Goodbody Stockbrokers projects rude financial health for Irish economy

The Irish economy will be in rude financial health for a number of more years, Goodbody Stockbrokers said today in a major report.

However, chief economist Dermot O’Leary and senior economist Juliet Tennent said housing will remain Ireland’s largest bottleneck, predicting that housebuilding “is unlikely to be a sharp recovery”.

Considering its top-of-the-class growth, Goodbody sees the economy continuing to outpace the rest of the eurozone for the fourth year in a row.

And the economy, which is expanding at its fastest rate for 15 years, will be relying more on consumer spending as the extraordinary rate of exports growth slows.

GDP, which grew 5.2% last year, will grow by 6.6% this year and then by 4.5% in 2016. The broker projects growth will continue at a rapid clip, expanding by 3.8% in 2017.

Unemployment will fall to 7.3% next year from 9.3% at present. The jobless rate will then fall 6.3% in 2017, it says.

“Stars are aligned for ongoing expansion in consumer as a confluence of factors, including faster employment growth, pay rises, lower taxes, reduced interest rates and low inflation have contributed to impressive growth in consumer spending in 2015,” the report says.

However, Goodbody only mildly reprimands the Coalition for announcing huge spending increases for this year, days before it unveiled its 2016 budget last month, but claims that “the damage is relatively minor”.

“Relative to previous pre-election periods, the splurge is relatively minor and will do little to damage debt sustainability due to rapid economic growth,” say the economists.

The Government will run a budget deficit of only 1% of GDP next year, while gross debt will fall to 89% of GDP by the end of 2017.

Housing, however, will be a bugbear for many years to come. New supply is likely to provide only 13,000 new homes this year, when approximately 30,000 homes will be needed on average each year over the medium term.

After surging 16.3% last year, house prices will rise 5.6% in 2015, and grow by 3.9% and 6.5% by the end of 2016 and 2017.

“Growth is broad-based, with contributions from all components of the economy,” said Mr O’Leary. “In the context of ongoing lacklustre growth in the euro area overall, Ireland remains the growth beacon.”

“Ireland is benefiting from non-inflationary credit-less expansion, what Goodbody calls the NICE economy, which contrasts starkly with the credit-fuelled overhang of the pre-crash 2000s.”