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Wednesday 17 July 2019

Central Bank contender Watt saw soft landing as Ireland's most likely outcome in 2007

Tipped for top job: Robert Watt previously lost out to Philip Lane. Photo: Steve Humphreys
Tipped for top job: Robert Watt previously lost out to Philip Lane. Photo: Steve Humphreys
Gavin McLoughlin

Gavin McLoughlin

Robert Watt, tipped to become the governor of the Central Bank, predicted a soft landing as the most likely outcome for the Irish economy in an article published months before the 2008 crisis.

Mr Watt argued against an "alarmist" view on the Irish economy in the piece, which was published in the 'Sunday Business Post' in June 2007.

Last night, he said he wrote the article at a time when no one had predicted the global economic turmoil which hit Ireland so hard.

In the article, Mr Watt wrote: "Before accepting our impending doom, there are a number of points worth considering."

He added that "while domestic factors are important, it is what is happening in the global economy that matters".

Although the article warned that there were risks for the economy, it said the latest assessments for the global economy were positive, and that "overall prospects remain okay".

"Given international developments, we can attain reasonable growth if our international competitiveness can be sustained and enhanced. Breakfast Roll Man needn't panic just yet," Mr Watt wrote.

He was working at the time as an economist with Indecon.

Last night, he told the Irish Independent: "In 2007, like most economists, I thought the Irish economy was vulnerable given our over-dependence on construction, excessive credit growth, and rapid house price inflation.

"The view I held was that with a favourable international environment we would be able to over time rebalance our economy.

"Clearly nobody predicted the turmoil on international markets which had such a devastating effect on our banking sector and our economy, given our vulnerability."

Mr Watt was one of the final two candidates the last time the Central Bank governorship became vacant.

He was pipped to the post by Trinity College economics professor Philip Lane, who is now taking up a post as chief economist at the European Central Bank (ECB).

The Central Bank job is an important one for managing the Irish economy. The Bank supervises the financial sector to protect stability, for example by setting minimum deposits for mortgage borrowing.

That means the candidates' pronouncements on the economy are bound to come under scrutiny as part of the process.

Mr Watt has been in the news frequently of late in his role as secretary general of the Department of Public Expenditure and Reform (DPER).

The department has been at the centre of the storm over the spending overrun on the National Children's Hospital.

A number of Oireachtas committees have proposed calling in Mr Watt for questioning, with a row breaking out over which committee he should appear before.

As head civil servant in the department responsible for public expenditure, Mr Watt was closely involved in the talks over nurses' pay, where pay increases were recently agreed, putting an end to strike action.

Mr Watt is an experienced economist who has led DPER for almost a decade.

The current expectation is that another major contender for the Central Bank post will be Sharon Donnery, a deputy of Prof Lane who has worked at the Central Bank since the mid-1990s.

Irish Independent

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