The head of the Central Bank has warned that party manifestos during the election should include “risk plans” amid any concerns the world may go back into recession.
Governor Philip Lane also agreed to consider a special credit system for homebuyers which would take into account their track record in paying rent when applying for a mortgage.
Mr Lane’s comments came as the Central Bank signalled the economy will weather the turmoil rocking international stock markets and continue to post very strong growth over the next two years.
But appearing at the Oireachtas Finance Committee, Mr Lane was quizzed about “fanciful” promises being put out at election time, given the likelihood of an “international recession”. “Is it not a dangerous game to be playing?” asked People Before Profit TD Richard Boyd-Barrett.
The governor acknowledged there were emerging risks about economies in Brazil and China, and said the bank’s role was to protect the financial system if “bad events” happen. He added: “Equally in terms of governments and manifestos, I think it’s a good question to ask, what if you’re wrong? If it turns out the world goes back into recession, which is not the main forecast, you can’t rule it out, what are your strategies then? I agree, excessive forecasts on the best guesses is incomplete, you need to have a risk plan as well.”
Mr Lane also agreed to a request by Fianna Fail’s Michael McGrath to review later this year how homebuyer’s mortgage applications are assessed, based on their track record paying rent.
Meanwhile, the Central Bank has signalled that the Irish economy will avoid global market storms and instead experience continued growth.
Ahead of the start of the election campaign, the forecasts will be closely watched by politicians as they suggest that a new Government can expect the exceptional flow of tax revenues to continue.
In its most positive outlook since the country exited the international bailout at the end of 2013, the Central Bank projects the economy will grow 4.8% and 4.4% in 2016 and 2017, respectively.
It said that the outlook was “benevolent” despite investors’ fears about the effects a slowdown of the Chinese economy could have across the world.
The favourable winds driving the Irish economy— including the weakened euro boosting exports, low oil prices, and the increase in jobs and household spending— are set to prevail for some time, the bank said.
It forecasts pay increases will average 2.5% this year and in 2017, helping to boost consumer spending across the economy.
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