Country Risk Service Ireland 1st Quarter
The Economist Intelligence Unit, January 2013, Pages: 15
The Economist Intelligence Unit expects the Fine Gael-Labour Party coalition to serve its full term to early 2016. However, austerity and economic restructuring have eroded its popular support, which will exacerbate differences within the coalition. What will happen beyond 2013, when the current EU/IMF bail-out programme expires, is highly uncertain. A significant risk is that if the euro area crisis escalates, the ensuing financial turmoil would hit Ireland. The export-driven economic recovery that started in the first half of 2011 remains weak. Real GDP is estimated to have expanded by 0.6% in 2012. We expect another year of modest growth in 2013. A gradual acceleration is expected from 2014, but output will still be below its 2007 pre-crisis peak in 2017. We expect the current account to remain in surplus during the forecast period.
On December 13th, the Labour Party chairman, Colm Keaveney, voted against social welfare cuts in the 2013 budget and resigned the party whip. He is entitled to remain as chairman, which is likely to cause further tensions in the party. We continue to consider an early election unlikely because of the damage that it would do to investor confidence, but the collapse of the government cannot be discounted.
The government has continued to pre-fund its financing needs for early 2014. On January 8th, Ireland raised EUR2.5bn on the syndicated bond market with a reissue of a five-year bond at a yield of a 3.3%. However, we continue to believe that a full return to the bond markets after the EU/IMF bail-out agreement expires will be difficult to maintain.
Country Risk Service Ireland 1st Quarter
Ireland at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Rating definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk
Central scenario for 2013-17: Political stability
Central scenario for 2013-17: Election watch
Central scenario for 2013-17: International relations
Central scenario for 2013-17: Policy trends
Central scenario for 2013-17: Fiscal policy
Central scenario for 2013-17: Monetary policy
Central scenario for 2013-17: Economic growth
Central scenario for 2013-17: Inflation
Central scenario for 2013-17: Exchange rates
Central scenario for 2013-17: External sector
Key risk indicators
Ratings summary
Quarterly indicators
International assumptions summary
Economic structure
Public finances
Exchange rates, interest rates and prices
Financial sector
Current account
Foreign payment and liquidity indicators
External trade
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