Like a Phoenix rising from the ashes, the economy’s recovery since the financial crash was hailed this week in a glowing review from the Central Bank.
Well, maybe not quite that far, but the regulator’s chief economist Gabriel Fagan called the economic recovery a “Phoenix miracle”, which is when strong growth is driven by rising income and business investment without increasing debt levels.
“I think the Irish case fits the bill precisely,” he said, due to its “high-wage, high-skills economy”.
In its official forecast, the bank said wages are going to rise further as employment grows at a faster rate than previously expected. Wage cost inflation is set to reach 2.8 per cent per annum for the three years to 2018.
The jobless rate meanwhile is expected to fall to 5.6 per cent by the end of 2018. The rate stood at 6.4 per cent in March, according to the Central Statistics Office, down from a crisis-time peak of 15.1 per cent in 2012.This week’s figures showed the number of workers classified as unemployed fell by 3,300 to 141,400 in March.
While the forecasts might suggest that all is rosy in the garden, the latest Exchequer figures were down on the Government’s targets, even if revenues were still running ahead of last year. Tax take for the year was 2.4 per cent or €282 million behind in March.
The problem lay with weaker-than-expected income tax receipts, which the Department of Finance said was in part related to the under-performance of the Universal Social Charge (USC), which was €60 million or 7.5 per cent below target.
Overall, income tax, the Government’s main tax head, undershot the target by nearly 4 per cent or €180 million this year, coming in at €4.1 billion for the three-month period.
On corporation tax, there was more disappointment for the Government. It came in 25 per cent below expectations at €520 million. On a monthly basis, it was nearly 40 per cent or €163 million below profile. However, these factors were partly offset by strong VAT returns.
Separately, businesses have broadly welcomed the impending introduction of real-time reporting for employers as part of efforts to modernise the PAYE system. Employers will report pay, tax and other deductions, as well as details of any employees leaving, at the same time as they run their payroll.
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Following disappointment recently as Dublin missed out on a number of institutions departing post-Brexit London, there was better news this week as the capital was said to be still in the running for Daiwa Securities’ new EU hub.
The chief executive of the Japanese brokerage, Seiji Nakata, told reporters in Tokyo it was still considering both Dublin and Frankfurt, and that it wants to make a decision “soon”. The hub will employ “several dozen employees” he said.
Separately, Scottish investment giant Standard Life, which is advancing plans to merge with Aberdeen Asset Management in an £11 billion (€12.9 billion) deal, said it was weighing turning the group's Dublin operation into its post-Brexit EU base. A spokesman said the city is one of the options being considered by the group.
Elsewhere, UK-owned investment firms including Quilter Cheviot, Investec and Smith & Williamson said they were considering changes to their structures in the Republic as they prepare their businesses for the fallout.
With negotiations between the UK and the EU getting under way towards the end of the month, dairy co-op Aurivo, formerly Connacht Gold, said it was hopeful tariff-free access to Britain’s food market would be maintained after Brexit.
“Maintaining a barrier-free border with the UK was an imperative for the dairy industry here,” chief executive Aaron Forde said.
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With the Government clamouring to contain hot-button issues like water and the Garda in recent weeks, the housing issue remains a critical sticking point.
Census figures this week revealed that just 2 per cent of the 1.7 million occupied homes in the State were built in the past five years, reflecting the near-complete collapse in construction after the crash.
The figures show that only 33,436 housing units were constructed between 2011 and 2016 compared to 431,763 dwellings between 2001 and 2011. The fall-off in supply since 2010 has resulted in an acute housing and homelessness crisis across the State.
That being said, quantity surveyors Linesight said the building industry grew by 18 per cent in 2016 and is poised to expand by a further 15 per cent this year. This could, it said, create up to 80,000 new jobs.
For now though, the lack of housing is driving up prices. The average cost of a home in the Republic is now nearly six times the average income, according to Davy's chief economist Conall Mac Coille. The figure is roughly in line with the situation in the UK, but below the "boom-time" peak of eight to nine times the average Irish income.
The situation hasn’t been helped by developers who have delivered just 37 social housing units last year under regulations that require the allocation of 10 per cent of new homes for use as social housing.
For many of those lucky enough to have a house however, paying the mortgage remains problematic. New research from the Central Bank showed young borrowers would suffer most from an interest rate increase.
The average monthly repayment for a 35- to 39-year-old with a tracker mortgage would rise from €760 to €932 if interest rates rose by two percentage points, it said.
Meanwhile, Mars Capital, one of the biggest overseas buyers of Irish mortgages following the banking crisis, is poised to refinance €332 million of former Irish Nationwide Building Society and Permanent TSB subprime loans in the bond market.
While 0.7 per cent of the loans are behind in repayments, none are more than three months in arrears, according to market sources. Almost 14 per cent of the portfolio has been restructured.
Separately, the Competition and Consumer Protection Commission told an Oireachtas committee it has "serious concerns" about efforts to cap interest rates on home loans, as it believes it would limit competition to the "detriment of the very consumers that it wishes to protect".
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Central Bank governor Philip Lane was before the Oireachtas finance committee to give the latest on the industry-wide examination of tracker mortgages that it ordered at the end of 2015.
He said Irish banks have paid out more than €120 million in the past two years in redress and compensation to mortgage customers who were denied a tracker rate. This comprised €78 million paid to 2,600 customers by the end of February.
The special liquidators of Irish Bank Resolution Corporation meanwhile are examining 29,000 mortgage customer accounts of the former Irish Nationwide Building Society to see if any of them might have been denied a tracker rate over the past decade or so.
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Finally, there were some positive developments on the jobs front as two companies announced plans to expand here.
Citadel Securities, the largest US equity trader, opened an office in Dublin as part of a European expansion and plans to employ at least 50 staff by 2019. The firm insisted the decision had been taken prior to the UK's Brexit referendum.
Elsewhere, IT services firm Version 1 announced plans to create more than 350 jobs in the Republic. It did not rule out adding further jobs in the near future as it eyes a possible flotation in Dublin or London.
