Leading economist warns of ‘tsunami effect’ of bankruptcies when Covid-19 backers are withdrawn for businesses


A leading economist has warned of a “tsunami effect of corporate bankruptcies” when the government backs off Covid-19 support for businesses.

Institute of International and European Affairs chief economist Dan O’Brien said pandemic supports created a situation in which bankruptcies plummeted as the economy suffered, but added that it is not sustainable.

Speaking to Brendan O’Connor on RTÉ Radio, he said, “Something really strange over the last 18 months, across the Western world, is that when you have a big drop in savings, you get a sharp increase in the number of companies going bankrupt.

“Surprisingly during the Covid period, despite the biggest economic contraction on record in the world, rich countries were able to support businesses and we actually saw the number of bankruptcies plummet.

“When you remove this support, some businesses will disappear. “

Mr O’Brien went on to say that in the normal course of events a number of companies will not survive, but that due to support from Covid a disproportionate amount has been supported.

He said this would lead to a ‘tsunami effect of corporate bankruptcies’ made up of businesses that would not have survived regardless of the pandemic and those suffering from a change in the way people live after Covid .

Mr O’Brien said the hospitality industry, in particular, would suffer because “people are not going to cram into nightclubs during the winter … it seems inevitable to me that there will be wasted money. ‘jobs’.

He added, however, that the pandemic has created a unique scenario for the Irish economy and the outcome remains highly uncertain.

“We have never had the experience of how it affects an economy when you dramatically increase subsidies to businesses and increase welfare and then try to take it out – so we have no historical experience with it. way it will turn out.

“Therefore, it’s very difficult to know if it will be negative with these scar effects on the economy… or can we bounce back and everyone will spend again,” he said.

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