Monday 22 January 2018

Exporters face a stormier 2016 as external tailwinds trail off, Investec warns

Economist Philip O'Sullivan.
Economist Philip O'Sullivan.
Colm Kelpie

Colm Kelpie

Irish exporters benefited from strong external tailwinds last year but these are unlikely to be repeated in 2016, specialist bank Investec has said.

In its latest economic commentary, Investec said Ireland was the fastest-growing economy in the EU last year and, while growth is set to moderate, it is still poised to retain this crown for the third consecutive year.

Much of the current growth is being driven by the domestic economy, but net exports remain important, the bank's chief economist Philip O'Sullivan said.

"On the latter, exporters benefited from strong external tailwinds in 2015 but this is unlikely to be replicated (at least to the same extent) in 2016," he said.

Investec said the mismatch between supply and demand shows little sign of abating over the short term. "While residential completions increased by 15pc last year, at 12,666 units they are running at only half of the level of new household formation, Mr O'Sullivan said.

"While leading indicators such as planning permissions and the residential component of the Ulster Bank Construction PMI suggest that completions will continue to recover, it could be the end of the decade before output rises to match demand. Due to this mismatch, our expectations remain that the path of least resistance for prices and rents is to the upside."

Investec also said it doesn't expect any major political policy shifts, because, even though we don't have a government, the mainstream parties are not that different.

Irish Independent

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