A research note just published by analysts at London-based Independent Strategy offers a largely positive perspective on the Irish economic recovery story, albeit with some caveats.
This followed a week-long trip here to test the pulse of the economy. Ireland has done a “great and gutsy job” in tackling its problems, the group says.
Independent Strategy, founded in 1994 and led by Trinity College Dublin graduate David Roche, is “long” on Irish sovereign debt. “It is a less exciting investment than it was, but this reflects vastly reduced risks as well as massive returns already achieved. And it still offers double-digit returns looking out.”
It says the “most exciting investment” here is commercial property, with “hyper-attractive” yields of 8 to 11 per cent and the fact that the State continues to attract the “cream” of foreign direct investors.
It is also a fan of the National Asset Management Agency. “Nama, the superbly run Irish ‘bad bank’, may well deliver a profit to add to the exchequer balances down the road,” it says. “That will be additional support to debt sustainability.”
Independent Strategy says Nama has paid down €4.75 billion of its original debt and is on target to pay another €2.75 billion this year. “It may well deliver a cash return to the State at the end of its operation,” it muses.
The caveats? It cautions that our banks will “probably” need more capital when stress tests are completed later this year to reflect ongoing difficulties with their mortgage and SME loan books. “We reckon there may be an additional need for €2.5 billion to €3 billion of recapitalisation for the banks, which they may yet find themselves.”
It also says Ireland’s export-led recovery depends on growth returning to other European economies and its sees little evidence of this in the short term.
“Uniquely in Europe there is an awareness of what needs to be done and the social and political cohesion to get it done. Ireland abú!” We’re not sure about the first part of this analysis, but here’s hoping for the victory.
