Ireland set to outperform eurozone

Ireland is expected to be one of the stand-out economies in the eurozone, this year, with GDP growth of around 4%.

In a wide-reaching 2015 economic outlook, published yesterday, investment banking/stockbroking firm Cantor Fitzgerald said it remains bullish on the Irish sovereign, adding that the country’s debt-to-GDP ratio could decline below 100%, from a peak of 123% in 2013, as soon as 2017.

The company, which owns Dolmen Stockbrokers here and is a leading shareholder in the Irish Stock Exchange, said Irish bond yields should continue to trade closer to the “semi-core” of eurozone member states and further away from periphery members.

“Factors such as continued fiscal discipline, strong growth, rating upgrades, and ECB support have all helped to tighten Irish spreads,” Cantor said.

“However, there are a number of remaining positive catalysts to continue the recent spread tightening. Divestment of the Government’s stakes in the now profitable Irish banks, and the surprising outperformance of Nama offer potential for future Irish sovereign performance.”

The company sees the eurozone economy growing by just 1.2% this year and said the ECB will have to launch a full quantitative easing programme by March, as well as the purchase of government bonds.

“It is difficult to see [eurozone] inflation getting back towards target for many years in the absence of more aggressive monetary measures,” according to Cantor analysts, adding that the ECB’s other unconventional monetary policy measures — including the provision of further cheap funding for banks and a programme to purchase asset-backed securities and covered bonds — “will not be enough” to kickstart the region’s economy.

“It is our belief that the ECB has little choice but to roll out such a programme. Given Germany’s strong opposition to the idea, the programme’s execution is still far from certain,” according to Cantor.

However, it added that it believes the eurozone could witness ECB government debt purchases by the end of the first quarter of this year.

Cantor has also named three Irish stocks in its list of 25 favoured picks for 2015. Among the likes of BMW, Pfizer, eBay, and JP Morgan Cantor fancies Irish-Swiss bakery group Aryzta, Ryanair, and Glanbia.

In the economic outlook, Cantor also pointed out the growing political risk of a voting swing to the left and independent candidates ahead of next year’s general election.


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