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Leinster Society of Chartered Accountants Seminar

Leinster Society of Chartered Accountants Seminar. Jim Power Nov 4 th 2013. Global Policy Response- Strong & Unorthodox. 6 th anniversary of enormous global crisis Strong response – signs that it is working

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Leinster Society of Chartered Accountants Seminar

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  1. Leinster Society of Chartered Accountants Seminar

    Jim Power Nov 4th 2013
  2. Global Policy Response- Strong & Unorthodox 6th anniversary of enormous global crisis Strong response – signs that it is working Quantitative easing of Money Supply – bond buying programme US & UK, more sterilised in Euro Area Federal Reserve buying $85 billion per month in bonds to keep long-term interest rates down & provide more liquidity to banking system Fiscal easing in US, Japan & fiscal tightening in Euro Zone & UK Interest Rates 0.5% in Euro Zone & UK, zero rates in US & Japan Policy makers will continue to do whatever it takes
  3. International Overview Euro Zone economy in recession for 6 quarters, positive growth in Q2 2013, continued in Q3 UK economy surprising on upside – Q3 strongest in 3 years US doing reasonably well, but not well enough Chinese economy has lost some momentum ECB will continue with accommodative stance – some concerns about bank liquidity – more LTROs Federal Reserve concerned about impact of higher bond yields on ‘moderate’ pace of growth – withdrawal of stimulus will be tricky for markets Official interest rates under no pressure – will require clear evidence of sustainable recovery everywhere Inflation not a problem anywhere
  4. Global Outlook from IMF (October 2013)
  5. IRISH ECONOMY SO FAR IN 2013 Economy technically out of recession Q2 2013 H1 GDP -1.1% YoY Retail Sales (J-S) Volume +0.4%, Value -0.2% Excluding Car sales Volume +0.5% Value +0.1% Merchandise Exports (J-A) -7.3% (Patent Issue) Food +8.1% Chemicals -9.8% +33,800 jobs in year to Q2, 64% full-time jobs Live register trending downwards Deficit falling gradually – tax take in line with expectations Credit conditions still very difficult Housing activity stabilising, Dublin market showing strong signs of life Overall, light appearing,but challenges remain
  6. Growth in Credit (YoY)
  7. Ireland-Employment Q2 2013
  8. Consumer Price Inflation (YoY)
  9. Ireland-Consumer Confidence (ESRI/KBC)
  10. Business Confidence (KBC/CAI)
  11. House Price Index
  12. House Price Index (YoY)
  13. Private Rent Index
  14. Mortgage Arrears 770,610 private residential mortgages with €109.1 bln in loans outstanding 148,529 buy to let mortgages with €30.6 bln in loans outstanding 97,874 private residential mortgage in arrears over 90 days end-June (12.7% of total) €18.6 bln outstanding balances on these mortgages in arrears 30,326 buy to let residential mortgages arrears over 90 days (20.4%) with €8.7 bln outstanding balances on these mortgages in arrears 79,357 PDH mortgages re-structured end-June 76.5% meeting new terms Major issue over next couple of years – no simple solution!
  15. Key Elements of Budget 2014 €2.5 bln adjustment €0.9 bln Revenue, €1.6 bln Expenditure Stimulus for property &construction sector Stimulus for tourism sector Further attach on private pension funds & savings Concept of universality still dominates expenditure – economically inefficient
  16. Irish Economic Forecasts
  17. Economic Forecast Budget 2014 (Dept of Finance)
  18. Total Tax Revenues
  19. Tax Projections 2014
  20. Changing Nature of Taxation
  21. Ireland’s Fiscal Consolidation
  22. General Gov Balance (% GDP)
  23. General Gov Debt (%GDP)
  24. Key Conclusions on Budget 2014 Budget as expected – not easy to take €2.5 bln out of economy struggling to emerge from recession Budget targets on track for IMF bailout Dec 15th Economic forecasts look realistic, but obvious risks Too early to make any comments on Budget 2015 Tourism and Property & Construction the main beneficiaries Attack on savings & pensions short-term thinking, not positive for long-term Relatively favourable for SME sector Approaching the end of very tough budgets, but debt levels still very high, so expansionary budgets not on the agenda, but good to have survived thus far!
  25. Key Economic Issues for Ireland External environment getting somewhat better Dangerous levels of sovereign debt Return to market funding in December 2013 NAMA impact on property market Personal Debt & Insolvency Bill Restoration of a functioning banking system
  26. Equity Markets in 2013
  27. S&P 500
  28. FTSE 100
  29. ISEQ
  30. NIKKEI
  31. DAX
  32. Issues for Equity Markets Economic recovery story becoming more real Corporate earnings healthy Lot of good news built in Tapering of Federal Reserve support Health of European banks Can current momentum be maintained?
  33. ANY QUESTIONS?
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