The Central Bank of Ireland has warned it could take until 2024 for the Irish economy to rebound from the coronavirus pandemic if there is a second outbreak of Covid-19.

This warning is based on the worst-case scenario laid out in the Central Bank’s latest quarterly analysis of the economy. This scenario assumes the strict lockdown period has a more damaging impact on economic activity and that there is a resurgence of coronavirus at some point over the next year, with the economy contracting by nearly 14 per cent for 2020 and the Government’s budget deficit ballooning to €30 billion.

In a more benign scenario, the Central Bank predicts that the economy could rebound by 2022, provided there is a gradual reopening of the economy this year and no resurgence of coronavirus.

However, the level of activity will be significantly below where it would have been had the economy grown in line with expectations before the pandemic, the Central Bank said.

“While there is considerable uncertainty about the outlook, the scenarios we present . . . point to a deep downturn in 2020, with a gradual recovery in coming years,” the bank’s director of economics and statistics, Mark Cassidy, said. “The path ahead for the economy will depend on the path of the virus, which makes the strength of the recovery and the future impact on sectors uncertain.”

Exchequer figures for the first six months of this year highlighted the cost to the State of battling the pandemic. The budget deficit swelled to €5.3 billion in June, as spending on health and income supports related to the Covid-19 pandemic soared.This compared with a surplus of €260 million for the same period last year.

Government spending was 20 per cent above its original target at nearly €32 billion in June. Social protection spending was €4.1 billion above profile, reflecting the Government’s income support schemes, while health spending was €1.2 billion ahead of target.