Jim Power, owner-manager of Jim Power Economics financial and economic consultancy, was joined on stage by Ibec CEO Danny McCoy for a lively and thought-provoking debate.
The two men shared a positive view on Ireland’s current economic position and outlook for the future. Indeed, Danny McCoy compared the transformation which the economy has undergone in recent years to an oil strike. But, he warned, an oil find, similar to a domestic Lotto win, could make or break an economy if not exploited properly.
He pointed out that Ireland is now in the top ten in the world for per capita income on all measures, up there with the likes of Brunei, Qatar and Luxembourg. A CSO survey of 10,000 citizens had confirmed an average weekly income of €1,100 - €57,000 per annum.
This very healthy position has been delivered as a result of Ireland’s ability to attract FDI. Referring to the 2015 recalculation of Ireland’s GDP which gave rise to derisory references to “Leprechaun economics”, McCoy pointed out that it was firmly based in reality.
Ireland’s corporate balance sheet had increased by 40 per cent in 2015, he said. That added €300 billion in corporate assets to bring the total to €1 trillion. No other country in the world can match that for per capita value. It added €60 billion or €34 billion to GDP as a result of the increased profits produced, and, of critical importance, added significantly to the exchequer’s coffers.
In 2015 the Department of Finance forecast a corporation tax take of €4.3 billion, he noted. The actual outturn was €6.9 billion. Apple has paid €1.2 billion to the Irish government over the past three years, he added. The corporate tax take was €7.7 billion in 2016 and it will be at least €8 billion in 2017.
Jim Power shared the view that Ireland has been doing incredibly well for that last two or three years. He recalled sharing a stage some time ago with two economists who said Ireland would never grow again, not for generations in any case. Power disagreed saying that it is not in human nature to accept generations of depression.
And Ireland has indeed come back very strongly. He also believes 2018 will be another very positive year for the Irish economy.
He noted that Ireland had benefited from strong performances by the UK and US economies over the past three or four years but with the slowdown in the UK, Ireland is now profiting from the strong recovery in the Eurozone economy.
That is not to say that Ireland doesn’t face stiff challenges. The legacy of the downturn is not going to disappear overnight, he pointed out, and housing will continue to dominate debate over the next two to three years.
He believes that the damage done to developers following the crash is at least in part responsible. It should be no surprise that there is a lack of housing supply, he said. He also believed the Help to Buy scheme was of little help stressing the need to build more houses rather than addressing the demand side.
He added that there is a need to identify what is preventing housing coming on stream.
Another area of concern is the quality of public services and rising pay demands in the public sector. With health, education, law and order, and housing all being priority areas he pointed to the clear trade-off between public service pay and investment in front line services. This will be very difficult for the government to manage, he added.
Turning to Brexit, Power said that it is going to be more difficult for Ireland than any other European country and that it will affect everyone and every sector in this country. Expressing his belief that it is going to be a hard Brexit, he warned that Ireland must prepare for the worst.
Danny McCoy was slightly more sanguine. He shared his belief that Ireland should support the move to the second phase of negotiations with the Border issue being left until later. This might be a high risk strategy but it would give Britain the time and space to change its mind regarding Brexit. He didn’t believe this would see another referendum, merely a change of heart on behalf of the UK government.
Even if this benign scenario fails to materialise, Power believes that Ireland can still prosper in the event of a hard Brexit. Irish exports to Britain increased by 11 per cent in first nine months of 2017, he noted. That’s because Irish business is bloody good, he concluded.