Irish economic recovery is continuing at a steady pace but further growth is under threat from the fallout from Brexit and currency volatility, according to the latest outlook from Friends First.
The company’s Chief Economist Jim Power said short-term and long-term impacts from Brexit are of considerable concern for Ireland.
He believes a slowdown in the UK economy and further weakening of sterling make it difficult to identify economic upsides for Ireland and the EU from a Brexit.
In the life assurance and investment firm’s economic outlook Mr Power says: “Uncertainty will be the byword for the foreseeable future. If the UK does decide to proceed with Article 50, it is not clear what sort of relationship will be negotiated with the EU, but it is clear that if the UK wants access to the EU market, which presumably it will, it would still be bound by many of the regulations and financial commitments that it is in theory trying to break free from.”
However, Mr Power states there could be some benefit to Ireland on the foreign direct investment front.
He points to declining oil prices, low interest rates, the strength of the euro, and positive US and UK economic growth as major drivers of Irish economic recovery in recent years, however, he says “all four are outside of our control, and cannot be taken for granted.
“Two have deteriorated considerably in recent months– sterling has lost 24% of its value against the euro and the UK economy is under Brexit-induced pressure.”
Mr Power says the housing crisis is still a major challenge, as is the issue of mortgage arrears.
He believes giving first-time buyers tax breaks “would not work, and the Central Bank lending regulations should not be amended.
“If more money is given to prospective buyers, they will just pay a higher price and exacerbate the upward pressure on house prices.” Mr Power states.
The Friends First chief economist finishing by saying “the prospects for Ireland in 2016 and beyond still look positive” and “at this time all indicators of real economic activity are continuing to suggest an improving Irish economy”, but it “would be naïve and dangerous to become complacent”.
