Rising risk of financial shocks

Rising risk of financial shocks

By Geoff Percival

The potential for further negative economic shocks to the Irish economy has increased over recent months, the Central Bank has warned.

In its latest macro-financial review, the financial regulator said the higher degree of turbulence in Europe’s financial markets over recent months “implies greater potential” for negative shocks.

Changes in international corporate tax arrangements in the EU and the US; a move towards protectionism in international trade; and Brexit remain the key international “risk triggers”.

However, the Central Bank also warned of domestic risks — above normal property price rises, bank exposures to property-related lending, high levels of household and public debt (Ireland currently being the fourth most indebted member of the EU), and the small number of payers accounting for a large share of corporation tax receipts.

“While the domestic economy is performing well, this — in itself — gives rise to potential risks,” said Central Bank deputy governor Sharon Donnery.

“Stronger growth could add to overheating pressures if not managed prudently. The array of risks facing Ireland, coupled with the fact that we are a small and open economy naturally prone to volatility, make it hard to predict what the future holds,” she said.

The potential for consumers and businesses to postpone investments until the future trading relationship with the UK is clearer, a slowdown potentially increasing non-performing loan levels, and UK insurance firms losing the right to do business here and affecting competition and product availability are Brexit risks.

“The risks arising from Brexit, especially a hard or disruptive Brexit, are far reaching for Ireland. The window of opportunity for resolving a range of issues for firms is closing fast and contingency plans need to be fully prepared,” Ms Donnery said.


More in this Section

UK pubs gear up for ‘historic day’ as reopenings nearUK pubs gear up for ‘historic day’ as reopenings near

Paschal Donohoe 'cautious' of 100% State-backed loans for SMEsPaschal Donohoe 'cautious' of 100% State-backed loans for SMEs

Work of Siteserv commission extended by three monthsWork of Siteserv commission extended by three months

Larry Goodman linked company secures judgment for €7.89m against co-founder of  Blackrock ClinicLarry Goodman linked company secures judgment for €7.89m against co-founder of  Blackrock Clinic


Lifestyle

For 2020, statement-making in interiors has expanded to just about anything we like as long as it draws the eye towards it in the way a fireplace or television dominating a room would typically have done in the past, writes Carol O'CallaghanHow just one item can create a focal point in a room and even spark a conversation

Dara McAnulty talks about his friendship with Chris Packham, his struggles with autism and the buzz around his debut book.Dara McAnulty: Meet the bright new teenage voice for conservation

'You see, in a classroom, I know the rules. I’m not perfect but I’m in the right ballpark at least. I can see and hear it in my students’ reactions, in their contributions from the stands.'Secret Diary of an Irish Teacher: Living the dream in a lockdown nightmare

'The old doll said we can’t go to Tenerife this year because her Mam would be ashamed if she went against the government's advice, whoever's in the government these days.'Ask Audrey: 'C’mere, what’s the story with getting ripped off by Kerry people?'

More From The Irish Examiner