Central Bank's strong growth outlook means this is a good general election to win

The Central Bank yesterday delivered its most positive outlook since the country exited the bailout over two years ago projecting that the exceptional factors driving the economy are not going away any time soon.
Central Bank's strong growth outlook means this is a good general election to win

Politicians in particular will be left in no doubt that the looming election is one election that they will want to win.

Such is the momentum behind the economy that last year the exchequer had over €3bn more in tax revenue than it had anticipated. That is an enormous sum of money.

Just days before officially unveiling its 2016 budget last October, the bounty allowed the Coalition to deliver its surprise supplementary budget.

It went onto pump €1.5bn in additional spending into the economy in the last few weeks of 2015. The favourable winds are still driving the economy.

A severely weakened euro boosted the profits of many multinational and indigenous exporters, while the slump in oil also helped curtail their costs.

Firms ended up paying more tax in total to the State.

There were also more jobs and therefore more money for households to boost retail spending.

Despite the warnings about the international winds, there was no evidence in yesterday’s core forecasts that the exceptionally favourable factors of the past year will abate.

There are of course the risks that the huge turmoil over a slowing Chinese economy and fears about debts of so many emerging markets that have so roiled world stockmarkets this month point to rough seas ahead.

However, in weighing such risks, the Central Bank still came up with growth forecasts for the next number of years that are truly impressive.

And there was no disguising the positive message in yesterday’s bulletin.

“It is a fairly benevolent scenario,” said the bank’s chief economist Gabriel Fagan.

The growth projections are indeed favourable.

After spluttering by only 1.4% in 2013, the economy sparked to life and expanded 5.2% in 2014.

The Central Bank says the economy then grew 6.6% last year — many others believe the growth number will likely work out at over 7% — and will expand 4.8% and 4.4% this year and in 2017.

The Central Bank doesn’t spell it out but the figures imply that an incoming government will have favourable economic conditions.

Those growth numbers suggest that despite the EU strictures on spending and paying down debt that the new government will have a considerable amount of tax revenue flowing into its coffers.

Already yesterday the talk turned to what any future government should do with the bounty.

The Central Bank said it wasn’t in the business of doling out fiscal advice, but the regulator said that building “buffers” or increasing the “fiscal space” — which translates as paying down the very high levels of public debt more quickly than the EU rules demand — was its preferred way to safeguard the economy.

Noting that investors do not like political uncertainty, Mr Fagan however, saw little evidence in sovereign bond spreads that markets were recoiling at the prospects of an uncertain election outcome.

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