We have really turned the corner ... so says the FT

Tora Bora

Even the FT, now agrees we have "turned the corner".

http://www.ft.com/intl/cms/s/0/4c8b2a44-c823-11e0-9852-00144feabdc0.html#axzz1V65JlYGx

Ireland’s unexpected economic comeback

By David Vines and Max Watson


Markets and rating agencies, not to mention academics, often make egregious errors in judging country risk. All too often this is by failing to notice a change in macroeconomic fundamentals that really does matter. As the crisis moves through its nadir, one major error is almost certainly the market assessment of Ireland’s public debt.
As a group, the troubled periphery economies have faced three challenges: achieving a leap in competitiveness that will restore growth; convincing markets that public debt is on a sustainable track; and normalising the access of banking systems to market funding. These three challenges have become inextricably linked. In Greece, deep-rooted fiscal problems have infected the financial system. In Ireland a banking debacle has swollen public debt. And without strong competitiveness to relaunch growth, this aggregate debt dynamics story can have no happy ending at all.
So the first and most important thing about Ireland is that it is swiftly restoring its competitive edge. Indeed it is moving rapidly towards a sizeable current account surplus – in a range of 3 to 4 per cent of gross domestic product. Of course, recession has also played a role in turning external accounts around, but a steady uptrend in exports has been underway for some time.
The second element is that Ireland’s net public debt will probably peak at somewhere around 110 per cent of GDP. This is a steep challenge; but it is a magnitude that Ireland, among other advanced countries, has shown to be entirely scalable in the past. It is increasingly clear, too, that Ireland does not need to borrow from markets until 2014: that is the sort of borrower that markets can relearn to love.
The third issue is Ireland’s banking saga. The Achilles heel of the economy lay in bad bank governance and supervision, and a subsequent hard landing that neither the authorities nor the International Monetary Fund saw coming. But today there is a growing recognition that this corner has been turned. Steps were finally taken at the end of March to cauterise the problem with recapitalisation based on a tough set of stress tests; and a sharp division of core from non-core assets in the two “pillar” banks that are left. The recent success in keeping Bank of Ireland in private hands is also a major psychological boost.
Fundamentally, Ireland is also displaying an admirable social resilience. It takes little knowledge of history to place this in a perspective that has already seen the economy weather four dreadful economic crises in less than a century. It matters too that emigration has yet again helped to contain unemployment to some degree – even though, at 14 per cent, it is worryingly high.
As a result of all this growth is starting to re-emerge, even though domestic demand is still contracting. As expansion accelerates, it will generate jobs only slowly. But with the speed and slope of correction in competitiveness that is under way, the feed-through to domestic demand and job creation will come. And over the next few years a socially more sustainable balance to the recovery will also end up swelling the tax base more strongly than the present pattern of export-led growth. For the pressured taxpayer, there is a glimmer at the end of the tunnel.
We are highly conscious of the contagion risks posed to Ireland by further bond market or banking shocks elsewhere in the eurozone, or by any setback in world trade. And no one can ignore the political challenge of keeping Ireland ahead of the Troika’s targets. It also has to be stressed that we are assuming firm persistence in the course of fiscal consolidation. This said, we do believe that Ireland’s macroeconomic fundamentals provide the most important defence there can be against all forms of shock.
Perhaps most important of all, an Irish success story of the kind we think is underway will come to be seen as a precious and crucial trump card for the eurozone debt strategy. It gives the lie to fears about a generalised transfer union. And it illustrates that adjustment in the eurozone is feasible, just as currency board countries in the Baltics have wrongfooted the diehard pessimists.
In short, when we look at Ireland against sovereign spreads in the eurozone, we see a mismatch. Either markets are persuaded that economic policies can never defeat contagion, or understandably – given pervasive crisis fatigue – they have dropped off to sleep at the wheel.
The writers are a professor of Economics and a fellow of Wolfson College at Oxford university.

Copyright The Financial Times Limited 2011. You may share using our article tools.
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ei.sdraob

/aside

Google "Ireland’s unexpected economic comeback" and click on FT result at top to read full article, these guys are annoying with their nagging to register...

ardmacha

The writers are a professor of Economics and a fellow of Wolfson College at Oxford university.

These people work in the public sector, and as a consequence are by definition incompetents. Who would listen to such people when the real truth can be found here on boards.ie any day of the week?

ei.sdraob

FT wrote:

[Ireland] is moving rapidly towards a sizeable current account surplus–in a range of 3-4% of GDP

ObsessiveMathsFreak wrote:

There are no words. I’ll just refer everyone to Seamus Coffey’s July article the exchequer balance to see which way the graphs are going. Frankly, I don’t know that planet these two guys are living on. I can’t believe this statement was even written, let alone put into print.

being discussed here too..

WalterMitty

ardmacha wrote: »

These people work in the public sector, and as a consequence are by definition incompetents. Who would listen to such people when the real truth can be found here on boards.ie any day of the week?

Oxford actually wants to go fully private in order to compete with ivy league and reduce governments interference in its operation. Oxford academics earn a lot less than Irish ones despite being amongst world's best. You can have a lecturer in some little institute of technology earning more than an Oxbridge lecturer. Mad.

Debtocracy

Iceland not Ireland has turned a corner. Ireland is in the midst of a debt death spiral.

ei.sdraob

Debtocracy wrote: »

Iceland not Ireland has turned a corner. Ireland is in the midst of a debt death spiral.

Illustrated here

Greece has turned a corner, as for us... I suppose will have to wait till final 2011 figures come out

ardmacha

Quote:
Originally Posted by FT
[Ireland] is moving rapidly towards a sizeable current account surplus–in a range of 3-4% of GDP

Quote=:
Originally Posted by ObsessiveMathsFreak
There are no words. I’ll just refer everyone to Seamus Coffey’s July article the exchequer balance to see which way the graphs are going. Frankly, I don’t know that planet these two guys are living on. I can’t believe this statement was even written, let alone put into print.

So the posters on IrishEconomy don't know the difference between the Balance of Payments and the Public Deficit either. A bit like here, people with no shame about ignorance.

jimmycrackcorm

Time Magazine also seem to think we've turned the corner:

ardmacha

Time Magazine also seem to think we've turned the corner:

Both of these are correct in that Ireland can trade its way out of difficulty in a way that say Greece is unlikely to. The problem now is that the international economy is sliding, we can export greatly if there is growing international trade, but it is hard to do this if international trade is stagnant, whatever efforts we make at home.

Scofflaw

ardmacha wrote: »

So the posters on IrishEconomy don't know the difference between the Balance of Payments and the Public Deficit either. A bit like here, people with no shame about ignorance.

To be fair, ObsessiveMathsFreak appears to express some shame there, with his comment that perhaps he should seek a career in business journalism.

cordially,
Scofflaw

Tora Bora

The evidence is mounting. We have turned the corner, and the facts support that supposition. Living proof that austerity is the only show in town, when it comes to tackling a fiscal crisis.
http://www.irishtimes.com/newspaper/breaking/2011/0922/breaking26.html

Irish economy grew by 1.6% between April and June

DAN O'BRIEN and CIARA O'BRIEN
The economy expanded at a faster rate than expected in the second quarter of the year, putting in its strongest quarterly growth performance since the recession began, according to new data published today.
The seasonally adjusted figures estimated that gross domestic product - the widest measure of economic activity - rose by 1.6 per cent between the first and second quarters of 2011. Gross national product, which excludes the profits of multinational firms, increased by 1.1 per cent compared with the first quarter of the year.
Domestic demand, which excludes exports and imports, expanded too, growing by 0.8 per cent.

It is the first time since the recession began that GDP, GNP and domestic demand all grew in the same quarter.

However, these figures are volatile and can be subject to significant revision. Nor do they take account of the deepening of the euro area financial crisis since July or the continued signs of weakening in economic activity globally since mid-year.
The slowdown in the world economy in the second quarter of the year was reflected in Irish export figures in today’s statistics. Exports of goods and services grew by 1 per cent quarter on quarter – the second lowest rate of expansion since exports began recovering at the beginning of 2010.
Consumer activity – which is the largest component of domestic demand - also expanded, if only slightly, in the second quarter of the year, by 0.3 per cent. Consumer spending has been on a downward trend since the beginning of 2008 and the growth in the second quarter was likely to be accounted for by the temporary boost provided by the car scrappage scheme.

Investment spending, which includes building activity, grew for the second consecutive quarter in the April-June period suggesting that the collapse of the construction sector may be bottoming out.
Over the year, GDP was 2.3 per cent higher.

Net exports were 23.9 per cent higher than the same period a year earlier, reaching €1.9 billion. However, domestic demand continued to lag, contracting by €714 million or 2.2 per cent.

Agriculture, forestry and fishing, and industry were the only sectors to record an annual rise in output, with the latter growing by 10 per cent and the former increasing by 6.9 per cent.

However, the Central Statistics Office noted the decline in the “other services” sector, which accounts for almost a half of GDP at factor cost, moderated during the three-month period, declining by 0.7 per cent.
"Even allowing for some slowdown in the second half of the year due to the weakening world economy and fall-off in global demand, we still think that Ireland will post positive average GDP growth of between 0.5 per cent and 1 per cent in 2011, which after three consecutive years of contraction, will be a major step in the right direction," said Bloxham chief economist Alan McQuaid.
"The turnaround in the economy should further boost the allure of Irish financial assets for international investors."

ardmacha

Ireland has regained competitiveness and can take advantage of buoyant international trade. Unfortunately, international trade is going to be fairly flat for a few quarters, but when it does pick up it will be grow all the faster and our exports can take advantage of that.

Growth in Agriculture, forestry and fishing is convenient as much of this business is Irish owned and the benefits are spread throughout the country.

irishh_bob

ardmacha wrote: »

Ireland has regained competitiveness and can take advantage of buoyant international trade. Unfortunately, international trade is going to be fairly flat for a few quarters, but when it does pick up it will be grow all the faster and our exports can take advantage of that.

Growth in Agriculture, forestry and fishing is convenient as much of this business is Irish owned and the benefits are spread throughout the country.

all those markets will tank if a global rescession resurfaces

Weylin

no, we defiantly have not!

Debtocracy

Tora Bora wrote: »

The evidence is mounting. We have turned the corner, and the facts support that supposition. Living proof that austerity is the only show in town, when it comes to tackling a fiscal crisis.

Contracting the money supply while retaining the same debt levels levels is simply masochism.

parrai

So have we or haven't we, and why?

Delancey

Unfortunately the export figures released yesterday take a lot of the ' gloss ' off the Economic Growth figures , a 12% decline in exports is hardly the sign of an economy in recovery.

washman3

ROLL UP, ROLL UP.
we,ve turned the corner. time to start buying and selling houses to each other again. there's outstanding value to be got now but we need to hurry up before they're all sold. this is a once in a lifetime opportunity to get on the ladder.
And if you hear anyone on the sidelines cribbing and moaning, just tell them to go commit suicide. what would they know about it.!!!

Taxi Drivers

Pretty decent presentation on today's figures here. It doesn't go blasting out "we've turned the corner" and is a bit more reticent about putting too much weight on so few observations than others have been but does seem to give a fairly comprehensive run through the CSO's figures.

https://www.youtube.com/watch?v=Sz4owACD_UM

ardmacha

One more reason why things are a little bit better

---

Tourists are returning to Ireland in significant numbers, according to new figures from the Central Statistics Office.

Between May and July 1.95 million tourists came here, up 9.4pc from a year earlier – although the figures last year were down significantly on the volcanic ash disruption.

Trips from Britain - Ireland's biggest tourism market - were up 8.8pc.

Visitor numbers from North America and continental Europe were also strong and up 9.3pc higher.

Meanwhile, Irish people are travelling abroad less.

The number of trips abroad by Irish people fell by 1.8pc from a year earlier to 1.97 million.

fliball123

ardmacha wrote: »

One more reason why things are a little bit better

---

Tourists are returning to Ireland in significant numbers, according to new figures from the Central Statistics Office.

Between May and July 1.95 million tourists came here, up 9.4pc from a year earlier – although the figures last year were down significantly on the volcanic ash disruption.

Trips from Britain - Ireland's biggest tourism market - were up 8.8pc.

Visitor numbers from North America and continental Europe were also strong and up 9.3pc higher.

Meanwhile, Irish people are travelling abroad less.

The number of trips abroad by Irish people fell by 1.8pc from a year earlier to 1.97 million.

I think we could have turned a corner but the next budget will turn that corner into a brick wall