Merrion Capital: Only politicians can wreck rosy 2016 growth outlook

A second stock broker yesterday raised its growth outlook for 2016, but warned politicians could wreck the rosy prospects by over-promising during the looming election campaign.

In his new quarterly forecasts, Alan McQuaid, chief economist at Merrion Capital, said that the economy went “from strength to strength” last year to expand by a huge 7% last year and will grow 5% in 2016.

Like other forecasters, including Goodbody Stockbrokers, which also this week projected an economic expansion rate of 5%, Mr McQuaid sees a recovery in domestic demand fuelling growth prospects this year.

Tax cuts and spending increases announced in October’s budget — the first significant expansionary measures for eight years — will drive spending and output.

Exceptionally favourable factors, including the weak euro and increased demand in the US and Britain that drove Irish exports last year, will not disappear overnight, said Mr McQuaid.

“Assuming no major external shock, the positive stimulus measures announced in Budget 2016 should help to generate further strong growth this year,” he said.

House price inflation will remain subdued — Merrion projects prices will rise at most by 4% this year across the State, but not rise at all in Dublin, as the Central Bank controls continue to ration mortgage credit.

CSO figures show that residential home prices, after the long years of the market crash, stirred in 2013, when they rose by 2.1%.

Prices then climbed 13% in 2014 — the last year before the Central Bank imposed its home loan lending restrictions on first- and second- time borrowers, and on lenders.

The broker provides average annual rates for his unemployment forecasts.

The jobless rate will fall from 9.4% in 2015 to 8.5% this year.

Unemployment ended 2015 at 8.8%, according to the CSO.

However, political risks could weigh most on the economy.

“One would hope politicans have learnt from past mistakes and continue to adopt a prudent approach to public finances, irrespective of who is in power following the forthcoming general election,” Mr McQuaid said.


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