by Aiken PR
The strong performance and resilience of the Irish economy since the financial crisis could be undermined by looming geopolitical threats according to leading independent economist Alan McQuaid, speaking today at an ACCA Business Leaders’ Forum Event in Dublin.
In a speech to inform leaders throughout the business community on the long–term implications of geopolitical changes, he warned that the global economy was now at a critical juncture with threats that could expose the Irish economy which is vulnerable to external shocks. Alan commented:
“As one of the most open economies in the world the major near–term risks for Ireland come from abroad, and most threats are geopolitical rather than economic in nature. Upcoming European parliamentary elections in Poland, Portugal and Greece on top of ongoing political uncertainty in Italy are all potential threats to the European project, which could have implications for the Irish economy. Brexit too is symptomatic of a wider malaise globally, driving a disenfranchised electorate and the rise of populism. President Trump is threatening the imposition of trade tariffs not just on China but on the EU and his administration’s tax policy could have implications for the rate of corporate tax in Ireland impacting US multinationals based here.”
According to Alan McQuaid a significant concern remains the “Japanification” of Europe with interest rates remaining at close to zero, just as they have in Japan for the past twenty years and as changes in personnel take place at the top of EU institutions.
He stated that the eurozone resembles Japan with its low–growth and low–inflation environment, coupled with still very loose monetary policy. Interest rates haven’t gone up in either the eurozone or
Japan since the aftermath of the global financial crisis. Conversely, the Federal Reserve has raised rates nine times since the crisis years giving it room to cut them again should the economy need a boost.
Alan added: “The changing of the guard at the European Central Bank, with the departure from office this year of key personnel such Mario Draghi and Benoit Coeure could impact on Eurozone interest–rate policy and we look set for a prolonged period of extremely low rates. This is happening as key figures that led Europe through the financial crisis like German Chancellor Angela Merkel will soon depart the political scene, to be replaced potentially by less market and EU friendly leaders. Changes are also affecting the European Commission with President Jean–Claude Juncker and the head of the European Council, Donald Tusk standing down. “
“These factors will impact on Ireland’s Gross General Government Debt which was 206.2bn euro at the end of last year. Debt per capita is at 42,000 euro one of the highest in the developed world, with only the major economies of the US and Japan at a higher level. Although household debt as a percentage of disposable income has declined significantly in recent years, it remains the fourth highest in the EU after Denmark, the Netherlands and Sweden.
Despite these challenges Alan is upbeat about Ireland’s future in the global economy:
“Irrespective of the short– and medium–term risks, Ireland has a history of punching above its weight on the global stage, and bouncing back strongly when the chips are down, helped by pro–growth economic policies. This much Ireland has proved since the Global Financial Crisis and I am confident that the valuable experience gained by leaders across political and business spheres over the last ten years will sustain economic prosperity in the next few years.”
Stewart Dunne, Chair of ACCA’s Ireland’s Business Leaders Forum welcomed Alan’s thoughts noting:
“Our international reach gives our members a more informed view of the potential impact of changes in the global economic landscape, which they can then bring to a local level in helping their businesses reach their full potential.”