Elections, bailouts, divergent Central Bank policies - how can Ireland navigate the coming challenges?

This was the topic of discussion at yesterday’s Investec/UCD Smurfit School Breakfast Briefing, attended by more than 200 graduates of the school's business programmes.

The event, which was chaired by Professor Pat Gibbons, was addressed by Professor Eamonn Walsh and Investec Ireland Chief Economist Philip O’Sullivan, following which a lively Q&A session was held.

At first glance, the global economy seems to be in Goldilocks territory – neither too hot nor too cold, with GDP projected to expand next year at the average annual pace (c. 3.5%) seen over the past three decades. However, this headline figure masks very divergent growth profiles across the world’s leading economies. Growth across the UK, US and Eurozone – the destinations for two-thirds of Irish exports – is seen as relatively lacklustre, with GDP forecast to expand by between 1.3% and 2.5% in 2017. A related pressure is the currency market, with sterling having fallen by a sixth in trade-weighted terms from its 2015 high, which represents a challenge for many Irish exporters.

Panellists explored the complexities of Brexit, a process that could take up to a decade to complete as the UK has to renegotiate its trading arrangements with 80 of the world’s industrialised nations. The upcoming US Presidential election and its implications for risk assets generally, the dollar and global trade (and by extension, for Ireland) were also covered by the speakers.

Speakers were more sanguine about the prospects for the Eurozone, while noting the downside risks from the wave of elections scheduled for over the coming year and the pressure on exporters should the single currency continue its recent ascent.

Closer to home, while the Irish economy expanded at a rapid clip (+4% year-on-year) in H1 2016, high frequency indicators such as the Investec Manufacturing and Services PMIs suggest that growth may have moderated since the Brexit vote. In this regard, the US election is seen as a pivotal event for the domestic economy.

In terms of advice for Irish businesses, the panel urged companies to be nimble and seek opportunities outside of their traditional markets, while at the same time examining all options when it comes to protecting business models, particularly in areas such as hedging.