Investec predicts Irish Government will fall over Budget 2017

The stockbroker does not envision Finance Minister Michael Noonan will have the three years he expects..

Investec has called into question how realistic Minister for Finance Michael Noonan's three-year projections in his department's Summer Economic Statement are.

The stockbroker released its own quarterly Irish Economy Monitor (IEM) this week, and suggested the minority Government will not see the new year.

Its IEM states:

"We continue to struggle to see a Budget getting passed in October, an event which would prompt fresh elections."

Writing about how political risk "is not just an external factor" when it comes to our economic health, the IEM said:

"February’s Irish general election produced an inconclusive outcome, with no one party managing to win even a third of the seats on offer.

"A minority administration has been formed but, given the political arithmetic and the excessive use of the whip across the political divide, the government is likely to find it difficult to implement large parts of its policy agenda."

Investec analyst Philip O'Sullivan singled out the Government's plan to scrap the Universal Social Charge (USC) as the probable catalyst for a political showdown in the autumn, according to the Irish Times.

In a note on the Summer Economic Statement, O'Sullivan argued:

"The minority Government needs opposition to support to pass a budget and the largest opposition party, Fianna Fáil, is on record as being opposed to the scrapping of the USC, which is the cornerstone of Government fiscal policy.

"Our base case is that the Government will not get its budget through in October, which would necessitate immediate elections."

Investec expects the Government's outlook to be revised yet again later this year.

Elsewhere in its IEM, Investec predicted that there will only be a "modest uptick" in housing completions in 2016 and sees the housing shortage continuing until the end of the decade, at least.