Politicians have been put on alert that strong economic growth won’t necessarily boost the feel-good factor among consumers ahead of an election this year, according to the author of the KBC Bank sentiment survey.
The bank’s chief economist Austin Hughes said its latest survey showed reduced fears of Britain crashing out of the EU helped lift the mood of Irish consumers for the second successive month in December.
However, many consumers said they expect the new year to make little difference to their finances and “one in five envisage a worsening of their circumstances in the coming year”, according to the survey.
Mr Hughes said that political parties cannot assume that economic growth will make people feel significantly better off, despite the lessening of fears around a damaging Brexit.
“The sense that reduced Brexit concerns were central to the improvement in Irish consumer sentiment last month is supported by the contrast between a large increase in UK consumer confidence in December, a relatively flat reading in the comparable metric for the US and a decline in consumer confidence in the euro area,” Mr Hughes said.
“The question is whether that relief will prove sufficient to spark a material step-up in spending on either side of the Irish Sea in early 2020.”
Meanwhile, GDP will grow by 3.9% this year as long as the Brexit concerns do not return to haunt the Irish economy, finance minister Paschal Donohoe said. He also projected a budget surplus of 0.7% of GDP this year.
Corporation tax revenues would likely fall by €500m from 2020 as reforms to the global tax regime under the international initiatives called Base Erosion and Profit Shifting, or BEPS, begin to bite.
“While there is some uncertainty surrounding this figure, it is the department’s best assessment, based on ongoing work being carried out by the Revenue Commissioners, that the overall risk from BEPS-related changes could be in the range of €800m to €2bn,” Mr Donohoe said.