Christmas has arrived early! Our new Q4 @ibec_irl Economic Outlook is out today. And by God are we relatively positive! A quick thread on why to follow

But first, the link to the full document is here. A perfect stocking filler for all the family: https://www.ibec.ie/-/media/documents/media-press-release/ibec-quarterly-economic-outlook-q4-2020.pdf

So - why so positive? Firstly, exports were a crucial driver of economic recovery after the last crisis and will be again after this one. So far, they are holding up reallly well. No funny stuff & this isn't just one or two firms - its pretty broad based.

Secondly, across developed countries FDI has fallen by aorun 75% ytd. In Ireland new IDA job announcements are down only 30%. Again important to the economy, and proving resilient.

Thirdly, consumer spending in Ireland has taken a big hit. Particularly in areas like socialising and hospitality. But this hasnt been driven by falling income - household income rose in Q2. Irish households are saving at a quicker rate than anyone else in Europe. This is good.

Think of it like this. Our last recovery went something like this:
1. Exports & investment grew.
2. Those firms paid more in wages
3. Workers spent those wages in local economies, which boosted employment & wages locally.

We still have step 1 and 2, but lockdown prevents 3

€11bn was saved by Irish households in the first 9-months of 2020. Similiar in scale to the 2006/2007 SSIA maturities. If we can find the right channels (& vaccine rollout) to get € into local economies, 2021 could be an big year for consumer spending & employment recovery.

Fourthly, SME leverage is not what is was in 2008. Quite simply - this recovery will not be as encumbered - broadly - with debt and de-leveraging as 2012 onward. Specific sectors worst impacted by lockdowns may need sensible solutions, but most will be able to catch any recovery.

Fifthly, the miracles of modern technology. Vaccine rollout is crucial to all of the above. The new plan today is a firm step toward that. It's not a panacea but it is a pre-requisite to a more normal environment.

What is the major barrier to all of this? Brexit.

No matter what happens when it comes to the trade negotiations, the UK’s transition out of the EU will end. A new relationship will begin. This will bring significant additional costs and unavoidable disruption.

And don't be fooled. The impact on exports as a whole might not be enormous - our reliance on the UK as a share of exports has shrunk in recent years. But, the sectors most reliant on the UK spend far more down domestic supply chains and from primary producers than others.

But a no-deal would bring additional tariff & quota costs which consumers or business in the EU or UK won't wear. If a trade deal is not agreed before January, that will not be the end of the process. The clock will begin again on negotiations to agree a deal in 2021.

In the meantime there may be significant damage. But recent months have shown how our resilient supply chains can continue to function in delivering goods on and off the island, during a severe disruption. However, the sectors and communities worst impacted will need help.