Numbers & Statistics

IMF Executive Board Concludes 2019 Article IV Consultation with Ireland

By  | 

Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2019 Article IV Consultation with Ireland







June 17, 2019















On June 14, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the
Article IV consultation

[1]
with

Ireland.



The strong growth of the Irish economy continued as multinational
sector-led net exports boosted real GDP growth in 2018 to 6.8 percent,
while (modified) domestic demand expanded by 3.3 percent. Solid job
creation pushed the unemployment rate below 6 percent, with strengthening
net inward migration. Inflation has been gradually rising on the back of
sustained demand pressures and dissipating effects of past sterling
depreciation. Public finances improved further, supported by strong output
growth and abundant unforeseen corporate income tax proceeds. Public debt
declined by almost 4 percentage points to below 65 percent of GDP (105
percent of GNI*). The current account surplus widened moderately to 9.1
percent of GDP, mainly reflecting activities of multinationals.

The downsized banking sector is well capitalized and liquid, but
profitability is under pressure and credit to the economy has only recently
begun to expand. While still high, nonperforming loans have declined. At
the same time, investment funds and other financial intermediaries continue
to grow rapidly, lifting the overall size of Ireland’s financial sector
above its pre-crisis level. Household balance sheets have improved on the
back of strong income growth. Housing prices continued to grow, but at a
slower pace amid signs that the supply of housing has begun to respond to
rising demand.

The outlook is broadly positive, provided Brexit proceeds in an orderly
manner. Growth is projected to slow to about 4 percent in 2019 as one-off
factors driving MNEs’ net exports dissipate, and to gradually converge to
its potential rate of close to 3 percent over the medium term, thereby
closing the positive output gap. Further employment growth will tap foreign
labor inflows, reduce unemployment to about 5 percent, and support earnings
and private consumption. Headline inflation is expected to reach 2 percent
over the medium term. Public finances are estimated to improve further. The
external current account surplus is projected to subside to below 5 percent
of GDP over the medium term.

Executive Board Assessment

[2]

Executive Directors agreed with the thrust of the staff appraisal. They
welcomed Ireland’s strong, broad‑based growth, bringing unemployment down
to historical lows and strengthening public and private balance sheets.
Directors noted that while the outlook remains favorable, there are
challenges from domestic capacity constraints and external downside risks,
notably a no‑deal Brexit, escalation of global protectionism, and adapting
to ongoing international tax changes. Against this background, Directors
encouraged the authorities to strengthen fiscal buffers, address key
structural bottlenecks to growth, and continue preparing for Brexit.

READ ALSO  Navigating Heightened Uncertainty

Noting the advanced cyclical position and external risks to the outlook,
Directors encouraged the authorities to accelerate fiscal consolidation to
alleviate demand pressures and build buffers. They saw merit in saving
additional corporate tax revenue, broadening the tax base to reduce
dependency on uncertain revenues, reforming personal income taxation to
make it more efficient, and enforcing spending limits. They underscored the
importance of ensuring value‑for‑money in public infrastructure
investments. Directors supported establishing the Rainy‑Day Fund as a
fiscal tool for unforeseen events and welcomed the authorities’ commitment
to using all proceeds from financial sector divestments to reduce public
debt. They encouraged the authorities to continue implementing the
international tax reform agenda, develop an ambitious strategy to achieve
Ireland’s climate change commitments, and strengthen the long‑term
financial soundness of the Social Insurance Fund.

Directors acknowledged that Ireland is uniquely vulnerable to a no‑deal
Brexit. They concurred that, if this risk were to materialize, the
government should let automatic fiscal stabilizers operate freely and
provide targeted support to hard‑hit sectors. A fiscal stimulus may be
called for, depending on the severity of the downturn in the broader
economy. In case of a sharp credit contraction, Directors considered that
the countercyclical capital buffer could be released.

Directors welcomed the progress in balance sheets repair of the domestic
banks but stressed that continued efforts to improve asset quality remain a
priority. To help reach the targets for NPL reduction, they supported
measures to accelerate legal processes, encourage creditor‑borrower
engagement, and enhance supervisory efforts. Directors welcomed the
proactive use of macroprudential policy tools and endorsed the expansion of
the toolkit with a systemic risk buffer and debt‑based measures. They also
encouraged further strengthening the AML/CFT framework.

Directors noted the authorities’ efforts in data collection on the large
and fast‑growing nonbank sector. They encouraged the authorities to further
improve data collection, closely monitor risk build‑up, and develop
system‑wide stress testing. In view of the sector’s global reach, Directors
emphasized the need for continued engagement in international cooperation.
Close cooperation with the EU and the U.K. should continue to avoid
cliff‑edge risks related to Brexit.

Directors underscored the importance of addressing key structural
bottlenecks to growth. They welcomed the progress in the provision of
social housing and encouraged the authorities to continue their efforts to
boost housing supply, including through further rationalizing building
regulations. Directors recognized the need to boost productivity in
domestic firms, also by direct funding of innovation, employee training
programs, and infrastructure investments. They supported the authorities’
measures to increase female employment, notably through the affordable
child care program, and encouraged further aligning educational paths with
business demand for high‑skilled jobs.

READ ALSO  IMF Membership Endorses Package on IMF Resources and Governance Reform





Ireland: Selected Economic Indicators, 2016–24

Populations (2018, millions):

4.8

Per capita income (euros): 37,545

Quota (as of Apr. 30, 2018, millions of SDRs):

3,449.9

At-risk-of -poverty rate 1/: 16.6

Projections

2016

2017

2018

2019

2020

2021

2022

2023

2024

(annual percentage change, constant prices, unless
otherwise indicated)

Output/Demand

Real GDP

4.9

7.2

6.8

4.1

3.4

3.1

2.9

2.7

2.7

Domestic demand

22.7

-13.0

4.4

3.8

3.3

3.0

2.8

2.7

2.7

Public consumption

3.5

3.9

6.4

3.0

1.7

2.5

2.9

2.1

2.3

Private consumption

3.7

1.9

3.0

2.5

2.5

2.4

2.4

2.3

2.3

Gross fixed capital formation

53.2

-30.2

7.8

5.9

5.2

4.1

3.5

3.5

3.5

Exports of goods and services

4.4

7.7

8.9

4.6

4.4

4.3

4.2

4.1

4.1

Imports of goods and services

18.5

-9.3

7.2

4.5

4.6

4.6

4.6

4.6

4.6

Potential growth

3.5

8.5

6.0

4.3

3.7

3.5

3.2

3.0

2.8

Output gap

1.9

0.7

1.5

1.3

1.1

0.7

0.5

0.2

0.0

Contribution to growth

Domestic demand

16.0

-10.7

2.8

2.6

2.3

2.1

2.0

1.9

1.9

Consumption

1.7

1.1

1.7

1.1

1.0

1.0

1.1

1.0

1.0

Gross fixed capital formation

12.6

-10.7

1.8

1.5

1.3

1.0

0.9

0.9

0.9

Inventories

1.7

-1.1

-0.6

0.0

0.0

0.0

0.0

0.0

0.0

Net exports

-12.1

18.9

4.4

1.5

1.1

1.0

0.9

0.8

0.8

Residual

1.0

-1.0

-0.4

0.0

0.0

0.0

0.0

0.0

0.0

Prices

Inflation (HICP)

-0.2

0.3

0.7

1.2

1.5

1.7

1.9

2.0

2.0

GDP deflator

-0.8

0.4

1.4

1.2

1.4

1.8

2.0

2.0

2.0

Terms-of-trade (goods and services)

-0.4

-1.8

-0.8

-1.0

-0.1

0.2

0.4

0.3

0.2

Employment and wages

Employment (ILO definition)

3.6

2.9

2.9

1.9

1.4

1.1

1.0

1.0

1.0

Unemployment rate (percent)

8.4

6.7

5.8

5.4

5.0

5.0

4.9

4.9

4.9

Average nominal wage

1.1

2.3

3.6

2.7

2.6

2.6

2.6

2.6

2.6

(percent of GDP)

Public Finance, General Government

Revenue

27.0

26.1

25.8

25.9

25.5

25.3

24.7

24.6

24.5

Expenditure

27.6

26.3

25.8

26.0

25.3

25.0

24.2

24.0

23.8

Overall balance

-0.7

-0.3

0.0

0.0

0.2

0.3

0.5

0.7

0.7

Primary balance

1.6

1.7

1.7

1.5

1.5

1.5

1.6

1.8

1.8

Structural balance (percent of potential GDP)

-1.5

-0.4

-0.5

-0.4

-0.2

0.1

0.3

0.6

0.7

General government gross debt

73.5

68.6

64.8

62.3

58.8

57.0

54.0

51.1

48.0

General government net debt

64.8

59.8

55.8

53.1

51.5

49.5

46.7

44.1

41.2

Balance of payments

Trade balance (goods)

38.9

36.7

34.5

32.8

32.0

31.7

31.5

31.4

31.4

Current account balance

-4.2

8.5

9.1

7.9

6.9

6.3

5.8

5.2

4.6

Gross external debt (excl. IFC)

294.4

255.0

221.3

209.7

200.3

191.5

183.3

176.3

169.8

Saving and investment balance

Gross national savings

33.7

33.2

35.0

35.6

35.2

34.9

34.6

34.3

33.9

Private sector

32.4

31.7

33.3

34.0

33.5

33.1

32.7

32.3

31.9

Public sector

1.3

1.5

1.7

1.6

1.7

1.8

1.8

2.0

2.0

Gross capital formation

37.9

24.8

25.1

26.5

26.9

27.1

27.2

27.4

27.5

(percent)


Monetary and financial indicators 2/

Bank credit to private sector (growth rate)

-7.6

-3.2

-3.4

Deposit rates

0.7

0.4

0.3

Government 10-year bond yield

0.7

0.8

1.1

Memorandum items:

Nominal GDP (€ billions)

272.9

293.7

318.3

335.4

351.8

369.4

387.7

405.9

425.0

Modified total domestic demand (percent)

8.4

1.4

3.3

3.6

3.2

3.1

3.0

2.7

2.7

Potential real GNI* growth (percent)

2.4

2.1

1.9

Population growth (percent)

1.2

1.1

1.2

1.3

1.0

1.0

1.0

1.0

1.0

Sources: CSO; DoF; Eurostat; and IMF staff.

1/
Share of population with an equivalised disposable
income (including social transfers) below the threshold
of 60 percent of the national median equivalised
disposable income after social transfers. Data is as of
2016.

2/
Latest observation is November 2018.

READ ALSO  Transcript of International Monetary Fund Managing Director Kristalina Georgieva's Opening Press Conference, 2019 Annual Meetings



[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
here:

http://www.imf.org/external/np/sec/misc/qualifiers.htm

.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Andreas Adriano

Phone: +1 202 623-7100Email: MEDIA@IMF.org






Print Friendly, PDF & Email

Hold dit netværk orienteret