The Christmas lull in the world of finance has thawed, and while the first week of the year has been punctuated with positive indicators for the year ahead, the nature of formidable challenges like Brexit and a Trump presidency have begun to crystalise.
The political uncertainty and fractured geopolitical nature of the world awaiting us in 2017 means it will be more important than ever to bolster and protect economic security should the worst of the forecasts come to pass.
Just as well then that the euro-area economy ended 2016 with the strongest momentum in more than 5½ years with the composite Purchasing Managers’ Index climbing to 54.4 in December from 53.9 in November, according to IHS Markit.
Businessman Donald Trump meanwhile waits in the wings ahead of his inauguration on January 20th, but that has not stopped him flexing his muscles.
Many officials of the US Federal Reserve believe the central bank could be forced to lift rates higher than expected if Congress passes Trump's promised economy-boosting tax cuts, according to minutes of the Fed's final policy meeting of 2016.
The US dollar continued to perform strongly, rising to its highest level in 14 years against the euro and a range of other major currencies on Tuesday after data showed solid growth in US manufacturing.
Nonetheless, former US treasury secretary Lawrence Summers said investors are underestimating the risks associated with Trump’s incoming administration. The Harvard professor, a Democrat who was treasury chief under Bill Clinton, said “extraordinary uncertainty” lies ahead.
And if Trump’s plans to cut corporation tax and ring fence US jobs weren’t bad enough for the Republic, more than 100 US legislators have asked him to revoke a permit allowing Norwegian Air International to fly from Cork and Shannon to Boston.
Washington’s department of transportation recently granted Irish-based Norwegian Air International a foreign carrier’s permit, but 108 congressmen and women have written to Trump calling on him to revoke or suspend the permit, claiming the company is Norwegian only in name.
“Its crews work under short-term contracts, many governed under Singapore law; some crewmembers are based in Bangkok; and the company is organised and regulated in Ireland,” they said.
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On the Brexit front, there were likely some furrowed brows in Government circles this week when the UK's senior diplomat in Brussels suddenly resigned. The resignation of Ivan Rogers, the British ambassador to the EU, raised fears that a hard Brexit is becoming more likely.
Rogers had drawn the ire of Brexiteers with his stance on the UK’s exit from the bloc, as well as comments that it could take a decade to negotiate Britain’s exit, and he didn’t go entirely quietly. In his resignation letter, he lamented the “ill-founded arguments and muddled thinking” that have characterised the Brexit debate.
That being said, the likes of Nigel Farage were clapping their hands in delight as he upped and went, although prime minister Theresa May resisted calls to appoint a committed advocate of Brexit as his replacement.
Instead, Tim Barrow, a career diplomat, got the nod. A former ambassador to Moscow and a current political director at the foreign office, Barrow has extensive EU experience and served at the British permanent representation in Brussels during the 1990s.
Farage meanwhile was on Irish airwaves claiming that if the UK fares well post-Brexit, the Republic will consider leaving the EU. “If...we are clearly better off democratically because we are running our own affairs, better off economically because we’ve reached out to the world...then public opinion in Ireland will very much move in our direction.”
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The good news with all that going on is the economy appears to be in rude health. The State’s finances were boosted by a record tax take of €47.9 billion in 2016, although the rosiness of the garden has led to speculation the Government may face fresh pressure to increase public spending this year. Tax figures for December were also below expectations.
Economists now estimate the budget shortfall for last year came to 0.7 per cent of the size of the economy, the lowest since the financial crisis began in 2008, compared with the Government's official target of 0.9 per cent. Austin Hughes, an economist at KBC Bank Ireland, said the figures would add to "pressures to ramp up public spending".
As part of the tax take, efforts by the Revenue Commissioners to ensure compliance with tax law yielded €555 million for the exchequer last year, when there were 17 criminal convictions for serious tax and duty offences.
The exchequer returns figures were published on the same day the Government raised €4 billion by borrowing on international markets, covering close to half of the minimum amount it plans to raise for the entire year.
It just kept getting better for the Government as data from the Central Statistics Office showed the unemployment rate fell to 7.2 per cent in December, the lowest since August 2008.
IDA Ireland held a briefing to say the flow of foreign direct investment (FDI) into the Republic will remain strong in the coming months after a record 2016, it also warned against "complacency" over cost-competitiveness and threats in the global economy.
Employment in foreign multinationals backed by the IDA reached a record high of almost 200,000 in 2016, with 244 investments during the year, up from a previous high of 213 in 2016.
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The housing crisis is never far from the news, and this week saw applications open for the help to buy scheme. Hundreds of first-time buyers applied within the first few hours on Tuesday.
The home purchase incentive offers homebuyers the chance to get up to €20,000 to put against their deposit on a new home. The scheme is open to first-time buyers who have signed contracts since July 19th last year or will do before the end of 2019 on newly-built homes, or properties they are building themselves worth less than €500,000.
It provides a payment equal to 5 per cent of the property value up to a maximum of €20,000 by way of a rebate of income tax and DIRT paid by the homebuyers in the four years before the year they buy their first home.
The scheme is not without its detractors however, and myhome.ie, the property website owned by The Irish Times Ltd, and Davy, the stock broking firm, warned it could lead to an 8 per cent inflation of property prices next year with double-digit growth a “distinct possibility” in the years ahead.
Homeowners will want to tread carefully when it comes to taking our mortgages following a warning from analysts at Investec that the State's banks are set to become more "aggressive" in their approach towards borrowers in default this year.
The warning came after an Irish Times analysis showed the largest home lender, AIB, led the way in resorting to legal action to recover unpaid debts in 2016. The bank issued almost four times as many High Court debt actions against borrowers than its closest rival, Bank of Ireland.
The State-owned bank filed more than 1,200 applications for summary judgment last year, up from 860 in 2015. Applications by Bank of Ireland for similar judgments fell last year to 325 from 550 in 2015.
