More than 50 members of the Mayo business community attended the Ulster Bank Economic Roadshow at The Harlequin Hotel in Castlebar this week to gain insight into how global decisions will impact how they do business in Ireland. The briefing entitled ‘Economic Recovery at Home and Abroad – Where do we stand?’ was led by chief economist Simon Barry, who gave his analyses of the outlook for exports, domestic demand, the labour and housing markets, inflation and public finances.
“There has been some modest improvement in Irish debt market conditions following the recent bank stress test results,” Mr Barry said. “Ten-year government bond spreads have fallen from their pre-test record highs. Nevertheless, spreads remain extremely high reflecting still-elevated concerns about Irish sovereign solvency. With 10-year bond yields at in excess of nine per cent at present, investors clearly view some form of debt restructuring as a live risk.”
According to Mr Barry the stress test and restructuring announcements represent important progress in addressing market concerns about the health of the banking sector, and in setting out robust estimates of the extent of the burden the sector will place on the sovereign. “However, it will be extremely important that both recovery dynamics and the fiscal correction remain on track if investors are to be convinced of the sustainability of the Irish public finances,” he added.
“The Irish fiscal correction is now well into its third year and the underlying budgetary situation is beginning to improve, evidenced by the emergence of positive, albeit slightly below-target, growth in tax receipts.
Commenting on Irish recovery prospects Mr Barry said: “Ongoing gradual global recovery offers very important support for Ireland. If maintained, modest export-led Irish growth should emerge this year, supported by ongoing improvements in competitiveness, albeit that consumers and domestic-facing businesses are likely to remain under considerable pressure in 2011.”