The Irish economy is now at the center of the Eurozone
headlines, as it is the first Euro area nation to have been able to
come out of the bailout program last week.
The economy was granted 85 billion euro ($115 billion) of aid by
the International Monetary Fund and European Union three years back
after a banking collapse and a property bubble burst, but seems to
be entering a new phase in its economic development now.
After all, the country met each and every clause under the 85
billion euro bailout program without facing any massive public
unrest. Stringent austerity measures mainly made this
Things are yet not over the hump just yet though, as austerity will
continue to pull the budget deficit down in the coming days and
reduce the sky-high debt burden. But still, many important economic
indicators show that the nation is on the right track (read
: Why PIIGS ETFs Are Outperforming
Economic Indicators Reaffirm Positive Mood
GDP growth Back on Track:
The economy scored 0.4% of GDP growth in Q2. As per the
, the Irish GDP will expand 0.3% in 2013, 1.7% in 2014 and 2.5% in
2015. Although, this is a reduced projection, the scenario is
brighter than some other Euro zone nations including Greece, Cyprus
and Portugal which are still struggling with their bailout
funds. The European Commission accounted for a
lower-than-expected private consumption for this lowered guidance.
Though the unemployment rate still remains very high, it is
exhibiting a declining trend. The unemployment rate - which was
14.7% in 2012 - will likely to come down to 13.3% in 2013, 12.3% in
2014 and 11.7% in 2015.
Decline in the All-Important Debt to GDP Ratio:
The debt profile is a very important gauge for a Euro zone country.
For Ireland, gross public debt as a percentage of GDP is expected
to fall from 124.4% in 2013 to 120.8% in 2014 and to 119.1% in
2015. Though on a nominal basis the numbers are stubbornly high,
the signs of healing were fair enough to create some bullishness
Ride Europe Higher with This Top Ranked ETF
Rise in Business & Consumer Confidence:
a steep rise
in business confidence in Q3 and to add to the optimism, the
country's commerce is predicted to see faster growth in the coming
three months. While the overall Euro zone recovery has supported
this confidence with an expected bullishness in Irish exports,
domestic sales expectations were also positive for three quarters
in a row. Consumer sentiment is finally building up with the 3
-month moving average
showing a pickup for seven months in a row.
Market and ETF Impact
The excellent yearly run in the Irish Stock Exchange (ISEQ) bears
evidence to the fact that such an encouraging trend has not escaped
investor attention. ISEQ gained an impressive 32.81% in the last
one-year frame (as of December 13). For U.S. investors seeking
exposure, there is an only one pure-play ETF in the Irish market -
MSCI Ireland Capped Investable Market Index Fund
) which we have highlighted in greater detail below:
EIRL in Focus
The fund looks to track the performance of the Irish equity market
and invests about $116.2 million in 26 holdings. It is heavily
concentrated in the top 10 holdings which account for almost
one-third of the total. The ETF charges a reasonable 49 bps in
EIRL is exposed to materials and consumer staples that make up for
about 50% of the share in the basket followed by the industrials
(20.3%) and healthcare (16.7%) sectors (see more in the
Return-wise, the fund remains an enticing option having added about
35% in the year-to-date frame (as of December 13) while broader
ETFs with significant Eurozone exposure -
iShares MSCI EMU Index
SPDR STOXX Europe 50 (
- returned 16.3% and 14.1%, respectively. EIRL currently has a
Zacks ETF Rank #2 (Buy).
Having exited the bailout program, Ireland can now stand on its own
feet, outline its growth path independently and
the money market in full swing. Also, long-term projections appear
bullish as the nation promises to close the ongoing austerity
measures by 2016 and plans to reduce the unemployment level to as
low as 4.2% by 2020.
Nevertheless, this is just the beginning of a journey. Ireland
needs to go a long way to return to its pre-recession levels. In
fact, the IMF's managing director Christine Lagarde
over the nation's 'heavy private sector debts and banks'.
But the country is striving hard to turn around. Thus,
risk-tolerant investors willing to capitalize on this improving
trend might bet their money on EIRL for the long term.
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
ISHARS-MS IRLND (EIRL): ETF Research Reports
ISHARS-EMU IDX (EZU): ETF Research Reports
FT-LRG CAP COR (FEX): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for the
Next 30 Days. Click to get this free report