see unemployment surge to almost 17 percent in 2020 while GDP would still be stuck at about 5 percent below its pre-crisis level by 2022.
The central bank said: “While the magnitude of output losses would be lower in a second phase of containment than during the first, such losses would likely be more persistent and thus more damaging to the long run potential growth rate of the economy.”
Both scenarios assume Britain agrees a free trade agreement with the European Union with no tariffs and quotas on goods applying from January 2021.
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Such an outcome would knock just under 1 percentage point off the growth rate of the economy in 2021 whereas a move to World Trade Organisation terms on January 1 could cause significant economic disruption and a hit of almost 3 percentage points next year.
Central Bank Director of Economics Mark Cassidy warned the crisis could widen the rural and urban economic divide.
He said while more stimulus may be required to boost the recovery, the new government would also have to lay out a credible return to much lower and sustainable deficit and debt positions.
But he admitted he was concerned about reopening the borders to international travel.
He said: “What is worrying the public health officials, worrying me, is continued volatility at the international level.
“Some countries doing well three weeks ago are not doing as well now.
“We have to be very cautious here.
“Economic recovery depends on continued suppression of the virus.”