Kyran Fitzgerald


Kyran Fitzgerald: Fascinating things to keep an eye on in 2020 at home and abroad

In Ireland, the degree to which prosperity is felt beyond the big cities will determine whether Leo Varadkar returns to power, writes Kyran Fitzgerald

Kyran Fitzgerald: Fascinating things to keep an eye on in 2020 at home and abroad

In Ireland, the degree to which prosperity is felt beyond the big cities will determine whether Leo Varadkar returns to power, writes Kyran Fitzgerald

The turkey is now but a carcass. The wine and beer glasses have re-emerged from the dishwasher. A new year is upon us. What awaits us? Let’s have a stab at guessing at what is coming our way.

US president Donald Trump will probably cobble together a deal with the Chinese to keep the US economy humming along nicely towards the election in November. In all probability, president Xi Jinping will go along with this as China has a strong vested interest in financial stability, but the leaders in Beijing have long memories and they are busy making plans.

In November, CBNC reported on how China aims to be a world leader in artificial intelligence, 5G, and blockchain technology within a decade.

There is talk of how the two great economies have been decoupling. Telecoms firm Huawei was blacklisted by Washington but went on to unveil its 5G plans.

Huawei is aiming to take control of its supply chain. At the same time, it is busy expanding its global reach.

The US is pressing allied countries to avoid entering into any relationship with Huawei. The unfolding of the US-China rivalry will be one of the fascinating tales of the next decade.

Some experts predict that global finance could be a new theatre of conflict with the US seeking to deploy its financial firepower.

Mr Xi is deploying blockchain technology as a means of eroding the power of the dollar. The historian Adam Tooze is sceptical about the Chinese ability to shape events in this regard.

He believes that any move by Beijing “to weaponise” its holdings of US bonds could rebound on China.

So we have a paradox. Under some measures, China is forging ahead whereas, under other measures, it is much more fragile.

In the short run, Mr Trump is continuing to benefit from an upswing in the US economy, even as the impeachment process unfolds.

Jobless levels have not been lower in America since the late 1960s. The main US stock indices have soared since his election in November 2016. Keeping the recovery going will be the political watchword in 2020 though US-EU relations look set for a bumpy ride.

Closer to home, the prospect of a hard Brexit appears to have eased following the landslide Conservative victory in Britain, but the setting of an end-year deadline for the EU-UK trade talks suggests that at the very least, that prime minister Boris Johnson, will run down the clock while playing hardball.

It is likely that businesses on this island will face another frustrating year with ambitious investment plans on hold.

Developments on corporate taxation at the OECD and EU levels will also be watched like a hawk. It is noticeable that leading accounting forms here no longer dismiss the prospect of negative developments on this front.

Finance Minister Paschal Donohoe and his putative successor will have to play a canny game in seeking to preserve as much of the status quo as it is possible to maintain.

No matter what the outcome is, uncertainty will remain. The Irish economy has continued to soar, yet the euphoria of the latter years of the Celtic Tiger are largely absent.

Personal savings are at high levels and the Central Bank controls mortgage lending. This is no surprise as Ireland remains one of the most indebted countries in the world despite considerable progress in paying down the accumulated debts, both private and public.

While Ireland benefits from a bonanza in corporation tax receipts, this may turn out to be temporary.

KBC Bank chief economist Austin Hughes regularly measures confidence levels among the public. He predicts that even while the economy continues to grow, confidence will not return to levels of the pre-crash era.

His concern is that, if anything, the economy will suffer from an overly cautious approach, at a time when significant investment is required and borrowing costs are low.

Mr Hughes points to the generation that was forever scarred by the Great Depression.

The degree to which prosperity is felt beyond the big cities will determine whether Leo Varadkar has a real chance of returning to power at the head of a new coalition.

In the view of the CEO of Chambers Ireland, Ian Talbot, the recovery is spreading out to the country’s towns, but this is proving to be a mixed blessing.

Banking data indicate that towns near to larger urban conurbations are experiencing housing pressures.

What is needed is active land management by a public authority with compulsory purchase powers and a mandate to provide affordable housing, says Mr Talbot.

And he believes successive budgets have not delivered for SMEs and he seeks measures to support tax reform, support for regional tourism and the provision of training options.

The capacity of the Government to preside successfully over a ramping up in the capital programme has been questioned following the huge cost overruns in building the National Children’s Hospital.

The Government has announced an ambitious programme of public service reform and Mr Donohoe has vowed there will be no repeat of the cost overruns of the past.

The increasing urgency of the questions posed by global warming will require a review of public capital programmes and a reordering of priorities.

Regardless of the outcome of the upcoming election, one can only hope that the Brexit process will no longer carry all before it, sucking all life out of discussions on the future.

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