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Ireland Country Risk Report Q2 2016

Ireland Country Risk Report Q2 2016

Core Views

Ireland's economic growth story will be robust in 2016 and 2017, withthe country set to remain the fastest-growing eurozone economy.

We believe the recovery is sustainable, with the chances of anotherhousing bubble re-emerging much lower than before the 2008 crisis.

Economic growth will be broad-based, driven by a combinationof surging private consumption, relaxed fiscal consolidation, andinvestment in productive capacity by multinationals.

External conditions will also be favourable, amid ECB QE, low globaloil prices, and Ireland's trade link with the US and UK economies.

The ruling Fine Gael/Labour coalition looks most likely to remain inpower after the April 2016 election.

They will benefit from improving economic conditions as well asdeclining support for the republican Sinn Fein party.

A Fine Gael election victory would be net positive from a financialmarket and investor perspective.

Major Forecast Changes

Even stronger activity than we expected means we have revisedup our forecasts for real GDP growth to 7.1% in 2015 and 4.6% in2016, from 6.1% and 4.1% previously.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Economy Healthcheck: Fewer Threats To Celtic Tiger 2.0
Ireland's robust economic recovery is sustainable, and will continue apace in 2016 and 2017 .
TABLE : ECONOMIC DASHBOARD
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE : GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Regional Monetary Policy
ECB: Underwhelming But Still Substantial Easing
The European Central Bank (ECB)'s monetary policy easing on December 3 disappointed markets in terms of its depth and breadth.
However, strengthening economic and inflation conditions in the eurozone suggest that the ECB may be better off holding fire, and in
our view, the easing is still fairly significant despite disappointment on the headline figures. We continue to forecast a weaker euro in
Chapter 2: 10-Year Forecast
The Irish Economy To 2025
Robust Long-Term Growth Outlook
We hold a positive view towards Ireland's economic growth prospects over the long term, with growth expected to average over 3.7
%per annum over the next 10 years. Exports will remain a key driver of growth, supported by improving conditions for households, which
means private consumption will become an increasingly important growth driver.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Fine Gael Well Positioned For Return To Power
Ireland's governing Fine Gael party is well positioned to remain in power following the April 2016 parliamentary election. A Fine Gael
victory would be welcomed by investors, as it suggests far-left Sinn Fein will be kept out of power, and as Fine Gael enjoys strong
macroeconomic credentials.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Political Challenges Beyond The Recession
Although political risk in Ireland is generally quite low, the country's economic downturn put several structural issues into the spotlight.
Challenges over the next decade will include demographic changes, regaining living standards, migration and the country's relationship
with Northern Ireland.
Chapter 4: BMI Global Macro Outlook
Global Macro Outlook
Unfinished Business In 2016
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: IRELAND – MACROECONOMIC DATA & FORECASTS

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