How are we looking for next year?

Hey guys,


I'd been checking this forum for weeks on end towards the end of 2009 (up to the budget), but then never really checked back much afterward.


I was just wondering if anyone could tell me how we (Ireland) are getting along?

Will next year be a dose of goodness with things picking up and getting better, or are we gonna be much worse off than we are at the moment?


(by the way, I know nobody knows for sure what way things will pan out, so I'm obviously just looking for some realistic opinions (realistic = not 'we're all gonna die' style comments).


Cheers

DubMedic

Put quite simply.. this country needs to cop itself on and wise up to the fact that you cannot just spend what isn't there, and hope it won't affect you.

Brian Lenihan is trying his level best to manage, but like all the others he's limited in the resources he has.

.

Nody

Another 4 years with reduction of spending by around 4 to 5 Billion a year based on current figures.

Then there is of course NAMA and the virtual high rents required for that fiasco. Guess the good thing is the brown envelope developers will get some work so a slight (I'd guess around 10% mark) reduction in cost to 90% of paid price due to taxes from that but that still means paying out even more money for them to develop the land to make it sellable at only a moderate to high loss in 10 years time (excluding the cost of capital, reduction of money etc. from future price paid today).

And we'll not even bother to mention public employees (state/semi state/qunago) and the unions and the strikes to come there (in various forms with out going on a real strike since that means the state saves money).

Now do you want to take a guess of my predictions?

ei.sdraob

the outlook is cloudy with a sprinkle of rain

AARRRGH

I would bet all my savings that 2010 will be worse than 2009, and 2011 will be worse than 2010.

I cannot see anything other than a long, painful correction. That means a couple of things:

1. You will never again earn the money you currently earn. Leave your job and expect a significant paycut.
2. Terrified workers saving all their wages and frantically paying off their debt means even lower tax returns.
3. More people losing their jobs means higher social welfare payments and once again lower tax returns.
4. People beginning to realise house prices are still rip off so no market activity.
5. More emigration resulting in less tax returns(but a slight easing of the social welfare bill.)
6. Incompetent government unable to make hard decisions resulting in our public expenditure continuing to be many times greater than the tax returns.
7. Huge amounts of denial in the public service resulting in strikes and a continuation of the insanely high public sector wage bill.
8. NAMA and the new debt forgiveness scheme adding billions of euros in interest payments each year, and making it difficult/expensive to raise new funding. There is a real risk we won't be able to get enough funding to make up our yearly deficit resulting in some sort of IMF style bailout.
9. Multi-nationals leaving Ireland (Intel, Microsoft, etc.) resulting in a massive knock in confidence and a huge increase in social welfare payments and emigration.

That's just off the top of my head.

There is no positive news, and hasn't been for many months. The country is completely ****ed. The more I think about it the more I am convinced this is true.

gandalf

At the moment I would say we are in for at least two more very bad years especially given the rudderless performance of our government.

deadhead13

Another 3 billion to be cut from budget deficit in the 2011 budget. 1 billion from lower capital spending, the rest from further public service cuts and income tax reform. PRSI and the levies to be replaced by a "social charge" and the introduction water charges. Unemployment expected to increase by a further 70,000.

johnnyskeleton

To see where we are going, you must first look at where we have been.

The attitude of the current govenment is that, while they might have spent recklessly during the 2001-2006 period, when things went south they reacted quickly and made tough decisions.

The first part is correct but the second is not, and the government's reaction to the recession has IMO been a bigger mistake than any made during 2001-2006.

What happened was that as the economy began to stall in 2006 and shrink in 2007, they maintained an air of denial - that it was a slight blip and nowhere near as severe as the problems in the US etc. So they kept on spending at the same level and ignored slightly falling tax returns. Crucially, they failed to take a firm line with the banks, resulting in the banks covering up the extent of their lossess when prompt action could have if not saved the banks, then certainly minimised the level of government money involved in bailing them out.

2008 and still no changes had been made, even though recession was officially recognised later in the year. By August the government were well aware of the perilous state of the banks but rather than take meaningful action to remedy the situation, they gave a blanket guarantee, far in excess of other state's guarantees, and then sat smugly back and said that Ireland was the world's leader in fixing the banks, "cheapest bailout ever" etc. All incredibly short term thinking. Later on they agreed to recapitalise AIB and BOI and, even though the writing was on the wall for Anglo in 2007, they allowed it to continue as a national farce until Jan 09. 2008 saw a lot of job losses in construction in particular.

2009 - even though this is year 3 of the downturn/recession/depression, the government had even as late as the 2009 budget in Dec 08, increased social welfare payments and allowed other spending to continue. They had introduced new income levies (which would be ramped up four months later) and were generally prescribing aspirin to cure appendecitis. In 2009 had a much larger level of unemployment across the board. The government maintain that Irish exports have held up well, but these are bolstered by a number of multinationals transferring even more profits to their Irish subsidiaries in expectation of Obama's clampdown on transfer pricing. Indigenous exporting companies employ 50% of workers in the export sector, but make up only 9% of total exports (and these are not underperforming companies by any standard).

So that's where we are - massive job losses, woefully managed government finances and a broken banking system. The shining light of our economy is that we have low corporation tax and EU memebership, but this could well change in the coming months. Because the government sat back for so long, they have been reacting to bad news rather than anticipating it, they are fighting a rearguard action and due to the manner in which they have handled it to date, the public won't stand for anything other than mere containment measures.

Looking forward, in the worst case scenario, Ireland will default on its debts (perhaps early 2011) and have to leave the eurozone, resulting in mass unemployment, inflation, emigration along the same scale as the 1950s or 1980s.

In the best case scenario, Ireland will simply stabilise at the level it is currently at for the next few years. No one is realistically predicting that we will return to growth any time soon, because the things which are suggested to do this e.g. green economy, smart economy etc have become too expense to make in Ireland relative to other countries which have young educated workforces.

Plus, I think we are starting to see widescale redunancies in the retail and services sectors i.e. shops which have had business decline steadily over the last few years have decided it is time to pull the plug.

For too many years, property became the engine that drove the economy which doesn't make sense other than that it was caused by a credit bubble. So it is wise to avoid looking at property and the wider economy together. However, property is a good analogy for where we are at the moment: despite clear signs of it being overpriced - supply greatly exceeds demand, people can't obtain finance, modest properties are still more than 5x good wages, few people are buying - vendors still refuse to drop their prices significantly and across the board. This means that there is a lack of reality in that market and this lack of reality is making prices fall faster. If prices declined at a steady rate since 2006 they would eventually bottom out and people would start to buy again. But because the market has been held up (as is natural for individual vendors but should be discouraged by the state) the drops are even more severe as consumer demand worsens because.

The same thing could be said of the wider economy - because the state buried its head in the sand for so long (and is even now continuing to ignore some of the real problems and take decisive action) we are set up for a much greater fall.

who_ru

johnnyskeleton wrote: »

To see where we are going, you must first look at where we have been.

The attitude of the current govenment is that, while they might have spent recklessly during the 2001-2006 period, when things went south they reacted quickly and made tough decisions.

The first part is correct but the second is not, and the government's reaction to the recession has IMO been a bigger mistake than any made during 2001-2006.

What happened was that as the economy began to stall in 2006 and shrink in 2007, they maintained an air of denial - that it was a slight blip and nowhere near as severe as the problems in the US etc. So they kept on spending at the same level and ignored slightly falling tax returns. Crucially, they failed to take a firm line with the banks, resulting in the banks covering up the extent of their lossess when prompt action could have if not saved the banks, then certainly minimised the level of government money involved in bailing them out.

2008 and still no changes had been made, even though recession was officially recognised later in the year. By August the government were well aware of the perilous state of the banks but rather than take meaningful action to remedy the situation, they gave a blanket guarantee, far in excess of other state's guarantees, and then sat smugly back and said that Ireland was the world's leader in fixing the banks, "cheapest bailout ever" etc. All incredibly short term thinking. Later on they agreed to recapitalise AIB and BOI and, even though the writing was on the wall for Anglo in 2007, they allowed it to continue as a national farce until Jan 09. 2008 saw a lot of job losses in construction in particular.

2009 - even though this is year 3 of the downturn/recession/depression, the government had even as late as the 2009 budget in Dec 08, increased social welfare payments and allowed other spending to continue. They had introduced new income levies (which would be ramped up four months later) and were generally prescribing aspirin to cure appendecitis. In 2009 had a much larger level of unemployment across the board. The government maintain that Irish exports have held up well, but these are bolstered by a number of multinationals transferring even more profits to their Irish subsidiaries in expectation of Obama's clampdown on transfer pricing. Indigenous exporting companies employ 50% of workers in the export sector, but make up only 9% of total exports (and these are not underperforming companies by any standard).

So that's where we are - massive job losses, woefully managed government finances and a broken banking system. The shining light of our economy is that we have low corporation tax and EU memebership, but this could well change in the coming months. Because the government sat back for so long, they have been reacting to bad news rather than anticipating it, they are fighting a rearguard action and due to the manner in which they have handled it to date, the public won't stand for anything other than mere containment measures.

Looking forward, in the worst case scenario, Ireland will default on its debts (perhaps early 2011) and have to leave the eurozone, resulting in mass unemployment, inflation, emigration along the same scale as the 1950s or 1980s.

In the best case scenario, Ireland will simply stabilise at the level it is currently at for the next few years. No one is realistically predicting that we will return to growth any time soon, because the things which are suggested to do this e.g. green economy, smart economy etc have become too expense to make in Ireland relative to other countries which have young educated workforces.

Plus, I think we are starting to see widescale redunancies in the retail and services sectors i.e. shops which have had business decline steadily over the last few years have decided it is time to pull the plug.

For too many years, property became the engine that drove the economy which doesn't make sense other than that it was caused by a credit bubble. So it is wise to avoid looking at property and the wider economy together. However, property is a good analogy for where we are at the moment: despite clear signs of it being overpriced - supply greatly exceeds demand, people can't obtain finance, modest properties are still more than 5x good wages, few people are buying - vendors still refuse to drop their prices significantly and across the board. This means that there is a lack of reality in that market and this lack of reality is making prices fall faster. If prices declined at a steady rate since 2006 they would eventually bottom out and people would start to buy again. But because the market has been held up (as is natural for individual vendors but should be discouraged by the state) the drops are even more severe as consumer demand worsens because.

The same thing could be said of the wider economy - because the state buried its head in the sand for so long (and is even now continuing to ignore some of the real problems and take decisive action) we are set up for a much greater fall.

good analysis johnnyskeleton - i agree the Govt is now effectively a fireservice, just trying to put out the fires that a popping up all across the banking sector. as a result they have all but ignored the unemployment crisis - we the taxpayers gave AIB & BOI 3.5bn euro each last year because management at both institutions successfully managed to destroy their own businesses through insane practices of lending money they didn't have in the first place.

CSO figures have clearly showed that both banks took this money and have sat on it and have not even tried to lend it to SME's or anybody else, so money that could have been used to stimulate the economy has instead been given to banks that refuse to lend it back to an economy crying out for access to credit.

as a result of this fiasco people are losing morale and confidence in the Govt's ability to steer the ship off the rocks, a columist in one sunday paper described the economy as 'being holed below the water line and sinking fast' it's very very sad, tragically in human terms but nevertheless true. where we end up is obvious, much less well off, much less opportunity, much more unemployment. our fate is almost sealed, we simply owe too much money as a country and as consumers. Our momentum is in one direction only.

i would encourage people to look abroad for a couple of years, i myself am contemplating this.

Fighting Irish

It has ownly just begun

AARRRGH

Fighting Irish wrote: »

It has ownly just begun

I agree with this. If the correction lasts for a few decades (which is likely) we have only just begun.

cleremy jarkson

As Jonny Quest's friend Hadji often says: "Oh, this is not good".

pah

cleremy jarkson wrote: »

As Jonny Quest's friend Hadji often says: "Oh, this is not good".

dromdrom

AARRRGH wrote: »

I agree with this. If the correction lasts for a few decades (which is likely) we have only just begun.

While I don't see a resscession ending anytime soon I think that we all have a tendancy to overhype our expectations both on the way up and the way down, personally I think we will see a stabilisation in the economy towards the end of the year followed by a period of growth trending near the european average after that, while many posters here might disagree there is a strong possibility of FDI flows increasing more than the current concensus due to the increase in competiveness we have seen in the traded sector this year (now a bit of firmer action by goverment to help bring down costs in the non traded sector would help, especially when my dentist thinks that €100 is the going rate for a filling!) coupled with a weaking euro could help the economy pick up quicker than expected in 2011-2012.