What does the departure of the 'Mango Mussolini' mean for Ireland?
Peter Brown joined us again on Friday 6th to discuss the result of the US election and it's impact on Ireland. What does the result of Joe Biden's victory mean for the world economy and most importantly - Ireland?
Peter also touched upon the Irish economic outlook in light of the current Covid situation.
What does a Biden victory mean for the market?
The US re-engages globally and tensions with China ease.
Peter cited that there are likely to be tax increases for the wealthy.
In terms of corporation Tax RTE's Will Goodbody also cited tax increases ''On the domestic front, Joe Biden’s tax policy includes a plan to increase corporation tax from 21% to 28%. If implemented, that could have a dampening impact on investment by US firms, including overseas in places like Ireland. But without Democratic control of the Senate, getting those tax changes through will be difficult if not impossible. ''
Peter believes that the markets response will be torn between their welcome reaction to the stimulus but less enthusiasm towards increased taxes.
The Wall Street Journal also believes Biden's impact may be quite diluted. ''Many money managers have coalesced around the idea that what happens now isn’t dependent quite so much on what Democrat Joe Biden will do once he takes control of the White House—especially since it appears Congress might be divided.''
Peter echoes this saying that he believes Biden's tax increases and stimulus package of $4 trillion will get watered down by the Republican (likely) controlled senate.
Ultimately Peter believes that Biden is good for Europe and Ireland.
Irish Outlook:
In terms of the Irish Outlook; Peter expects:
Massive hit to growth
High unemployment to stay
Companies pairing back will lead to more job losses
Residential property prices cannot hold up against this backdrop
Many business closures will be permanent
Government supports will have to continue
Commercial property badly hit.
The ESRI summer report which can be found here was equally glum in it's predictions, forecasting in May the largest recession in history. It said ''Two areas where the economic impact of COVID-19 has been clearly visible are the labour market and public finances. The unemployment rate reached a record high of over 28 per cent in April. Research in the commentary indicates that young workers and those living outside of Dublin have been most heavily impacted. While unemployment is expected to decline as the economy reopens, our Baseline scenario still has unemployment above 17 per cent for the year as a whole.''
Paschal Donohues recent government forecasts cited the impact of COVID-19 on GDP is less than previously expected, mainly due to the resilience of Multi-National Company (MNC)-dominated exports, however the hit to the domestic economy has been severe.
He went onto say ''my department is projecting that GDP will fall by -2.5 per cent this year. While this headline figure is less severe than envisaged in the spring, it reflects the contribution to GDP from parts of the multinational sector*. Other – more relevant – indicators confirm a severe economic fall-out from the pandemic. Modified Domestic Demand, perhaps the best indicator of domestic economic conditions, is projected to fall by 6.5 per cent this year.''
In summary it looks like a rocky post covid economic outlook for Ireland, very moderately tempered by the arrival of a more Ireland and Europe friendly in policy US President.
As always please do your own independent research before making any financial decisions and the above are not recommendations.