Thursday 22 March 2018

Black sky ahead?

Businessmen and economists are split over prospect of double dip

CLOUDS OVERHEAD: A woman walks past the electronic stock board of a securities firm in Tokyo showing falling stock prices
CLOUDS OVERHEAD: A woman walks past the electronic stock board of a securities firm in Tokyo showing falling stock prices

THE very real threat of a global double-dip recession, fears of another banking credit crunch and the complete inability of European leaders to address the sovereign debt problem have caused world stock markets to capitulate in a massive worldwide sell-off, the scale of which hasn't been seen since the collapse of Lehman Brothers.

Last week's optimism about the pace of an Irish recovery could be misplaced given our dependence on exports in the face of a global slump. We asked top businessmen, economists and market readers whether the prospect of a global double-dip recession was a clear and present danger and whether the Irish recovery would be steamrollered.

Stephen Flood

Executive director, Goldcore

"I fear that we are already in a double dip. Global debt deleveraging is becoming contagious. No country is immune. There's far too much debt and not enough market confidence in the future to support it, combined with a deficit of political creativity within Europe.

"Markets will be very volatile until the political leadership void is filled.

"Ireland will continue to be buffeted by international trade winds. ECB interest rates and core EU countries' inflation rates will continue to be a key factor in our recovery."

Paschal Taggart

Dealmaker and

corporate adviser

"Clearly all the indicators are very negative, but I don't know if we're in a double dip or not.

"I'm optimistic enough to think the markets could stop falling and turn around before the end of the year.

"If there's a recession worldwide, it won't help Ireland, so you'd have to be worried going forward. There's severe uncertainty around, and no one is immune from it.

"The businesses I'm involved in, mainly in the IT sector, are not affected by the wider economy to some extent, but at the same time the ongoing turmoil doesn't help the plans that we have."

John Teeling

Chairman, Cooley Distillery

"The bad debt problems in the banks, which were passed on to the governments, have come home to roost," says Mr Teeling. "The world financial system is in a state of chaos -- led by the inevitable restructuring of the euro."

Mr Teeling, who has been investing since 1963, says he has "never seen this level of uncertainty" on world stock markets. He believes that stock markets could fall for the next two or three years.

"What you see now is a rise in fear," says Mr Teeling. "People think the future will be worse than the past so they will either stay on the sidelines and refuse to buy shares -- or they will pay less for shares."

The latest stock market turmoil is "bad" for Ireland's economic recovery, adds Mr Teeling. "Things won't be good for the average Irish person over the next two or three years."

Conrad Burke

Founder of Innovalight

"We never really left the first dip in many ways. We're in very uncertain times. The markets will be choppy for the rest of the year at least. Policymakers are giving mixed messages. The leadership vacuum in Europe and the US has a huge impact.

"Foreign direct investment, thanks to the IDA's efforts, and broader entrepreneurial activity, remains very encouraging in Ireland. But the domestic economy will be very unsettling for some time.

"The debt burden we're under is very challenging and we can't lose sight of that. Clearly, with a steely resolve, we're doing the right things when compared with some other countries."

Stephen Young

CEO of HSBC Ireland

"Typically in a recovery you get bumps on the road. Whilst recent economic indicators out of Germany and the US are not that positive, there's still a strong motor for growth in Asia.

"Markets will keep falling as long as investor sentiment remains jittery. This will likely remain until big economic questions are answered -- including what measures the EU might take with the euro, and a clearer picture on fiscal consolidation.

"Ireland has a very open economy, which is aligned to global downturns or recovery. So, while export performance is at record levels, in the event of a double-dip recession, we would likely be impacted."

Colm Kearney

Professor of International Business, Trinity College

"There's far too much uncertainty to predict whether there will be a double dip, but I don't think so. There may be more fall to come in the markets as it is difficult for people to continue to commit funds against so much uncertainty.

"The sooner we have more certainty the better and to that end we need a eurobond to stabilise the eurozone. I'm confident in the fact Ireland has been able to have an export-led recovery against this background so I am not a doom and gloom merchant. There's a lot of pain to go through but we seem to coping."

Ronan Reid

Co-founder of

Dolmen Stockbrokers

"In Ireland we've never really come out of our initial recession, so we're still effectively in the first dip. A double dip is less likely in the US and more likely in Europe.

"Markets will correct over the next three or four months. Companies have cash on board, they've cut costs and paid down debt and have good operational margins. The issue is that there's an unwillingness to lend, invest or spend. That'll eventually right itself.

"The markets recognise the banks being overleveraged is the main issue in Ireland. We probably need two budgets out of the way before consumers start spending again."

Sean Pairceir

Partner at Brown

Brothers Harriman

"A business focused on servicing global asset managers gives you an observational perspective on market confidence, not predictive powers.

"However, viewed from Europe or the US, clearly there is less optimism about the latter half of the year than there was about the first. But those are not the only perspectives any more. Asian investment flows play an important part in the overall picture.

"For many of our clients, market volatility is either a buying opportunity or a time when they see demand for new investment products that cater to revisions in investors' appetite for risk. The Irish fund industry needs to continue to ensure that the country remains one of the key global locations for domiciling and servicing those products."

Alan Gray

Managing partner, Indecon

"Really only fools or frauds would venture an opinion on whether there will be a double dip; there isn't enough information to make a sensible judgement at the moment. There is a likelihood of further market falls in the coming weeks because there's such uncertainty about the European bailout, particularly with Finland looking for collateral for participation in the Greek bailout.

"This makes things more challenging for Ireland. Our growth potential is very much determined by our exports, which will be influenced by demand particularly in the US, UK and Germany. The balance of probability is we will experience some modest growth -- it would be unlucky not to -- but with continuing high unemployment."

Ronnie O'Toole

Chief economist with

National Irish Bank

"On balance, we think it's unlikely there will be a double dip," says Mr O'Toole.

While he expects stock markets to recover before the end of the year, he says the latest stock market turmoil would hold back Ireland's recovery.

"The latest turmoil will affect Irish exports which have been the big growth area," he says. "The outlook for the second half of this year is weaker than expected. Our major markets have been hit so growth will be slower as a result."

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