AN ECONOMIC UPDATE Following the Friends First Quarterly Economic Briefing “Budgeting for the Future” held on the 17th of November 2010, we at Behaviour & Attitudes thought it relevant to provide our clients with a synopsis of Chief Economist Jim Powers interpretation of the current global and domestic economic positions, alongside our own opinions on the current Irish economic situation.
The Global Context is exhibiting clear positive signs Strong growth rates in developing economies including India, China, the South America and Russia are driving international economic growth, while developed economies are now returning to modest economic growth. US growth rates should remain modest over the next number of years. UK growth rates will also remain positive but at lower levels than seen recently, due to the new austerity measures being applied. Growth in the Eurozone is being driven by German Manufacturing and Export performance. However there is a significant imbalance in budgetary difficulties and recovery rates between Central and Peripheral Eurozone countries … read more B&A analysis
The Irish Economy: Current Difficulties Irish budget deficit: The current budget deficit for 2010 is €11.7 billion, while the Exchequer Funding Requirement will be €14.4 billion for the same period. The government is currently borrowing €1.2 billion per month to allow the maintain state solvency. Debt Servicing: 16.6% of Irish revenue will be used in 2010 to pay interest and capital on government loans. If left unchecked in 4-5 years this could grow to over 30%. Bond Market Speculation: Current spreads on Irish 10 year government bonds would yield 8.5% interest if the government were forced to borrow from the markets in the near future. Making borrowing from the markets on an ongoing basis unfeasible at present. Bank Recapitalisation: Irish banks access to capital at affordable interest rates is now largely limited to the ECB. … read more B&A analysis
The Irish Economy: Economic indicators Retail sales, manufacturing output, Exports and Car sales have all increased during the year to date, while Imports have decreased. Irish business competitiveness has also increased by an estimated 10%, with more room for manoeuvre in this area available. … read more B&A analysis
The Irish Consumer: Uncertainty Rules Irish consumer confidence has continued to decrease throughout 2010, due to uncertainty in the labour market ,the continuing economic downturn and reduced disposable income. Levels of consumer savings have increased from 3% in 2007 to 12.5% in 2010, leaving an estimated €97 billion in consumer capital now held in savings. … read more B&A analysis
ECB/IMF: A helping hand? If a recapitalisation through the use of European funding were to occur, certain positive factors may reduce the uncertainty levels in the country. Ireland would not have to enter the bond market for three years and reduced interest rates on loans from the ECB, and European Stability would be attainable. Budgetary and fiscal policy requirements could be viewed in light of best practice among European partner countries. Unpopular cuts in expenditure could be achieved more readily. … read more B&A analysis
Where to from here: Cautious Optimism The fundamental factors driving Ireland’s economic growth appear to be stabilising. Consumer saving of €97 billion should return to the market when confidence improves. The international trading situation is improving. Manufacturing and Export sectors are growing in strength and unemployment appears to have plateaued. … read more B&A analysis For Enquiries or further information please contact: John J Clarke Research Executive Behaviour & Attitudes Milltown House, Mount St Anne’s, Milltown, Dublin 6 Email: email@example.com T: 00-353-01-2057500 F: 00-353-01-2057522 W: www.banda.ie