Tuesday 20 August 2019

The chance of new recession is '100pc', NTMA boss warns

Brexit among risks identified as Donohoe agrees change in fortunes will be 'inevitable' in the future

Words of caution: Finance Minister Paschal Donohoe visits the American Chamber of Commerce Ireland in Dublin to mark yesterday’s Independence Day celebration.
Words of caution: Finance Minister Paschal Donohoe visits the American Chamber of Commerce Ireland in Dublin to mark yesterday’s Independence Day celebration. PHOTO: NAOISE CULHANE
‘Mountain of debt: NTMA chief executive Conor O’Kelly

Cormac McQuinn and Evie Kearney

It is inevitable Ireland will be hit by another recession, the boss of the National Treasury Management Agency (NTMA) has warned.

Chief executive Conor O'Kelly said the chances of another economic downturn are "100pc" and Ireland "can't afford not to have a contingency in place".

He identified Brexit and international tax changes among risks. But he also said it could be something "that we can't even think of today that'll end up hitting".

The warning of storm clouds on the horizon comes as it emerged the number of people on the Live Register - which measures unemployment and part-time workers entitled to jobseeker's benefit - is at its lowest level since 2008.

The Central Statistics Office said the number of people signing on now stands at 190,100.

Doomsday predictions of a no-deal Brexit have warned of a slashing of economic growth and the loss of up to 80,000 jobs over a decade.

Finance Minister Paschal Donohoe responded to Mr O'Kelly's comments saying economies go through cycles and while they can "go very, very well it is inevitable at some point their prospects change".

Mr O'Kelly made the remarks at the Dáil's Public Accounts Committee (PAC). He was asked by Sinn Féin TD David Cullinane about the risks of Brexit and Ireland's €205bn national debt.

Mr O'Kelly said Ireland is a small, open economy, is "highly indebted" and relies on international investors for 90pc of its borrowings.

"We're in the permanent contingency business in Ireland with the debt we have.

"People talk about whether the bond market is predicting recession... I'll give you a prediction of recession. The chance of a recession in Ireland is 100pc. So we can't afford not to have a contingency in place."

Mr O'Kelly added: "We have to remain vigilant to that and we do that by having significant cash buffers at all times."

He pointed to the €1.5bn "rainy day" fund and €20bn in cash held by the NTMA.

Fine Gael TD Kate O'Connell asked about his recession remarks, raised the possibility of a hard Brexit and put it to Mr O'Kelly "we really are in an extremely precarious position as a country".

Mr O'Kelly said he was making a general point in terms of the long-term, but added: "Our debt makes us more vulnerable than we would have been."

Mr Donohoe later said: "Will there be a change in our economic circumstances at some point in the future?

"Yes there will. That is why we need to ensure that we manage our economy well, we make careful decisions and we do all we can to prepare for Brexit."

He said if a Brexit deal is secured with the UK the economy is expected to grow by 3pc next year. He said if there's a disorderly Brexit growth is still expected but it will be between 0pc and 1pc.

Mr O'Kelly told the PAC that Ireland has a "mountain of debt", adding: "There is only one way to get down a mountain and is very slowly and very carefully and not take any alternative routes and certainly not to go back up the mountain."

He said the interest bill on the national debt had fallen from €7.5bn in 2014 to an expected €4.5bn next year due to the low interest environment created by the European Central Bank (ECB).

He said interest rates have fallen further since the nomination of Christine Lagarde as the next ECB president after the market reacted to an appointment seen as "dovish".

"So the interest rate environment looks like it is going to remain low for the foreseeable future," he said.

Irish Independent

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