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Economist predicts
sterling rise 21.02.10
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by Kevin Kelly, Inishowen Independent
ONE OF the country’s leading economists has
predicted that Inishowen faces an uncertain future
as the recession continues to bite. Bank of Ireland
chief economist Dr Dan McLaughlin, who is originally
from Culkeeny near Malin Head, expects the peninsula
area will face many challenges in the coming months
as it struggles to recover from the collapse in the
construction sector.
“Unfortunately the construction sector, which can
provide a major source of employment in
disadvantaged areas like Inishowen, has experienced
a huge contraction and there is little sign of
recovery near-term” McLaughlin said.
Nationally house-building has been particularly
badly hit. In 2008 52,000 houses were completed in
the Republic and this fell to around 27,000 last
year, with most forecasts envisaging 15,000 or less
this year. McLaughlin believes that “houses are much
more affordable that they have been for some time,
prices have fallen and interest rates are extremely
low, but would-be buyers are fearful of job losses
and further price falls.” |
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Inishowen’s proximity
to the border has been making it difficult for small
businesses to compete with their counterparts in
Northern Ireland. This is primarily due to the drop
in the price of sterling over the last eighteen
months that has seen hundreds of shoppers from
Inishowen flocking to Derry to do their weekly
shopping.
“There is some better news on the exchange rate, at
least for Inishowen businesses if not for
consumers,” McLaughlin forecasts. “Three years ago
one euro bought only 66 pence sterling but |
this time last year the
figure was around 98 pence. Since then sterling has
strengthened and I expect the euro to trade around
85 pence over the next few months.”
Dr McLaughlin predicts that the euro will fall from
its current level of 87p to 85p by the end of March,
83p by the end of June and 80p by the end of
September.
He also predicts that the euro will fall against the
US dollar, from its current level of $1.39 to $1.30
by the end of September.
“The UK economy may pick up more rapidly than
continental Europe, and the debt problems of
countries like Greece, Spain and Portugal have put
the euro under
pressure” added McLaughlin.
The signs of recovery being witnessed across the
water may have a positive spin off effect for
Inishowen. “The pick-up in the UK represents some
good news for Inishowen as the economy in the North
will follow the broader British trend and a rise in
Northern spending would spill over into Inishowen,
particularly if sterling continues to appreciate,”
the economist said. “Tourism in the peninsula may
also improve this year and next given the better
international economic environment.”
A call for steps to be taken to limit the effect of
the exchange rates on businesses has gained momentum
in recent months. However the BOI man says “there is
little one can do to mitigate the impact of a medium
term appreciation or depreciation, although exchange
rates tend to move in cycles - the euro has averaged
70 pence against sterling over the past decade,
ranging from 58 pence to 98 pence.” |
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