Cantillon: market wobbles a warning for Ireland

The contrast between buoyant economic optimism here and the nervousness internationally becomes clearer daily.

Traders and investors endured a tough start to the year on Monday with global markets on the slide, worried about the impact of China on world growth. In Ireland, meanwhile, we await confirmation today of the strongly improving exchequer position and of details of record job figures for State-supported Irish industry from Enterprise Ireland.

It is as if Ireland is in a kind of economic bubble, insulated from the woes which are troubling the global financial markets.

The expected GDP growth rate of 7 per cent for 2015 may be overstated due to specific factors but, even allowing for these, underlying growth here must be 4 per cent at least.

Can the Irish economy continue to defy international trends?

For the moment it is all systems go, with interest rates set to remain low and a weak euro helping exporters. It means the general election campaign will be fought on the basis of a strongly growing economy which, all the parties will assume, will continue to create resources and allow for some generous budgets.

Maybe these assumptions will prove correct, but the international trends do give some cause for caution.

Ireland’s strong performance over the past couple of years has been helped by growth in two of our biggest export markets, the United States and the UK. The euro zone has remained in the doldrums, but this has had the welcome side effect of keeping interest rates down.

The danger for the Irish economy – apart from the impact on international confidence of any sustained market turmoil – is if the US and UK economies start to run out of steam in a more generalised international slowdown. In the UK the threat of Brexit will not help growth, while in the US the Federal Reserve board is trying to engineer a rise in interest rates.

Ireland has shown the ability to outperform but the market wobbles are a warning sign that a relatively benign international backdrop cannot be taken for granted.