“ While we must weather the lockdown – and subdued output – for another while yet, come the second half of the year, assuming a successful deployment of the vaccine, the economy should begin to recover,” he said in an online address to students at the University of Limerick.
He said evidence from consumer behaviour points to a potential surge in demand in the second half of 2021 supported by strong Government supports.
Mr Makhlouf said modified domestic demand – an alternative measure of domestic activity – was estimated to have declined by 7.1 per cent last year on foot of the disruption to economic activity, but was forecast to rise by 2.9 per cent this year.
However, he cautioned this forecast was contingent on several key assumptions regarding the pathway of the virus.
Mr Makhouf said Government spending on financial supports for workers and businesses – while triggering a major build-up of debt – would preserve the productive capacity of the economy.
This would aid recovery in the medium term, he said.
“Economic resilience is in essence the ability of an economy to manage change, whether it is to withstand or recover from the effects of shocks or the more gradual evolution to a different state,” he said.
In its latest economic bulletin, published last week, the Central Bank said the recent resurgence in coronavirus cases and the reimposition of strict containment measures had weakened the near-term outlook, making it more uncertain.
However, it upgraded its growth forecasts for the Irish economy to 3.8 per cent in gross domestic product (GDP) terms for this year and 4.6 per cent for 2022.