EAMON QUINN: Political turmoil poses an ‘immense risk’ for Ireland

European elections, Brexit talks, and the policies of US president-elect Donald Trump are among the “immense risks” facing the Irish economy in 2017, economist Jim Power said in his annual assessment for investment firm Friends First.

The presidential election in France and general elections in Germany and the Netherlands next year could “cause significant difficulties for the stability of the EU”, he said, and victory has generated a further level of uncertainty, and “market volatility is likely to b ea prominent feature of the landscape over the coming months”.

“A weak government” agreeing to public sector wage demands, at a time of continuing restraint for the public finances, could only lead to reduced services or higher taxes, he warned, adding that a Dáil election was most likely to be called in 2018 rather than next year.

Budget plans to re-introduce incentives for first- time buyers, along with the Central Bank decision to soften its mortgage loan rules, threaten to push up house prices.

Amid the slump in sterling’s value, Brexit is proving challenging for Irish exporters and tourism, and the UK’s formal divorce talks with the EU will only heighten political risks. Nonetheless, Mr Power said the economy will hold up reasonably well.

GDP will expand 4.2% this year and by 3.3% in 2017, he projects, but said “we have to acknowledge the immense uncertainty given the range of external factors in operation”.


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