Recovery Paths from COVID-19 and the Impact of Policy Interventions

The COVID-19 pandemic and the measures put in place to control its spread have resulted in a collapse in economic activity around the world. The long-term recovery path from this deep economic shock is uncertain. In this article we explore different potential recovery scenarios over the medium term and the economic mechanisms that will influence the shape of the recovery. In the baseline scenario, output rebounds strongly but the recovery is incomplete by 2025, with output still below the level that could have been achieved had COVID-19 not occurred. A severe adverse scenario could see persistently high unemployment until the middle of the decade. Policy interventions by governments and central banks will play an important role in ensuring the economy recovers within a reasonable timeframe. We estimate that domestic and international policy responses announced to date could reduce the fall in output in Ireland by almost 4 percentage points in 2020.