NEWS Release - Ireland: Staff Concluding Statement of the Sixth Post-Program Monitoring Mission
A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country.
Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs or post-program monitoring, or as part of other staff monitoring of economic developments.
The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
An International Monetary Fund (IMF) mission visited Dublin during November 29—December 2, 2016, for the sixth post-program monitoring discussions—part of the IMF’s regular surveillance of countries with significant IMF credit outstanding. The mission was coordinated with the European Commission and the European Central Bank. At the end of the visit, the mission issued the following statement:
The Irish economy is growing at a healthy pace, but remains subject to downside risks. Commendable progress has been achieved through a long and difficult adjustment period. The mission welcomes the authorities’ ongoing commitment to reinforce the recovery, while safeguarding financial stability and restoring needed buffers through steady fiscal adjustment. As this process continues, building consensus on measures that best utilize available resources to support sustainable, inclusive growth and job creation remains crucial. Despite risks, capacity to repay the Fund remains strong.
1. The economic outlook remains broadly positive. Robust domestic demand is projected to drive GDP growth to about 4½ percent in 2016 and just above 3 percent in 2017, supporting further moderation in unemployment. Over the medium term, growth is projected to remain around 3 percent, broadly in line with potential. Inflation, which turned slightly negative this year, is expected to edge up gradually.
2. In the context of Ireland’s highly open economy, external risks dominate. Brexit-related risks, a sustained low growth-low inflation environment in Europe, a changing political landscape in the US and Europe and rising anti-globalization sentiment, as well as ongoing developments in corporate tax treatment at the international level add to uncertainty. Within a challenging political context, agreement on the 2017 budget represents an important milestone for the new minority government.
3. The impact of operations by multinationals, including contract manufacturing and aircraft leasing, on headline GDP complicates assessment of domestic activity essential to economic decision making. The mission welcomes work underway, with support from the IMF and other outside experts, on alternative measures for domestic activity. Preliminary results are expected shortly.
4. Against this backdrop, the government’s fiscal targets are broadly appropriate:
Given Ireland’s strong track record of fiscal discipline, the moderate fiscal adjustment planned in 2017 strikes a reasonable balance between advancing deficit reduction and addressing public expectations for a growth dividend.
Maintaining steady progress in rebuilding fiscal buffers is essential. With public debt still elevated, the mission welcomes the authorities’ commitment to reach their medium-term deficit target of 0.5 percent of GDP by 2018, establish a “rainy-day” fund beginning in 2019, and reduce debt-to-GDP to 45 percent within a decade. Risks to the outlook and to the revenue base, including from the concentrated corporate tax base, call for maintaining moderate growth in expenditures, saving any revenue windfalls, and ensuring that potentially temporary revenue gains are not used to fund permanent expenditure increases.
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