OPTIMISM OVER ECONOMY IS VERY REAL AND VERY POSITIVE

This article first appeared in Irish Examiner 8th June 2018

In the midst of some signs of an easing of Eurozone growth so far in 2018, it is interesting to observe that almost all data releases are providing a very upbeat assessment of what is happening in the Irish economy.

In the midst of the economic crisis some years back, there were many prepared to argue that the Irish economy would not emerge from the morass in a generation and, indeed, a number of commentators made a strong media name for themselves by preaching an incredibly negative narrative about Ireland’s prospects.

I never accepted this narrative as I always believed that it is not the nature of the Irish to sit back and accept the apparently inevitable.

However, I have been taken somewhat aback at the speed and magnitude of the economic recovery.

Ireland has certainly defied the conventional view in a very positive manner. It says a lot about the Irish mentality and about the spirit of entrepreneurship that permeates the national psyche. Long may it continue.

In the midst of the crisis, policymakers took some very difficult fiscal policy decisions and a lot of pain was felt by a lot of people.

This obviously helped put the public finances back on track and helped restore international confidence in the economy much more quickly than anybody would have anticipated.

However, I think most importantly, some strong and sensible strategic decisions were taken to ensure that the two most important indigenous sectors — tourism and agri-food — would provide the pathway for the emergence of the economy from a very difficult place.

Indeed, that has turned out to be the case and both sectors have played a key role in driving the economy forward.

In 2017 for example, 9.93 million overseas visitors came to Ireland, which was the highest level in our history.

Data released by the CSO last week showed that the strong tourism performance has continued into this year.

In the first four months of the year, 2.82m overseas visitors came into the country, which is 7.3% ahead of the same period in 2017.

Visitor numbers from Britain are up 1.5% and accounted for 39.7% of total overseas visitor numbers.

The North American market expanded by 13.6%, and visitor numbers from the Rest of Europe increased by 12.3%.

These are incredibly impressive visitor numbers and certainly suggest that just as Bord Bia is doing a superb job promoting the Irish agri-food sector, Tourism Ireland and Fáilte Ireland are doing a superb job promoting Irish tourism.

The recent relative strength of sterling is good news for Ireland, but the more recent strengthening of the dollar is particularly good news.

When the dollar was sliding significantly during 2017, fears about the impact this currency move might have on the attractiveness of the Irish market for US visitors were justified.

On the agri-food side, the uncertainty presented by Brexit is obviously of key concern, but it is good to see that Irish policymakers are taking a very proactive approach to developing new more exotic markets like China and South Korea. The sector is still doing very well.

The great thing about the contribution of tourism and the agri-food sector is that they both have a strong regional and rural footprint, and both have a strong domestic value-added content.

In other words, the inputs into both sectors are very much domestic, both are labour intensive and leakages are not significant.

All in all, Ireland now finds itself in a very strong place and the sense of optimism and enthusiasm is very real and very positive.

Regardless of one’s views on the recent referendum, the sense of enthusiasm and optimism it has generated amongst young people, in particular, is a joy to behold.

Socially, Ireland is now becoming a very progressive and outward looking country and this just serves to feed into the very positive trends on the economic front.

It is good to be Irish at the moment and it would be nice to see an optimistic narrative swamping the negative narrative that has been so prevalent over the past decade.

Ireland is moving forward, and long may it continue.

ITALY’S HUGE DEBT PUZZLE

This article appeared in Irish Examiner 1st June 2018

Following the momentous global political dislocation in 2016 that resulted in the election of Donald Trump and the UK vote to leave the EU, there was a lot of concern about the European political calendar coming into 2017.

Elections were upcoming in the Netherlands, France, and Germany, and the fear was that the anti-establishment trend could be replicated in those countries, with negative implications for the future stability of the eurozone.

Notwithstanding some weakening of Angela Merkel’s position in Germany, all three elections basically turned out reasonably good.

On top of this, the eurozone growth performance in 2017 turned out to be relatively stellar and suddenly all of the long-term doubts about the stability of the monetary union faded into distant memory.

However, over the past few weeks we have come back down to earth with a bang.

Coming into 2018, the markets and the rest of us knew there was going to be an election in Italy in March and we knew that the anti- establishment parties were performing pretty strongly in the opinion polls.

Although we all knew this, we weren’t terribly worried and the typical reaction in the markets was a shrug of the shoulders, an attitude of ‘what else would you expect from Italy?’ and a view that, as always, Italy would muddle through, as would the rest of us.

Over the past week, the Italian situation is threatening to turn into another outright crisis for the eurozone. Italy is a significant player in the eurozone and is the third largest economy.

However, its growth performance over the past couple of decades has been abysmal. It currently has an unemployment rate of 11% and at the end of 2017, its government debt-to-GDP ratio stood at 131.8%, which compares to around 68% in Ireland, and a eurozone average of 86.7%.

The European Commission has been extremely concerned about Italy for some time. Not surprisingly, the euro has come under considerable pressure, Italian bond yields have gone up, and equity markets have been given another reason to become nervous and volatile.

One positive is that the latest bout of uncertainty will just serve to postpone further the change in interest rate policy from the ECB and the weaker euro will help Irish exporters.