| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

News : Irish Last Updated: Oct 16, 2009 - 8:18:16 AM

Irish Economy: Goodbody says recovery will be U-shaped; Private sector debt levels will increase to 225% of GDP in 2009 - - among highest of developed world
By Finfacts Team
Oct 15, 2009 - 2:38:51 PM

Email this article
 Printer friendly page

Irish Economy: Goodbody Stockbrokers says a recovery is underway and will be U-shaped rather than V-shaped, given the scale of the task ahead in terms of fiscal consolidation and deleveraging, although economic growth is expected to return in the second half of 2010. The broker says private sector debt levels will increase to 225% of GDP in 2009.

The latest quarterly economic update issued today from Goodbody Stockbrokers predicts a contraction in the economy of 1.1% (GDP) for 2010, rising to a growth figure of 2.4% in 2011. (This contrasts with the broker’s previous most recent prediction of a 3.7% contraction in 2010, followed by a 1.2% growth figure in 2011.) Overall, Goodbody Stockbrokers say they are more confident now that a recovery is on the way, led by an improvement in exports but it will be U-shaped rather than V-shaped.

Goodbody Chief Economist Dermot O’Leary says that although public sector debt levels are receiving most of the attention, high private sector debt levels are of greater concern in the medium term for the Irish economy. “We believe private sector debt levels will increase to 225% of GDP in 2009, and are unlikely to fall below 200% until 2012 (similar to current levels in the UK and US). Given that Ireland is one of the most indebted economies in the developed world, we have benefited most from the collapse in interest rates, which we have quantified at around 5% of GNP. However, this benefit will not be repeated and will instead act as a drag on businesses and consumers going into 2011 in particular as the impact of interest rate rises is felt.”

“We have repeated an analysis of household debt that we originally carried out in 2005,” continued Dermot O’Leary, “And although household debt levels increased further over the past few years, to peak at 175% of disposable income, our original findings remains the same: Irish households are better able to sustain higher debt levels due to the younger population and low interest rates. However, high debt levels increase the sensitivity of Irish households and the economy overall to interest rate changes, both on the way up and they way down.”

Goodbody says at the end of 2006, total household assets amounted to €824bn, representing a 97% increase over the previous 5 year period. However, since that time Ireland has experienced significant wealth destruction. By the end of next year, asset values are set to amount to €654bn, a drop of 20% from the peak and close to levels last seen in 2004. This can be very much attributed to property, giving Irish households’ dependence on this source of wealth. By the end of 2010, the broker estimates the value of the housing stock will stand at €342bn, a drop of a third from the peak.

“The budget deficit is likely to remain high in the coming years,” says Dermot O’Leary,


“and we do not believe that the Government will reach its target of hitting the 3% of GDP deficit by 2013. Despite this, we have become more confident about the outlook over recent months. Government bond yields are down, policies have been put in place for resolving the banking issue, a budget consolidation plan has been put in place, funding is complete for this year and has begun for 2010 and recent rhetoric suggest that more focus is going to be placed on spending in the coming Budget rather than further damaging tax increases. Risks remain but the outlook has brightened considerably.”

Goodbody says private sector debt levels in Ireland are now among the highest in the developed world. The economists estimate that the private sector debt/GDP ratio will rise to 225% this year, compared to 86% a decade ago. However, the process of deleveraging has now begun. Since its peak last November, outstanding credit has fallen by 3%. However, this is a very slow process, and is viewed as the most significant medium-term concern for the Irish economy, given that, by definition Irish households and business will have been the biggest beneficiaries of the dramatic fall in interest rates over the past twelve months, but this will reverse, albeit slowly over the coming years. The economists assume that private sector debt/GDP ratio will fall to only 211% by the end of 2011.



The Goodbody economists say that although Ireland is a very open economy and is influenced by global developments, it must be stressed that the recession in Ireland was not caused by global trading patterns.

In fact, exports have held up remarkably well in Ireland as global trade has collapsed. Goodbody said it is taking the opportunity in its current commentary to upgrade views of the prospects for a recovery in Irish exports in 2010 and 2011, in line with signs of both a more vigorous recovery in the global economy and an improvement in the export orders components of domestic PMI (Purchasing Managers' Index)  surveys. This also has some positive implications for employment and investment.

As a result, the economists now expect GDP to contract by 1.1% in 2010, before growing by 2.4% in 2011.

However, they say that the shape of the recovery will be heavily influenced by developments in domestic demand. A collapse in domestic demand has been the cause of the recession in Ireland. After contracting by c.5% in 2008, domestic demand is expected to fall by a further 12% in 2009 and 5% in 2010, before growing modestly in 2011.

The trajectory of consumer spending will play an integral role in the speed of the economic recovery in Ireland.

Related Articles
Related Articles

© Copyright 2007 by Finfacts.com

Top of Page

Latest Headlines
Ryanair revises up full-year profit guidance
AIB bank profitable in third quarter
Ryanair announces half-year profits up 32% to €795m
Ryanair benefits from improved customer service
Ryanair to buy 100 new Boeing 737 MAX 200
Finfacts server migration Thursday
State-owned Allied Irish Banks reports H1 2014 profit as bad loan charges plunge
Ryanair reports profit in its financial first quarter soared 152%
UK firm opens van dealership in Dublin
Ryanair reports 8% fall in full-year profit; US services to commence in 2019
Global Financial Centres Index: New York overtakes London; Dublin slips to 66 of 83 cities
Bank of Ireland reports “significant” improvement in 2013 results
Sale process of IBRC UK projects Rock and Salt completed
CRH says 2014 will be year of profit growth after reporting 2013 loss
Ryanair reports third-quarter loss
Irish Water says it saved €100m in setup costs
RSA Insurance fires two Irish executives for large loss/ accounting irregularities
Bank of Ireland will have to raise provisions by €1.4bn; AIB says it's "well capitalised"
CRH reports slightly improved third quarter
Central Bank says ownership of Newbridge Credit Union transferred to permanent tsb
Ryanair reports H1 profits rose by 1% to €602m
Dublin Web Summit: Irish Stock Exchange and NASDAQ OMX announce dual listing plan
Irish pension managed funds returned to growth during September
Dan O’Brien resigns as economics editor of The Irish Times
Central Bank says no action required on Anglo tapes revelations
Ryanair flew 9m passengers and Aer Lingus carried 1.1m in August
UK Competition Commission says Ryanair must cut Aer Lingus stake to 5%
CRH reports H1 2013 revenue dip and loss
Vodafone refunded UK after discovery of Irish tax haven deal
RBS reports half year profit; Ulster Bank posts reduced loss
Bank of Ireland cuts pretax losses in HI 2013 to €504m
Irish State-owned Allied Irish Banks reports losses of €758m in H1 2013
Service Announcement
Irish managed pension funds declined in June
VHI reports 2012 surplus of €54.3m; Health insurance made loss
Ex- Elan director says management / board "not competent to run a business"
Aer Lingus to put €140m in employees pensions fund; Ryanair apoplectic
Wednesday Newspaper Review - Irish Business News and International Stories - - May 22, 2013
Tuesday Newspaper Review - Irish Business News and International Stories - - May 21, 2013
Ryanair, Europe’s biggest low cost carrier, announced Monday record annual profits of €569m - - up 13%