## 1irlea2025001-print-pdf ## Source details **Canonical URL:** [1irlea2025001-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1irlea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1irlea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1irlea2025001-print-pdf.pdf.json) --- ### Selected indicators, recent developments, and macro outcomes - Growth and demand - Real GNI* growth: 5 percent in 2023; estimated about 4 percent in 2024. - Modified Domestic Demand (MDD): increased by 2.7 percent in 2024. - Modified investment: expanded in 2024 despite weaker-than-anticipated housing completions. - Real GDP: increased by 1.2 percent in 2024 following a contraction in 2023. - Net IP exports: about €18 billion (3.4 percent of GDP) in 2024; historical average about €-3 9 billion or -11.2 percent of GDP during 2015–23. - Monthly indicators in early 2025: industrial production, services, and retail sales posting positive growth. - Inflation and wages - Headline inflation: ended 2024 at 1 percent; annual average rate for 2024 was 1.3 percent. - Inflation in 2025: picked up as negative energy price contribution waned, remained below 2 percent. - Core inflation: hovered around 2 percent since the beginning of 2025. - Services inflation: averaged above 3 percent and has been more persistent. - Perceived inflation: decreased from elevated levels but remains above actual inflation. - Hourly nominal wage growth: 5 .4 percent in 2024 on average; real wage growth turned positive after two years of decline. - Labor market - Unemployment rate: 4.3 percent in 2024. - Employment growth supported by immigration and higher labor participation; female participation rose notably. - Vacancy rates: elevated in professional, scientific and technical activities (skilled labor shortages). - Job postings: declining year-on-year in early 2025, indicating moderating labor demand. - Public finances and fiscal flows - Revenue (excluding one-offs): increased by about 8 percent in 2024. - CJEU Apple ruling one-off boost: about €14 bn (4.5 percent of GNI*). - Primary expenditure: grew by about 8 percent in 2024 (wage bill, social protection, capital expenditure). - Fiscal impulse (change in structural primary balance, excluding one-off revenue): estimated at ⅓ percent of potential GDP. - Overall fiscal balance: estimated at 7½ percent of GNI*. - Public debt: declined further to 70 percent of GNI*. - Credit and real estate - Bank credit: strengthened in 2024; household borrowing increased by about 3 percent y-o-y. - Lending rates passthrough: NFC rates increased most; consumer loan rates barely moved. - Residential property prices: growth accelerated to 10 percent (y-o-y) in August 2024; moderated to 8 percent y-o-y in February 2025. - Commercial real estate (CRE): capital values continue downward trend (office and retail); industrial CRE stabilizing; CRE rents flat; office vacancies up. - External position and capital flows - Current account (headline): surplus widened considerably in 2024 driven by services and goods. - Net FDI: outflows increased in 2024; portfolio investments registered net outflows. - External balance assessment (headline CA): points to substantially stronger external position but model generates a large residual due to MNE-related distortions. - Staff assessment (accounting for MNE effects): Ireland’s external position in 2024 is moderately stronger than level implied by fundamentals and desirable policies. ### Outlook, projections, and illustrative adverse scenario - Baseline projections - Real GNI*: projected to increase by 2.4 percent in 2025; converge to potential of about 2¼ percent in the medium term. - Real GDP: projected to expand around 3 percent in 2025; grow at a similar rate as GNI* thereafter. - Inflation (headline and core): expected to stay close to 2 percent from 2025 onward in absence of major shocks. - External sensitivity: direct effect of announced tariff measures projected to be contained; heightened external policy uncertainty would weigh on spending and investment. - Domestic supports: strong labor market, rising real incomes, anticipated pick up in housing investment and government capital spending, and ECB monetary policy easing; fiscal policy assumed broadly neutral in baseline. - Illustrative adverse scenario (sensitivity analysis) - Assumption: MNE profits associated with windfall CIT revenues decrease by 20 percent annually from 2026 to 2030. - Impact: under this scenario, GDP would decline by 7 percent per year on average. - Scope: shock captures direct impact on CIT revenues and GDP forecast; does not capture spillovers to the rest of the economy. - Downside risk drivers highlighted - Concentration of activity in a small number of MNEs. - Escalation of trade tensions and geoeconomic fragmentation (GEF). - Sustained reversal of globalization (supply-chain reorganization, intangible asset relocation). - Regional conflicts, commodity price volatility. - Domestic supply-side constraints (housing, infrastructure). - Risk of overheating if fiscal policy turns expansionary amid monetary easing. ### Fiscal policy guidance, reform priorities, and financing plans - Recommended stance - Broadly neutral fiscal stance in 2025 with higher capital expenditure. - Avoid adding to aggregate demand when the economy operates at full capacity; allow automatic stabilizers to operate fully if downside risks materialize; provide focused counter-cyclical support where essential while avoiding entrenched support. - One-off receipts identified to finance additional capital spending (to be used for investment during 2025–30) - €3 billion: proceeds from further reducing government’s holdings of AIB shares. - €14 billion: from the CJEU ruling. - €3.15 billion: transferred from the Infrastructure, Climate, and Nature Fund (ICNF). - Tax-base broadening and CIT risk management - Staff baseline assumption: “windfall” CIT revenues averaging €16 billion annually during 2025–30. - Policy recommendations: - Broaden tax base through VAT, property tax, and PIT reforms. - Reduce items subject to preferential VAT or excise rates. - Increase taxation of residential property and land. - Introduce additional PIT bands and calibrate rates; mitigate progressivity impacts with means-tested transfers. - Contingency: if windfall CIT revenues decline significantly, additional policy effort required; short-term accommodation possible while reforms implemented. - Fiscal framework strengthening - Recommended elements: - Consider a general government debt anchor targeting a net debt to GNI* ratio of 40 percent. - Complement with operational rule based on multi-year net expenditure ceilings covering general government. - Include escape clause, correction mechanism, and periodic reviews; integrate Future Ireland Fund and Infrastructure, Climate, and Nature Fund. - Irish Fiscal Advisory Council to monitor compliance and enhance credibility. - Authorities’ preference: noted difficulty broadening tax base amid large surpluses; expressed preference for expenditure-based anchor over debt-based anchor. ### Public debt projections and baseline debt consolidation (percent of GDP unless indicated) - Public debt (actual and projected): - 2024: 40.9 - 2025: 36.4 - 2026: 34.4 - 2027: 33.1 - 2028: 31.6 - 2029: 30.2 - 2030: 29.0 - 2031: 28.9 - 2032: 29.6 - 2033: 30.8 - 2034: 32.6 - Change in public debt: - 2024: -2.4 - 2025: -4.5 - 2026: -2.0 - 2027: -1.3 - 2028: -1.5 - 2029: -1.4 - 2030: -1.2 - 2031: -0.1 - 2032: 0.7 - 2033: 1.2 - 2034: 1.8 - Primary deficit (percent of GDP): - 2024: -4.7 - 2025: -1.8 - 2026: -1.6 - 2027: -1.5 - 2028: -1.8 - 2029: -1.9 - 2030: -1.7 - 2031: -1.3 - 2032: -0.8 - 2033: -0.3 - 2034: 0.1 - Noninterest revenues (percent of GDP): - 2024: 27.6 - 2025: 25.4 - 2026: 25.5 - 2027: 25.4 - 2028: 25.9 - 2029: 26.0 - 2030: 26.0 - 2031: 25.4 - 2032: 24.9 - 2033: 24.3 - 2034: 23.8 - Gross financing needs (percent of GDP): - 2024: 1.3 - 2025: 5.3 - 2026: 3.2 - 2027: 2.8 - 2028: 3.2 - 2029: 3.7 - 2030: 5.0 - 2031: 6.7 - 2032: 5.8 - 2033: 6.8 - 2034: 6.8 - Debt service (percent of GDP): - 2024: 6.3 - 2025: 7.3 - 2026: 5.1 - 2027: 4.5 - 2028: 5.2 - 2029: 5.8 - 2030: 7.0 - 2031: 8.2 - 2032: 6.8 - 2033: 7.3 - 2034: 7.0 - Memo indicators (selected) - Real GDP growth (percent): 1.2 (2024), 3.2 (2025), 2.1 (2026), 2.1 (2027), 2.2 (2028), 2.1 (2029), 2.3 (2030) through 2.3 (2034). - Inflation (GDP deflator; percent): 3.3 (2024), 1.9 (2025), 1.4 (2026), 1.8 (2027), 2.1 (2028), 2.0 (2029–2034). - Effective interest rate (percent): 1.5 (2024), 1.6 (2025), 1.7 (2026), rising to 8.2 (2034). - Staff commentary: public debt expected to continue on a downwards path over the medium term given strong fiscal position and robust growth, though risks remain. ### Banking sector soundness, NBFI risks, and macroprudential settings - Banking sector metrics and resilience - Total banking sector assets: about 140 percent of GDP at end-2024; domestic banks about 40 percent of sector assets. - Domestic retail banks (Allied Irish Banks, Bank of Ireland, Permanent TSB) (2024Q4): - Credit growth to Irish residents: 2.5 (Domestic Banks) vs 3.9 (EU average EBA). - Return on assets: 1.3 vs 0.7 (EU average EBA). - Return on equity: 13.0 vs 10.5. - Net interest margin: 2.9 vs 1.7. - Cost-to-income ratio: 48.9 vs 53.8. - NPL ratio: 1.7 vs 1.9. - Tier 1 capital ratio: 16.8 vs 17.5. - Profitability: improved with higher interest rates; expected to moderate as rates fall but remain above pre-pandemic levels. - NPL ratio: declined further due to performing loan growth and legacy NPL sales. - Pockets of vulnerability: CRE exposures show higher transition to forbearance and NPLs; international banks susceptible to funding stress from nonbanks. - Macroprudential policy and nonbanks - Countercyclical Capital Buffer (CCyB): maintained at 1.5 percent since June 2024. - Credit cycle: Ireland’s alternative credit gap close to zero compared to a year earlier. - Mortgage measures: recalibrated measures have led to more loans originated closer to higher limits and reduced use of allowances for lending above limits. - Recommendations: - CBI to continue assessing macroprudential stance and adjust if warranted. - Continue stress-testing with adverse macroeconomic/financial shocks (including CRE price declines and geopolitical events). - Strengthen reporting and data for NBFIs; reduce data gaps (OFI residual) via international coordination. - Progress on nonbank measures: - Macroprudential leverage limit for property funds: 60 percent introduced Nov 2022 with phased implementation. - Macroprudential framework for GBP-denominated LDI funds: announced April 2024 in coordination with Luxembourg authorities; Europe’s first cross-border macroprudential measure for investment funds. - Nonbank financial sector vulnerabilities and actions - Key vulnerabilities: liquidity mismatches and leverage in investment funds; large, externally-oriented MBF sector with growing domestic linkages. - Actions: CBI stepped up monitoring of MBF sector; deeper understanding of funds’ business models; strengthening of reporting requirements; international engagement (FSB, IOSCO, ESMA, ESRB). ### Housing, planning, AI, and structural policies - Housing and planning - New Planning and Development Act: signed into law and to be commenced on phased basis; full effects expected from 2026. - Revised National Planning Framework approved to enable accelerated housing delivery. - New national housing plan under development for publication later in the year. - Measures: support for cost rentals and affordable purchase homes; targeted supports for apartment delivery where viability gaps occur. - Constraints and risks: insufficient construction capacity, infrastructure deficiencies, rent regulation calibration may deter build-to-rent investors; review of rent regulation nearing completion. - AI and digitalization - National AI Strategy refresh published last November: roadmap to leverage AI for productivity; people-centered and ethical approach. - Policy guidance: ensure equitable AI adoption (including SME support), adjust tax and welfare systems for AI effects, and provide targeted education and training. - Structural competitiveness and resilience measures - Promote MNE–domestic firm linkages in innovation cooperation. - Ramp up public investment within a spending envelope; expedite planning and judicial review processes. - Leverage STEM education and academia-business collaboration for AI expertise. - Increase housing supply via urban density, construction productivity, land use improvements, planning process expedites, leveraging private capital, and converting vacant offices to residential where feasible. ### Risk Assessment Matrix — key global and domestic risks - High-likelihood, high-impact risks - Trade policy and investment shocks: Likelihood: High; Expected Impact: High. - Deepening geoeconomic fragmentation: Likelihood: High; Expected Impact: High. - Volatile MNE activities: Likelihood: High; Expected Impact: High (domestic risk). - Other risks and policy responses - Regional conflicts: Likelihood: Medium; Expected Impact: Medium. Responses include fiscal buffers, migrant integration, and accelerating public investment. - Commodity price volatility: Likelihood: Medium; Expected Impact: Medium. Responses include using fiscal buffers and diversifying suppliers. - Tighter financial conditions and systemic instability: Likelihood: Medium; Expected Impact: Medium. Responses include allowing automatic stabilisers, intensifying financial monitoring, closing data gaps, and developing macroprudential measures. - Cyberthreats: Likelihood: High; Expected Impact: Medium/High. Responses include intensified monitoring and resilience testing. - Domestic supply-side constraints (housing, labor, infrastructure): Likelihood: Medium; Expected Impact: Medium/High. Responses include accelerating public investment and active labor market policies. ### Data adequacy, reporting, and IMF staff assessment - Data standards and participation - Ireland subscribes to SDDS since July 1996 and publishes data on its National Summary Data Page. - Table timestamp for common indicators: (As of April 25, 2025). - Staff summary assessments and gaps - Overall staff summary: "The data provided to the Fund are adequate for surveillance." - Remaining data gaps: mostly pertain to the "OFI residual" segment and cross-border non-bank financing activities. - Recent improvements: more detailed classification of the OFI sector in quarterly financial accounts; CBI updating ML risk understanding via cross-border payments data. - Heatmap and adequacy ratings (as presented) - Top-level rating string: AAAABAA. - Coverage cell rating string: AAAAB. - Consistency cell rating string: AA. - Frequency and Timeliness cell rating string: AABAA. - Granularity rating: A. - Staff recommendation - Continue collaboration between CBI, CSO, and other regulators to reduce data gaps for non-bank financing entities and identify foreign and domestic linkages including OFI residual entities. *Source: 1irlea2025001-print-pdf — IMF staff report chapter excerpts and annexes.* ### 1. Selected Indicators_______________________________________________________________________________4 ### 1. Selected Indicators ### Context - Ireland has become a top destination for international investors, benefiting from a well-educated and skilled labor force, a favorable business environment, and sound policies and institutions. - Key challenges and risks include dependence on tax revenues from multinational enterprises (MNEs), housing shortages, infrastructure gaps, rising trade tensions, and deepening geoeconomic fragmentation (GEF). *Figure references and governance indicators are reported in the source.* ### Recent Developments: Growth and Domestic Demand - Real GNI* posted 5 percent growth in 2023 and is estimated to have grown by about 4 percent in 2024. - Modified Domestic Demand (MDD) increased by 2.7 percent in 2024, driven by private and government consumption. - Modified investment expanded in 2024 despite weaker-than-anticipated housing completions. - Real GDP increased by 1.2 percent in 2024 following a contraction in 2023. - Net exports contributed positively to GDP growth, reflecting a strong recovery of merchandise exports, notably pharmaceuticals and electronics. - Services export growth was influenced by exports of intellectual property (IP), linked to a significant fall in investment last year. - Monthly indicators suggest continuing strong performance into 2025 (industrial production, services, and retail sales posting positive growth). ### Inflation Developments - Headline inflation ended 2024 at 1 percent; the annual average rate for 2024 was 1.3 percent. - Inflation picked up somewhat in 2025 as the negative contribution of energy prices waned, but remained below 2 percent. - Core inflation has hovered around 2 percent since the beginning of the year. - Services inflation averaged above 3 percent and has been more persistent, offsetting falling prices of non-energy industrial goods. - Perceived inflation has decreased from elevated levels but remains above actual inflation. ### Labor Market Developments - Employment growth supported by immigration and higher labor participation, especially female participation. - Unemployment rate stood at 4.3 percent in 2024, close to historic lows. - Monthly unemployment data suggest continuing labor market strength in 2025Q1, but labor demand appears to be moderating with job postings declining from a year earlier. - Vacancy rates remain elevated in sectors such as professional, scientific and technical activities, indicating skilled labor shortages in areas. - Hourly nominal wage growth stood at 5 .4 percent in 2024 on average, and real wage growth turned positive after two years of decline. ### Fiscal Developments - Revenue, excluding one-offs, increased by about 8 percent in 2024, reflecting broad-based growth in tax collections. - A CJEU ruling on Apple provided an additional one-off boost of about €14 bn (4.5 percent of GNI*). - Primary expenditure grew by about 8 percent in 2024, driven by the wage bill, social protection, and capital expenditure. - The fiscal impulse, measured by the change in the structural primary balance (excluding one-off revenue), is estimated at ⅓ percent of potential GDP. - The overall fiscal balance is estimated at 7½ percent of GNI*. - Public debt declined further to 70 percent of GNI*. ### Credit Developments - The passthrough of the last ECB tightening cycle was uneven: lending rates for non-financial corporations (NFCs) increased the most, while interest rates on consumer loans barely moved (likely reflecting low funding costs for domestic banks and competition from non-banks). - Lending rates have started to trend down recently following monetary policy easing. - Bank credit strengthened in 2024, mostly due to household borrowing increasing by about 3 percent y-o-y, with growth in both mortgage and consumer loan segments. - Loans to Irish NFCs increased as well, albeit at a lower rate. ### Real Estate Prices and Markets - Residential property prices growth accelerated to 10 percent (y-o-y) in August 2024 before moderating to 8 percent y-o-y in February 2025. - The residential price rise is driven by under-supply. - Commercial real estate (CRE) capital values continue a downward trend, led by office and retail space; industrial CRE appears to be stabilizing. - Office vacancies are up, reflecting low demand for office space. - CRE rents are flat overall. ### Balance of Payment Developments and External Position - The headline current account (CA) surplus widened considerably in 2024 as services exports increased significantly. - The trade balance was boosted by a strong goods balance and significantly higher services exports, including a large one-off IP-related services export in the MNE sector. - Net IP exports reached about €18 billion (3.4 percent of GDP) in 2024, compared to an average of about €-3 9 billion or -11.2 percent of GDP during 2015–23. - Net FDI outflows increased in 2024, and portfolio investments registered net outflows. - The external balance assessment (EBA), based on the headline CA, points to a substantially stronger external position, but the model does not account for large MNE-related distortions and volatilities and generates a large residual for Ireland. - Taking into account MNE-sector effects, including the large one-off IP export, staff assesses Ireland’s external position in 2024 to be moderately stronger than the level implied by fundamentals and desirable policies (Annex IV). ### Outlook and Risks - Monthly indicators and sectoral performance suggest a favorable near-term outlook into 2025, but risks stem from global trade tensions, geoeconomic fragmentation (GEF), MNE volatility, housing supply constraints, and infrastructure gaps. - Policy priorities include building resilience to external shocks, addressing dependence on MNE-sourced tax revenues, and tackling housing and infrastructure shortfalls to sustain inclusive growth. *Source: IMF staff report chapter "1. Selected Indicators."* ### 9. The Irish domestic economy is projected to continue to grow, though at a slower pace ### 9. The Irish domestic economy is projected to continue to grow, though at a slower pace ### Outlook and projections - Staff projects real GNI* to increase by 2.4 percent in 2025, and by slightly less in the next two years as the impact of trade tensions unfolds. - Growth would eventually converge to its potential of about 2¼ percent in the medium term. - GDP is projected to expand in 2025 by around 3 percent and grow at a similar rate as GNI* thereafter, but uncertainty around this forecast is much higher due to the volatility of the MNE sector activity. - In the absence of major shocks, both headline and core inflation are expected to stay close to 2 percent from 2025 onward. - External environment: as a small open economy with significant trade and investment linkages with the US, Ireland is exposed to US policy changes; the direct effect of the announced tariff measures is projected to be contained, but heightened external policy uncertainty would weigh on household and business spending decisions, increasing precautionary savings and a “wait-and-see” approach to investment. - Domestic support: strong labor market, rising real incomes, anticipated pick up in housing investment and government capital spending, and ECB monetary policy easing would support demand; fiscal policy is assumed to be broadly neutral in the baseline. ### Downside risks and scenarios - Significant downside risks to growth include concentration of activity in a small number of MNEs, making the economy and public finances vulnerable to external trade and tax policy shifts and firm- or sector-specific shocks. - An escalation of trade tensions would hurt exports and lead to lower growth and higher unemployment; extending tariffs to key sectors currently exempt would likely reduce growth overall, though impact depends on policy responses and behavioral reactions. - A sustained reversal of globalization risks reorganization of supply chains, relocation of intangible assets, and reduced investment over time, putting at risk the Irish economic model. - Intensification of regional conflicts can cause disruption of trade, increased refugee inflows, and commodity price volatility. - Domestic supply-side constraints could delay infrastructure and housing goals and lead to higher costs. - Risk of overheating remains, especially if fiscal policy turns expansionary amid monetary easing. - Illustrative adverse scenario (sensitivity analysis): the adverse scenario assumes that the MNE profits associated with windfall CIT revenues decrease by 20 percent annually from 2026 to 2030. Under this scenario, GDP would decline by 7 percent per year on average. The shock only captures the direct impact of a potential decline in MNE profits on CIT revenues in the budget and GDP forecast; it does not capture spillovers to the rest of the economy. ### Authorities’ views (summarized) - Authorities broadly shared staff’s views on the economic outlook and key risks; they noted Ireland’s resilience to Brexit and the pandemic, attributing it to strong fundamentals, sound policy, and comparative advantages. - Authorities’ growth projections for the domestic economy are relatively close to staff’s. - Authorities highlighted large one-off factors affecting the current account in 2024 and expressed concern about potential measures targeted at key sectors where Ireland has substantial exports, which could lead to structural shifts with significant impact on tax revenue. - Authorities emphasized persistent infrastructure and housing gaps as a drag on competitiveness and growth. ### Fiscal policy assessment and recommendations - Staff view: a broadly neutral fiscal stance in 2025, with higher capital expenditure, is appropriate. Staff estimates the budget, together with additional capital spending to be financed by one-off receipts, would result in a broadly neutral fiscal stance. - One-off receipts identified in the text to finance additional capital spending (to be used for investment during 2025–30): - €3 billion proceeds from further reducing the government’s holdings of AIB shares acquired during the financial crisis, - €14 billion from the CJEU ruling, - €3.15 billion transferred from the Infrastructure, Climate, and Nature Fund (ICNF). - Rationale: fiscal policy should avoid adding to aggregate demand when the economy is operating at full capacity and accounting for further monetary easing; ramp up public investment to address housing and infrastructure deficits; allow automatic stabilizers to operate fully if downside risks materialize and provide focused counter-cyclical support where essential while avoiding entrenched support that prevents adjustments and reallocation. - Staff recommends the updated Medium-Term Fiscal and Structural Plan (MTFSP) adhere to a broadly neutral stance and pursue further public debt reduction to below 50 percent of GNI* by 2030. ### Public investment and spending efficiency - Planned scaling-up of public investment should be done within a proper overall spending envelope to ensure value for money and supported by complementary measures. - Priorities and measures: - Prioritize capital outlays within a spending envelope consistent with the broadly neutral fiscal stance. - Expedite the complex planning and judicial review process to reduce bottlenecks to timely execution of investment projects. - Improve spending efficiency across key expenditure areas. - Limit current spending growth, broaden the tax base, and reduce the likelihood of spending overruns by enhancing budgeting and expenditure management to create space for further increases in public investment within the planned fiscal path. ### Tax base and corporation tax (CIT) risks - CIT from MNEs accounts for a sizable share of tax revenue and recent fast growth of CIT revenues is highly concentrated and well above what would be implied by domestic economic fundamentals, leaving the fiscal position highly exposed to external policy shifts and shocks. - Staff’s baseline assumes “windfall” CIT revenues averaging €16 billion annually during 2025–30. - Policy recommendations to broaden the tax base: - Broaden the tax base through VAT, property tax, and PIT reforms. - Reduce items subject to preferential VAT or excise rates, especially those that disproportionately benefit higher-income earners. - Increase taxation of residential property and land (scope exists despite recent reforms). - Introduce additional tax bands to the PIT system and properly calibrate tax rates to broaden the tax base while reducing disincentives to work; mitigate potential impact on progressivity with means-tested transfers. - If windfall CIT revenues decline significantly, additional policy effort would be required; short-term accommodation of deterioration could be feasible while reforms are implemented to rationalize spending and increase yields from other taxes. ### Fiscal framework strengthening - Staff recommends strengthening the national fiscal framework to safeguard public finances against shocks while addressing investment needs and long-term spending pressures. - Key elements recommended: - Consider a general government debt anchor with the aim of building sufficient buffers and ensuring fiscal sustainability with a high probability; staff analysis suggests targeting a net debt (defined as general government gross debt minus cash balance) to GNI* ratio of 40 percent, accounting for historical growth volatility and vulnerability to shocks. - Complement the debt anchor with an operational rule based on multi-year net expenditure ceilings, calibrated to keep general government debt close to the anchor while considering prevailing economic conditions; expenditure ceilings should ideally cover all institutions under the general government classification and be simple to implement and communicate. - Include provisions for credibility, flexibility, and adaptability: escape clause and triggering conditions, a correction mechanism specifying remedial actions for noncompliance, and periodic reviews to ensure calibration to macro-fiscal conditions. - Integrate the two savings funds, Future Ireland Fund and Infrastructure, Climate, and Nature Fund, into the fiscal framework. - The Irish Fiscal Advisory Council should play a critical role in monitoring compliance with fiscal rules and enhancing policy credibility. - Authorities’ stance: committed to maintaining fiscal prudence while addressing infrastructure and housing gaps; outlined a broadly neutral stance in the Medium-Term Fiscal and Structural Plan published in October 2024; Programme for Government (post-January 2025) commits to produce a new Medium-Term Fiscal & Structural Plan later in the year. Authorities noted difficulty broadening the tax base while recording large fiscal surpluses from windfall CIT revenues and expressed a preference for an expenditure-based anchor over a debt-based anchor. ### Financial and macroprudential policies - Household and corporate balance sheets: - Healthy balance sheets and favorable domestic economic conditions have supported resilience of households and firms. - Prevalence of fixed-rate mortgage loans has mitigated recent tightening; most borrowers experienced little or no increase in debt service costs. - Higher savings, robust employment and income growth, and positive revaluations (particularly of housing assets) have boosted households’ net wealth. - NFCs’ net financial position is stable though higher wage costs could begin to weigh on profit margins; credit standards on loans to firms and mortgages have remained largely unchanged. - Corporate insolvencies increased in 2024 as a whole, although Q4 saw a decline over the same period in 2023. - Financial stability risks: - In a highly uncertain global environment, financial stability risks have increased since the last Article IV consultation. - Key vulnerabilities include liquidity mismatches and leverage of investment funds, which could amplify adverse shocks and transmit them through interconnectedness to other parts of the financial system and the real economy. - Ireland’s large and complex financial sector is dominated by the mostly externally-oriented market-based finance (MBF) sector; the sector’s linkages with the domestic economy are growing. - Trade tensions and geoeconomic shifts may adversely affect MNE activities in Ireland with knock-on effects on public finances and balance sheets of households and SMEs. - Financial stability risks from the housing market remain limited given housing shortages and mortgage macroprudential policy measures (MPMs). - Despite commercial real estate (CRE) market weakness, greater risk sharing through a more diversified investor base (smaller role for domestic banks and greater role for non-banks and international capital) has helped limit dislocations to the domestic financial system. - The Central Bank of Ireland (CBI) has less visibility over some non-bank financing entities and their cross-border activities due to data gaps, which can only be closed through international coordination. *Source: 1irlea2025001-print-pdf - 9. The Irish domestic economy is projected to continue to grow, though at a slower pace* ### 21. Banks remain sound but continued close monitoring of credit, liquidity, and ### 21. Banks remain sound but continued close monitoring of credit, liquidity, and operational risks is warranted. ### Banking sector soundness and vulnerabilities - Total assets of the Irish banking sector stood at about 140 percent of GDP as of end-2024, of which domestic banks comprised about 40 percent. - Higher interest rates have markedly improved profitability. - Banks maintain strong capital and liquidity positions, in excess of regulatory requirements. - The non-performing loan (NPL) ratio declined further, reflecting growth in the performing loans portfolio, sales of legacy NPLs, and proactive management of credit risk. - Pockets of vulnerability: - Exposures to the CRE sector exhibit a higher share of loans transitioning to forbearance and NPLs. - International banks’ vulnerability to funding stress and shocks from nonbanks warrant close monitoring. - Outlook and operational risks: - Bank profitability is expected to moderate as monetary policy rates have fallen, but remain above pre-pandemic levels. - Monitoring and managing operational risks of retail banks, including from cyber threats and outsourcing, are becoming increasingly important. - Efforts should continue to divest government stakes in retail banks. ### Selected financial indicators (2024Q4) for Domestic Retail Banks (Allied Irish Banks, Bank of Ireland, Permanent TSB) - Credit growth to Irish residents: 2.5 (Domestic Banks) vs 3.9 (EU average EBA). - Return on assets: 1.3 (Domestic Banks) vs 0.7 (EU average EBA). - Return on equity: 13.0 (Domestic Banks) vs 10.5 (EU average EBA). - Net interest margin: 2.9 (Domestic Banks) vs 1.7 (EU average EBA). - Cost-to-income ratio: 48.9 (Domestic Banks) vs 53.8 (EU average EBA). - NPL ratio: 1.7 (Domestic Banks) vs 1.9 (EU average EBA). - Tier 1 capital ratio: 16.8 (Domestic Banks) vs 17.5 (EU average EBA). ### Macroprudential settings and recommendations - The CBI has maintained the CCyB rate at the neutral level of 1.5 percent since June 2024, which appears appropriate in the current macro-financial environment. - Ireland’s position in the credit cycle remains broadly unchanged compared to a year ago, with the alternative credit gap close to zero. - The recalibrated mortgage measures seem to have yielded the intended outcomes: - More loans are originated closer to the higher limits, but the use of allowances for lending above the limits has declined, implying adherence to prudent lending policies. - Recommendations: - As macro-financial conditions evolve, the CBI should continue to assess the macroprudential stance and stand ready to adjust if warranted. - Ongoing stress-testing exercises assuming adverse macroeconomic and financial shocks, including disruptive geopolitical events and further CRE price declines, can help identify vulnerabilities and inform capital adequacy assessments. ### Nonbanks (NBFIs), funds, and macroprudential progress - Considerable progress has been made in assessing and reducing risks from nonbanks. - The CBI has stepped up monitoring of the MBF sector in light of heightened global uncertainty and should remain vigilant about risks to the sector. - Actions and developments: - Further work has been done to improve understanding of business models and monitoring of subsegments of the funds sector and non-bank lenders, in line with 2022 FSAP recommendations. - Strengthening reporting requirements for NBFIs and conducting more granular risk analysis is important given ongoing financial innovation. - The CBI has led internationally in developing and operationalizing macroprudential frameworks for nonbanks: - A macroprudential framework for GBP-denominated LDI funds was announced in April 2024 together with the Luxembourg authorities—Europe’s first macroprudential measure for investment funds on a cross-border basis. - The CBI should continue to closely monitor phased implementation of macroprudential policy measures for property funds introduced in 2022, and advance development of a macroprudential framework for investment funds in collaboration with international regulators and other jurisdictions. - Efforts should continue, in collaboration with other regulators, to reduce data gaps and identify foreign and domestic linkages, including of the “other financial institutions residual (OFI residual)” entities. ### Progress on FSAP recommendations, insolvency, and AML/CFT - Authorities have amended the national insolvency regime on examinership to transpose mandatory provisions of the EU Directive on Preventive Restructuring. - Examinership is primarily used by large and medium-sized companies; micro and small companies generally utilize the simplified rescue process known as SCARP (Small Companies Administrative Rescue Process). - Ongoing efforts to deepen focus on transnational money laundering (ML) risks and enhance collection and analysis of cross-border payments data to inform AML/CFT supervision are welcome. - The CBI is moving toward an integrated model for prudential, consumer protection, and AML/CFT supervision. - The CBI should ensure AML/CFT issues are accorded sufficient priority and resourcing in the integrated model. ### Authorities’ views and policy priorities - Authorities broadly concurred with the staff’s assessment and policy advice. - Key concerns and observations: - Trade tensions and heightened policy uncertainty, combined with vulnerabilities in NBFIs, can amplify market adjustments and potentially spill over to other parts of the global financial system. - The structural weakness of the CRE market persists, but there are signs of the decline bottoming out; banks are now much less exposed to this segment and macroprudential measures are in place for property funds. - The resilience of Irish households and companies was confirmed, but a downturn in MNE activity could have a negative impact given the high share of MNEs in employment and mortgage exposures in some sectors. - Enhancing retail banks’ operational resilience is a key supervisory focus. - On macroprudential policy for NBFIs: - The CBI reconfirmed commitment to advance work, contributing to European Commission consultations and the FSB’s workstream on leverage. - Work is ongoing to understand how price-based liquidity management tools are used in Irish-domiciled funds and to undertake analytical work on hedge funds. - Recent data improvements include a more detailed classification of the OFI sector in the quarterly financial accounts, though splitting OFI residuals into foreign and domestically controlled entities requires EU-level cooperation. - Authorities expressed concern about potential divergence of regulatory standards globally and emphasized a pragmatic approach to the Savings and Investments Union focused on supervisory outcomes rather than institutional arrangements. *Source: 1irlea2025001-print-pdf - 21. Banks remain sound but continued close monitoring of credit, liquidity, and operational risks is warranted.* ### 32. The authorities recognized the potential benefits and risks of AI. A refresh of Ireland’s ### 32. The authorities recognized the potential benefits and risks of AI. A refresh of Ireland’s National AI Strategy ### AI, digitalization, and human-capital policy - The authorities published a refresh of Ireland’s National AI Strategy last November that: - Serves as a roadmap for leveraging the potential of AI to unlock productivity and benefit the society. - Elaborates on specific actions to position Ireland as a leader in AI development and use. - Emphasizes a people-centered and ethical approach to AI. - Policy guidance: - Ensure equitable adoption of AI, including support to SMEs. - Adjust the tax and welfare system as needed to accommodate AI-driven changes. - Provide targeted education and training to support workforce adaptation. ### Housing supply, planning, and affordability - Recent legal and planning developments: - The new Planning and Development Act was signed into law last year and will be commenced on a phased basis; although some elements are already in place, the full effects should become visible from 2026. - The government approved a revised National Planning Framework to enable accelerated housing delivery. - A new national housing plan is under development for publication later this year. - Measures to improve affordability: - Support for cost rentals and affordable purchase homes. - Targeted supports to enable the delivery of apartments where a viability gap occurs. - Acknowledged constraints and risks: - Insufficient capacity in construction and infrastructure deficiencies. - Current calibration of rent regulations could deter investors from the build-to-rent market. - A review of the current rent regulation regime to inform the government’s consideration of rent regulation is nearing completion. ### Macroeconomic outlook and risks (Staff appraisal) - Near-term outlook: - Entering 2025 in a strong position, the Irish domestic economy is expected to continue to grow, though at a slower pace against high global uncertainty and structural shifts. - Healthy household balance sheets, real wage growth, and the ECB’s monetary easing would support domestic demand. - Inflation is expected to remain close to target. - Ireland’s external position is assessed to be moderately stronger than the level implied by fundamentals and desirable policies. - Downside risks: - Further escalation of trade tensions and policy shifts, deeper geoeconomic fragmentation, regional conflicts, and commodity price volatility. - Concentration of activity in a small number of MNEs leaves the economy and public finances vulnerable to trade and tax policy shifts and firm- or sector-specific shocks. - Domestic supply-side constraints that could hinder infrastructure and housing objectives. ### Fiscal policy guidance - Recommended stance: - A broadly neutral fiscal stance with higher capital expenditure is appropriate in 2025 and over the medium term. - Given the economy is expected to operate at full capacity, fiscal policy should avoid adding to aggregate demand. - Implementation and priorities: - Scale up capital expenditure within an appropriate overall spending envelope consistent with a broadly neutral fiscal stance, ensuring value for money. - Expedite complex planning and judicial review processes and enhance public spending efficiency. - Broaden the tax base to protect the budget from uncertainty of CIT revenues and provide space for higher investment. - Should downside risks materialize, provide focused counter-cyclical support where essential. - Fiscal framework recommendations: - Consider adopting a general government debt anchor, complemented by an operational rule based on multi-year net expenditure ceilings. - Include well-defined provisions, notably an escape clause and a correction mechanism, to ensure credibility, flexibility, and adaptability. - Give the credible fiscal framework legislative status if possible. - Integrate the two savings funds into the fiscal framework. ### Financial stability, banks, and nonbanks - Systemic assessment: - Irish households and non-financial corporations generally have healthy balance sheets, and banks are sound. - Financial stability risks from the housing market remain limited. - The CRE sector may continue to face headwinds despite signs of moderation of the downturn; the banking system has capacity to absorb the downturn. - Risks and monitoring: - High global uncertainty interacting with vulnerabilities in nonbanks could transmit and amplify shocks through interconnectedness to the rest of the financial system and the real economy. - Credit, liquidity, and operational risks of banks warrant continued close watch. - The macroprudential stance is appropriate; the CBI should reassess measures and be ready to adjust them as conditions evolve. - Nonbank sector policy actions: - Continue efforts at the domestic and international levels to enhance regulation and supervision of nonbanks and address data gaps. - Strengthen reporting requirements for nonbanks and conduct more granular risk analysis. - Continue CBI leadership in developing and operationalizing macroprudential frameworks for nonbanks in collaboration with international regulators. - Reduce data gaps and identify foreign and domestic linkages, including of the OFI residual entities. ### Structural and resilience policies - Mitigating geoeconomic fragmentation: - Promote linkages between MNEs and domestic firms in innovation cooperation and improve infrastructure to increase competitiveness and resilience. - Maintain fiscal prudence to allow for focused and time-bound support to facilitate resource reallocations from affected sectors. - Continue engagement in the EU to further strengthen the single market. - Complementary measures to boost competitiveness and wellbeing: - Leverage Ireland’s focus on STEM education and strong academia-business collaboration to build on AI-related expertise. - Increase housing supply by: - Increasing urban density and construction sector productivity. - Improving the use of land and ensuring greater housing policy certainty. - Expediting the planning process. - Leveraging private capital and converting vacant offices to residential space where feasible. - Reducing complexity and restrictiveness of rent legislation to increase rental supply. ### Institutional and procedural note - Staff proposes that the next Article IV consultation with Ireland take place on the standard 12-month cycle. *Source: IMF staff.* ### Annex II. Implementation of FSAP Key Recommendations ### Annex II. Implementation of FSAP Key Recommendations ### Oversight – Cross Cutting - Rec No. 1 - Recommendation: Notwithstanding strong de facto independence, further strengthen de jure Central Bank independence by: - amending legislation such that the Minister for Finance may dismiss Central Bank Commission members only on specified grounds of serious misconduct, and - enshrining in legislation a written procedure for the submission by the Central Bank and approval by Minister for Finance of the supervisory levy. - Addressee: DoF, Oireachtas - Time: ST - Comment: A suitable legislative vehicle for both proposed changes will be identified. All legislative changes are subject to agreement by the Minister and Government. - Rec No. 2 - Recommendation: Amend relevant legislation to provide for greater individual accountability and enhance supervisory powers of the Central Bank to take direct enforcement action against individuals. Finalize the related internal framework to operationalize execution of the upgraded accountability regime. - Addressee: DoF, Oireachtas, CBI - Time: ST - Comment: The Central Bank Individual Accountability Framework (IAF) Act 2023 was enacted on 9 March 2023. - The Act provides for greater individual accountability through the introduction of individual and business conduct standards and enhances the supervisory powers of the CBI to take direct enforcement action against individuals. - The Act also provides for an amendment to Section 48 of the Central Bank Supervision and Enforcement Act (2013) to provide the CBI with a regulation making power to give effect to the Senior Executive Accountability Regime (SEAR). - The legal instruments commencing all provisions of the Act have been signed by the Minister for Finance to allow for the implementation of the legislation to achieve its objectives. - The CBI issued SEAR Regulations that apply to in-scope firms from 1 July 2024 and for (Independent) Non-Executive Directors in in-scope firms from 1 July 2025. Technical amendments to improve existing legislation and clarify certain statutory processes are included in the Act. - A CBI-wide project has been completed to operationalise the new IAF regime. IAF Guidance has been finalised and issued by the CBI. - Rec No. 3 - Recommendation: Adopt a sequenced action plan for banking and insurance supervision to manage climate-related financial risks in priority areas, with an early emphasis on robust data and quality disclosure. - Addressee: CBI - Time: I - Comment: A sequenced action plan is in place. This takes the form of 3-year forward-looking roadmaps detailing the various projects and activities that are required to meet these (and broader) objectives with respect to climate change risk management. These were updated in January 2025. The work is progressing through the climate change hub and spokes model led by the CBI’s Climate Change Unit. The cross-Bank teams meet on a monthly basis to discuss progress across the activities in the roadmaps, to identify gaps and obstacles and to engage in strategic conversation to progress the work. Material progress over the past year includes improvements in data and insights such as flood risk in bank lending and insurance flood protection gaps. While the action to adopt a sequenced action plan is completed, significant work is still required to mature and embed management of climate-related risks as outlined in the roadmaps. ### Macroprudential Policy - Rec No. 4 - Recommendation: Work with European institutions to develop macroprudential tools targeting risks from non-banks, including for leakages and other cross-border issues. - Addressee: CBI - Time: MT - Comment: The CBI has engaged with international colleagues (Eurosystem, ESRB, ESMA, FSB, IOSCO etc.) in taking forward work on macroprudential policy for investment funds internationally. The CBI published a Discussion Paper (DP) on the macroprudential framework for investment funds in July 2023 while the Feedback Statement to the Discussion Paper was published in July 2024. The CBI also hosted an international conference on macroprudential policy for funds in May 2024 as part of the programme of engagement with key stakeholders on the contents of the Discussion Paper and the feedback received. Building on the Discussion Paper, the CBI published its response to the European Commission’s targeted consultation on macroprudential policies for non-bank financial intermediation (NBFI) in November 2024. The CBI was also heavily involved in developing a single Eurosystem response to the European Commission’s consultation. The Eurosystem High-Level Task Force which prepared the Eurosystem response is co-chaired by the CBI, alongside the Banque de France. The CBI is also active in a number of international workstreams at the FSB and IOSCO on this topic, including the FSB's Working Group on Leverage in NBFI, which published a consultation paper in December 2024. In addition to inputting to these international workstreams, the CBI has introduced two macroprudential measures targeting specific cohorts of investment funds in recent years - namely the macroprudential measures for Irish property funds announced in Nov 2022 (see Rec 6 below) and macroprudential measures pertaining to GBP denominated LDI funds announced in April *Annex II. Implementation of FSAP Key Recommendations — source document.* ### 2024. Given the cross-border nature of GBP-denominated LDI ### 1irlea2025001-print-pdf - 2024. Given the cross-border nature of GBP-denominated LDI ### International coordination on GBP-denominated LDI - The CBI sought to ensure international coordination in introducing measures for GBP-denominated LDI funds. - The CBI’s consultation paper represented an aligned public consultation with the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, which published in parallel a consultation paper and final framework on GBP-denominated LDI funds. - Since the beginning of the UK gilt market crisis in 2022, the CBI has worked closely with ESMA, UK authorities and other relevant stakeholders. ### Macroprudential policy and non-bank lenders (NBLs) - Recommendation: Expand the monitoring of non-bank lenders beyond those engaged in mortgage activities. (Addressee: CBI; Timing: ST) - Key findings and actions: - Research since 2019 estimates the share of NBLs in SME lending at 30-40 percent in recent years, and closer to one-half among real estate SMEs. - In late 2023, a detailed balance sheet profile of NBLs was developed using hand-collected data (Moloney et al 2023). - In 2024, a deep-dive on the CRE market prioritized the role of NBLs, including risk-profile analysis of lending to NBLs versus banks (Lambert et al., 2024; FSR Special Feature 2024h1). - NBLs based outside Ireland likely play an important role in funding structures for Ireland’s CRE market; transaction-level data on CRE deals is now being used to fill data gaps. - A special Quarterly Bulletin article on the housing market (September 2024) prioritized non-bank sources of financing for housing development. - Further work analysing Specialist Property Lenders will be forthcoming in the next few months. - Research is ongoing to investigate the different pass-through of monetary policy to lending volumes and interest rates using credit register data. ### Property funds: leverage and liquidity management - Recommendation: Strengthen resilience of property funds by introducing a macroprudential leverage limit and liquidity management guidance, adjusting the limit countercyclically. (Addressee: CBI; Timing: I) - Actions and details: - In November 2022 the CBI announced a leverage limit of 60 percent on property funds, to be gradually implemented over a five-year period for existing property funds. - Funds with leverage currently over 50 per cent must submit a plan outlining how to keep leverage below 60 percent or reduce it below 60 percent prior to the implementation deadline. - The leverage limit is subject to regular monitoring by the CBI, including engagement on leverage reduction and maintenance plans. - New Guidance to address liquidity mismatch was introduced with an 18-month implementation period to May 2024. - Both measures apply immediately to newly-authorised Irish property funds. ### Banking sector supervision - Recommendation: Maintain use of tools developed for intensified monitoring of banks’ credit losses introduced during the pandemic. (Addressee: CBI; Timing: ST) - Implementation and structures: - Pandemic-era tools continue to drive supervision of credit and debt-related risks. - Data analysis is considered collaboratively via formal fora established by the Distressed Debt Working Group. - Specific groups: Credit Network (focuses on credit risk issues and priority actions) and Debt Steering Group (looks at indicators of latent distress and credit availability on a forward-looking basis). ### Insurance sector supervision and recovery planning - Recommendation: Continue strengthening insurance supervision focused on intra-group transactions and concentrations, post-Brexit group structures, recovery planning, and liquidity risk management. (Addressee: CBI; Timing: ST) - Actions and timelines: - On 30 January 2023, the CBI published "Guidance for (Re)Insurance Undertakings on Intragroup Transactions & Exposures" to clarify expectations regarding IGTs. - Thematic review of recovery plans produced industry feedback in Q4 2022. - Further engagement will occur under CBI's PRISM engagement, including regular risk assessments and annual reviews of recovery plans and ORSAs. - Specific reviews of intra-group arrangements are planned for 2025. ### MMFs and funds sector resilience (MBF Sector) - Recommendation 9: Work with ESMA, ESRB, and EU Commission, as part of the Commission’s review of the EU MMF Regulation, to promote MMF resilience. (Addressees: CBI, DoF; Timing: ST) - The CBI responded to the EU Commission consultation on NBFI, opining on need for targeted MMF reform, and continues stakeholder engagement. - Recommendation 10: Prioritize guidance to funds on using the full range of liquidity management tools (LMTs), including passing transaction costs to subscribing/redeeming investors. (Addressee: CBI; Timing: ST) - The CBI co-led FSB work on OEIFs regarding LMTs, particularly price-based LMTs, and was heavily involved in IOSCO international guidance development. - The CBI is part of ESMA project team developing Regulatory Technical Standards and guidance on LMTs under revised AIFMD. - The CBI issued guidance on side-pockets by UCITS in 2022. - Domestic work includes understanding how price-based/anti-dilution LMTs are used in Irish-domiciled funds and implementation challenges (incorporating market impact into swing factors; inconsistencies; use in normal and stressed conditions). - A survey of Irish-authorised funds on LMT availability and use was recently conducted; targeted follow-ups with industry will supplement data. - Recommendation 11: Intensify collaboration between Central Bank, CSO, and international regulators to better understand OFI residual entities and conduct granular risk analysis. (Addressees: CBI, CSO; Timing: MT) - CSO internal analysis examined OFI links to the domestic economy and intra-group activity proportions. - Quarterly Financial Accounts Statistics will incorporate greater OFI sector splits to better understand OFI residual at aggregate level over time. - The CBI lacks granular data on the 'OFI residual' for risk analyses but actively monitors SPEs, investment funds, and MMFs (e.g., MBF Monitor) and published a ‘Behind The Data’ on IFs’ use of SPEs and links to the domestic economy. - European-level discussions deprioritized over past 18 months; bilateral discussions on captive financial sector typology and vulnerabilities will be progressed further in H2 2025. - Recommendation 12: Conduct more deep dives to enhance monitoring of subsegments of the funds sector. (Addressee: CBI; Timing: ST) - Unstructured risk assessments ongoing: analysis of Irish-domiciled Hedge Funds; assessment of investment funds’ LMT availability and use; improvements in CBI data granularity. - Supervisory deep dives achieved for ETFs, MMFs, FOE and regular monitoring through the Funds Impact Model. ### Fintech and digital assets (MiCAR, DORA) - Recommendation 13: Prepare to introduce domestic legislation if MiCA framework is significantly delayed or has material gaps. (Addressees: DoF, CBI; Timing: ST) - EU Markets in Crypto Asset Regulation (MiCAR) published in Official Journal on 9 June 2023. - MiCAR became applicable to issuers of Asset-Referenced Tokens (ARTs) and E-Money Tokens (EMTs) on 30 June 2024 and to Crypto-Asset Service Providers (CASPs) on 30 December 2024. - MiCAR transposed into Irish law on 7 November 2024 by S.I. No. 607 of 2024 European Union (Markets in Crypto-Assets) Regulation. - Under the S.I., the CBI is designated as the NCA for authorisation and supervision of entities subject to MiCAR. - Companies operating in Ireland must achieve full compliance within the twelve-month transitional period concluding on 29 December 2025. - Throughout 2023 and 2024 the CBI worked with ESMA and EBA on level 2 and 3 texts and supervisory convergence; the CBI established a cross-sectoral team to integrate MiCAR into authorisation and supervisory processes. - Recommendation 14: Advocate for inclusion of systemic Irish cloud service providers in the Union Oversight Framework under DORA; otherwise seek statutory powers to review resilience. (Addressees: CBI, DoF; Timing: MT) - DORA published in official journal in December 2022 and transposed in January 2025. - ESAs preparing new Oversight Regime for critical ICT third-party providers, relying on collection of the Register of Information on ICT services provided by third-parties from all regulated financial entities subject to DORA. - The CBI expects all critical cloud service providers of financial entities will come under the ESAs Oversight Regime. ### Insolvency and creditor rights - Recommendation 15: Further develop government strategy with coordination across agencies to provide targeted solutions to long-term mortgage arrears borrowers based on financial situation and debt servicing capacity. (Addressees: CBI, DoF, DOJ, ISI, consulting relevant agencies; Timing: ST) - An inter-Departmental Group reviewed the Mortgage Arrears Framework and issued a report in September 2024 with recommendations. - A second iteration, the Mortgage Arrears Forum, commenced in December 2024 to oversee implementation. - Recommendation 16: Review examinership given limited usage, the new EU Directive, and identified gaps; consider introducing a new hybrid procedure aligned with EU Directive spirit. (Addressees: DETE, CLRG; Timing: I) - EU Directive on Preventive Restructuring’s mandatory articles were transposed into Irish law via minor amendments to examinership. - Review of examinership in relation to optional articles is on the Company Law Review Group Work Programme for 2024–2026. - SCARP (Small Company Administrative Rescue Process) is Ireland's hybrid insolvency procedure for small or micro companies (in effect 98 percent of companies on register are eligible). - 2023 saw a 50 percent rise in SCARP notifications compared to first year of operation; numbers for 2024 are roughly on a par with 2023. - SCARP usage has outnumbered examinerships during 2022, 2023 and significantly in 2024. - Department of Enterprise, Tourism and Employment has undertaken an insolvency statistics project to support analysis and policy. ### Crisis management and bank ELA in resolution - Recommendation 17: Develop policies and procedures for assessing prospective solvency of a bank entering into or undergoing resolution to determine eligibility for ELA. (Addressee: CBI; Timing: ST) - A workshop in Q4 2023 sought three outcomes: - (i) Agree how assessment of credible prospect of recapitalisation within 24 weeks would be carried out by the National Competent Authority (NCA), in consultation with the National Resolution Authority (NRA), for a bank requesting ELA that falls within scope of criteria 4.1 (b) of the Eurosystem Agreement. - (ii) Examine how NCA, in consultation with NRA, would approach such assessment when ELA is requested at different stages of the resolution process (entering resolution and undergoing resolution). - (iii) Identify follow-up work required to support NCA’s approach and preparation for ELA. - Workshop recommendations progressed within the CBI; cross-bank ELA procedures will be updated to include approach when ELA is provided to a bank entering or undergoing resolution. - A solution to restore full access of an entity in resolution to Eurosystem monetary policy operations (MPOs) the day after adoption of the resolution scheme has been set out and agreed by the ECB Governing Council. ### Insurer insolvency regime and legislative amendments - Recommendation 18: Remedy weaknesses in the insolvency regime for insurers, including any required legislative amendments. (Addressees: DoF, CBI; Timing: ST) - Insurance Recovery and Resolution Directive (Directive 2025/1) published in Official Journal of the EU on 08 January 2025. - Ireland has begun to transpose the Directive into Irish law before the deadline of 28 January 2027. - The IRRD will require insurers that meet criteria for resolution to be prepared for possible failures and orderly management of such cases. - Department of Finance has met with CBI to assess proposal to update powers to seek appointment of a liquidator for insurers. ### Financial integrity and AML/CFT capacity - Recommendation 19: Adequately resource AML/CFT capacity, use advanced data analytical tools, and focus on ML/TF risks from non-resident and cross-border activity. (Addressees: Relevant AMLS C members; Lead: DoF; Timing: ST) - Staffing, systems, and supervisory changes: - FIU Ireland staffing increased by 15 percent (excluding management members). - In early 2025 the next generation of FIU.net rolled out to all European FIUs, providing a business interface solution and more analysis capability than predecessor. - FIU Ireland’s GoAML software upgraded to version 5.4; Phase 2 upgrade expected end of Q2 or early Q3 2025 to provide more analysis capabilities. - In January 2025 the CBI commenced implementing a new integrated supervisory framework establishing integrated supervisory teams to identify and assess all risks (prudential, consumer protection & AML) across sectors and firms. - Framework structure: three large vertical directorates (Banking & Payments, Insurance, Capital Markets & Funds) and a horizontal supervision directorate with expert teams operating horizontally. - The Financial Integrity Division (FID) remains as a horizontal division responsible for AML/CFT supervision across the entire financial sector, at the same level of dedicated AML resources as previous AML Division. - Integrated supervisory teams in vertical directorates will conduct AML/CFT supervision in partnership with FID as the new framework is implemented. - Project begun in 2024 to enhance data collection for risk-based ML/TF supervision: enhanced Risk Evaluation Questionnaires (REQs) will be sector specific with emphasis on domestic and international flows; roll-out for consultation and phased completion over 2025 and into Q1 2026. - A risk assessment partner was procured in 2024 to assist revision of Ireland’s national risk assessment for ML and TF; completion due in Q4 2025 with transnational financial flows as a priority area. *Source: 1irlea2025001-print-pdf - 2024.* ### Annex III. Risk Assessment Matrix ### Annex III. Risk Assessment Matrix ### Global Risks - Trade policy and investment shocks - Likelihood: High - Expected Impact: High - Key point: The Irish economy is highly integrated into the global value chains, with significant reliance on FDI and trade concentrated in a small number of sectors, notably, pharmaceutical manufacturing and ICT. As a result, the country is highly vulnerable to trade and investment restrictions and supply disruptions. - Policy Response: - In case of a large negative impact, use fiscal buffers to provide focused and time-bound support where essential. - Accelerate structural reforms to strengthen competitiveness and build resilience. - Diversify exports, strengthen supply chain resilience and linkages between MNEs and the domestic economy. - Redouble efforts together with other EU countries to deepen the single market and complete its architecture. - Deepening geoeconomic fragmentation - Likelihood: High - Expected Impact: High - Key point: Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth. - Policy Response: (See Trade policy and investment shocks — overlapping mitigation measures) - Regional conflicts (e.g., Middle East, Ukraine, Sahel, East Africa) - Likelihood: Medium - Expected Impact: Medium - Key point: Negative spillovers from conflicts would weaken external demand and raise commodity prices, affecting growth and inflation in Ireland; migrant inflows could increase fiscal and housing pressures but also help alleviate labor shortages. - Policy Response: - In case of a large negative impact, use fiscal buffers to provide focused and time-bound support where essential. - Facilitate the integration of migrants. - Accelerate high-quality public investment projects. - Commodity price volatility - Likelihood: Medium - Expected Impact: Medium - Key point: As a commodity importer, higher commodity prices would increase firms’ costs, resulting in higher inflation and lower private consumption and investment. - Policy Response: - In case of a large negative impact, use fiscal buffers to provide focused and time-bound support where essential. - Strengthen the resilience of the supply chain of critical commodities including by diversifying suppliers. - Tighter financial conditions and systemic instability - Likelihood: Medium - Expected Impact: Medium - Key point: Higher-for-longer interest rates would increase financing costs and slow credit and growth. Asset repricing and market dislocations would affect negatively Ireland’s large NBFI sector. A mitigating factor is that the sector is mostly externally oriented, with limited linkages to the domestic economy. - Policy Response: - Allow automatic stabilizers to operate fully and recalibrate fiscal policy in line with cyclical conditions. - Intensify monitoring of the financial sector and close data gaps. - Recalibrate and develop macroprudential measures as needed. - Global growth acceleration - Likelihood: Low - Expected Impact: High - Key point: Ireland’s integration in global value chains means higher global growth would raise demand for Irish exports which could strain capacity and contribute to higher costs of goods and services. - Policy Response: - Tighten fiscal policy to reduce aggregate demand and counteract overheating pressures. - Accelerate structural reforms to ease capacity constraints. - Cyberthreats - Likelihood: High - Expected Impact: Medium/High - Key point: Cyber-attacks, if successful, could inflict significant damage to the financial sector and other critical infrastructure. - Policy Response: - Intensify the monitoring of cyber risks and exchange of information with partners. - Strengthen further the cyber security framework, including resilience testing and business continuity plans. - Climate change - Likelihood: Medium - Expected Impact: Medium - Key point: Rising sea levels increase the risk of coastal erosion and coastal flooding. Changing precipitation patterns increase inland flood risks and rising temperatures may result in droughts. - Policy Response: - Strengthen climate adaptation policies and infrastructure to increase resilience. - If risks materialize, consider providing fiscal support to affected individuals and firms. ### Domestic Risks - Supply-side constraints (housing, labor, infrastructure) - Likelihood: Medium - Expected Impact: Medium/High - Key point: Housing and infrastructure shortages further limit the extent to which the Irish economy can attract workers, increasing wage and price pressures and lowering competitiveness and potential growth. - Policy Response: - Accelerate high-quality public investment in housing and infrastructure. - Employ active labor market policies to increase labor supply. - Adopt policies aimed at increasing urban density, improving the use of land, and boosting construction productivity. - Introduce greater housing regulatory certainty and remove rental caps. - Volatile MNE activities - Likelihood: High - Expected Impact: High - Key point: MNEs are important employers and taxpayers in Ireland. A retrenchment (expansion) of the MNE sector would lead to lower (higher) employment growth, tax receipts, and confidence. - Policy Response: - Allow headline fiscal balance to fluctuate in the short run if MNE profits fall temporarily. - If the fall is permanent, use fiscal buffers in the short term, rationalize spending, and implement tax reforms. ### Risk Assessment Notes and Definitions - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. - The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). - The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenario highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon. *Source: Fund staff.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors ### Debt coverage and recording - Coverage remains unchanged from the last Article IV: it covers general government debt, with most debt issued by the central government. - Basis of recording / Valuation notes: - Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. - Insurance, Pension, and Standardized Guarantee Schemes (IPSGSs) typically include government employee pension liabilities. - Recording bases referenced: accrual recording, commitment basis, due for payment, non-cash basis, cash basis. - Definitions preserved: Nominal value, Face value, Market value as described in source. - Reporting on intra-government debt holdings: GG: expected; Nonfin. pub. corp.; State govt.; Local govt.; CG; CPS; Debt securities noted in tabulation. ### Public debt structure indicators (as reported) - Perimeter shown: consolidated public sector (for Figure 3); general government for some panels. - Currency composition: public debt is almost entirely in domestic currency. - Instrument and marketability: predominantly marketable and largely held by external creditors. - Interest and maturity profile: - Residual maturity: 10. years - Debt primarily on fixed rates, providing a buffer to higher interest rates. ### Baseline scenario — key projections (Figure 4; Percent of GDP unless indicated) - Public debt (actual and projected): - 2024: 40.9 - 2025: 36.4 - 2026: 34.4 - 2027: 33.1 - 2028: 31.6 - 2029: 30.2 - 2030: 29.0 - 2031: 28.9 - 2032: 29.6 - 2033: 30.8 - 2034: 32.6 - Change in public debt: - 2024: -2.4 - 2025: -4.5 - 2026: -2.0 - 2027: -1.3 - 2028: -1.5 - 2029: -1.4 - 2030: -1.2 - 2031: -0.1 - 2032: 0.7 - 2033: 1.2 - 2034: 1.8 - Contribution of identified flows (mirrors Change in public debt numbers for 2024–2034). - Primary deficit (percent of GDP): - 2024: -4.7 - 2025: -1.8 - 2026: -1.6 - 2027: -1.5 - 2028: -1.8 - 2029: -1.9 - 2030: -1.7 - 2031: -1.3 - 2032: -0.8 - 2033: -0.3 - 2034: 0.1 - Noninterest revenues (percent of GDP): - 2024: 27.6 - 2025: 25.4 - 2026: 25.5 - 2027: 25.4 - 2028: 25.9 - 2029: 26.0 - 2030: 26.0 - 2031: 25.4 - 2032: 24.9 - 2033: 24.3 - 2034: 23.8 - Noninterest expenditures (percent of GDP): - 2024: 22.8 - 2025: 23.6 - 2026: 23.9 - 2027: 24.0 - 2028: 24.1 - 2029: 24.1 - 2030: 24.2 - 2031: 24.1 - 2032: 24.1 - 2033: 24.0 - 2034: 23.9 - Automatic debt dynamics (contribution, percent of GDP): - 2024: -1.3 - 2025: -1.4 - 2026: -0.6 - 2027: -0.6 - 2028: -0.6 - 2029: -0.4 - 2030: -0.2 - 2031: 0.6 - 2032: 0.9 - 2033: 1.0 - 2034: 1.1 - Real interest rate and relative inflation (percent): - 2024: -0.8 - 2025: -0.1 - 2026: 0.1 - 2027: 0.1 - 2028: 0.1 - 2029: 0.3 - 2030: 0.4 - 2031: 1.3 - 2032: 1.6 - 2033: 1.7 - 2034: 1.8 - Real growth rate (percent): - 2024: -0.5 - 2025: -1.3 - 2026: -0.8 - 2027: -0.7 - 2028: -0.7 - 2029: -0.7 - 2030: -0.7 - Other identified flows (percent of GDP): - 2024: 0.7 - 2025: -1.3 - 2026: 0.3 - 2027: 0.8 - 2028: 0.8 - 2029: 0.8 - 2030: 0.8 - 2031: 0.5 - 2032: 0.5 - 2033: 0.5 - 2034: 0.5 - Contingent liabilities (percent of GDP): 0.00 across projection years shown. - (minus) Interest Revenues (percent of GDP): -0.2 each year across projection. - Other transactions (percent of GDP): - 2024: 0.9 - 2025: -1.1 - 2026: 0.5 - 2027: 1.0 - 2028: 1.1 - 2029: 1.0 - 2030: 1.0 - 2031: 0.7 - 2032: 0.7 - 2033: 0.7 - 2034: 0.7 - Contribution of residual: 2.9 in 2024 and 0.0 thereafter. - Gross financing needs (percent of GDP): - 2024: 1.3 - 2025: 5.3 - 2026: 3.2 - 2027: 2.8 - 2028: 3.2 - 2029: 3.7 - 2030: 5.0 - 2031: 6.7 - 2032: 5.8 - 2033: 6.8 - 2034: 6.8 - Of which: debt service (percent of GDP): - 2024: 6.3 - 2025: 7.3 - 2026: 5.1 - 2027: 4.5 - 2028: 5.2 - 2029: 5.8 - 2030: 7.0 - 2031: 8.2 - 2032: 6.8 - 2033: 7.3 - 2034: 7.0 - Local currency debt service: same series as debt service above. - Foreign currency debt service: 0.00 across projection years. - Memo indicators: - Real GDP growth (percent): 1.2 (2024), 3.2 (2025), 2.1 (2026), 2.1 (2027), 2.2 (2028), 2.1 (2029), 2.3 (2030), 2.3 (2031), 2.3 (2032), 2.3 (2033), 2.3 (2034). - Inflation (GDP deflator; percent): 3.3 (2024), 1.9 (2025), 1.4 (2026), 1.8 (2027), 2.1 (2028), 2.0 (2029), 2.0 (2030), 2.0 (2031), 2.0 (2032), 2.0 (2033), 2.0 (2034). - Nominal GDP growth (percent): 4.6 (2024), 5.2 (2025), 3.5 (2026), 3.9 (2027), 4.4 (2028), 4.2 (2029), 4.3 (2030), 4.4 (2031), 4.3 (2032), 4.3 (2033), 4.3 (2034). - Effective interest rate (percent): 1.5 (2024), 1.6 (2025), 1.7 (2026), 2.2 (2027), 2.5 (2028), 3.0 (2029), 3.6 (2030), 6.6 (2031), 7.7 (2032), 8.0 (2033), 8.2 (2034). - Staff commentary: Despite a projected growth slowdown and a less supportive interest rate environment, public debt is expected to continue on a downwards path over the medium term on the back of a strong fiscal position and still robust growth. ### Medium-term risk assessment (Figure 5) - Debt fanchart metrics: - Fanchart width: 85.51.2 (percent of GDP) [value as presented]. - Probability of debt non-stabilization (percent): 20.7 0.2 - Terminal debt-to-GDP x: 5.40.1 - Debt fanchart index (DFI): 1.5 - Risk signal: 3/Moderate - Gross Financing Needs (GFN) module: - Average baseline GFN (percent of GDP): 3.91.3 - Initial Banks' claims on the gen. govt (pct bank assets): 0.70.2 - Change in banks' claims in stress (pct banks' assets): 0.30.1 - GFN financeability index (GFI): 1.7 - Risk signal: 4/Low - Medium-term index: - Combined contributions: Debt fanchart index 1.5; GFN financeability index 1.7. - Risk signal: 5/ (presented as the medium-term signal classification). - Final assessment probabilities (2025-2030): - Prob. of missed crisis, if stress not predicted: 9.1 pct. - Prob. of false alarms, if stress predicted: 58.0 pct. - Commentary: The debt fanchart shows a moderately low probability that Ireland's public debt will not stabilize over the medium term. All other medium-term tools point to low level of risks. - Source: IMF staff estimates and projections. ### Realism of baseline assumptions (Figure 6) - Historical and projection context: - Commentary: Debt reduction has been faster than expected due to strong growth and low interest rates in recent years. - The projected fiscal adjustment is well within norms; debt reduction projections are slightly above norms but well below Ireland's maximum historical 3-year debt reduction. - Key indicators and comparisons: - 3-year debt reduction above 75th percentile: 5.9 ppts of GDP (75th percentile threshold noted). - Percentile rank for 3-year debt reduction: 80. - 3-year adjustment above 75th percentile (primary balance): 2 ppts of GDP (75th percentile threshold noted). - Methodological note: Laubach (2009) rule referenced for implied spread behavior (rule assumes bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio). ### Demographics — Pensions (Figure 7) - Pension financing summary: - Permanent adjustment needed in the pension system to keep pension assets positive for: - 30 years: 0.5% - 50 years: 1.4% - Until 2100: 2.2% - Current and projected pension expenditure: - Total pension expenditure: - 2022: 3.8 percent of GDP - 2070 projection: 6.6 percent of GDP - Demographic driver: Old-age population share projected to rise from 15 percent in 2022 to 29 percent in 2070 (European Commission’s 2024 Ageing Report). - Net migration sensitivity: Net migration higher by a third would reduce pension spending by 0.2 percentage points of GDP relative to the baseline. - Commentary: Public expenditures on pensions are significantly below EU averages due to a favorable age structure, but ageing will raise pension costs substantially over the long run. ### Demographics — Health (Figure 8) - Health expenditure projections: - Total public expenditure on healthcare: - 2022: 4.1 percent of GDP - 2070 projection: 5.6 percent of GDP - Commentary: While healthcare spending as a percent of GDP is significantly below EU averages, per capita health care expenditure is high. Ageing (old-age population rising from 15 percent in 2022 to 29 percent in 2070) is expected to increase health spending over time. *Source: IMF staff estimates and projections contained in the chapter "5. Debt consolidation across sectors."* ### Annex VI. Data Issues ### Annex VI. Data Issues ### Data adequacy and standards participation - Ireland subscribes to the Special Data Dissemination Standard (SDDS) since July 1996 and publishes the data on its National Summary Data Page. - The latest SDDS Annual Observance Report is available on the Dissemination Standards Bulletin Board. - Summary assessment statements from staff: - "The data provided to the Fund are adequate for surveillance." - "The data provided to the Fund have some shortcomings but are broadly adequate for surveillance." - "The data provided to the Fund have some shortcomings that somewhat hamper surveillance." - "The data provided to the Fund have serious shortcomings that significantly hamper surveillance." - Rationale for staff assessment: "Data provision is adequate for Fund surveillance. Ireland publishes timely economic statistics and posts most of the data and the underlying documentation on the internet. Remaining data gaps mostly pertain to the 'OFI residual' segment and the authorities have made progress in reducing the size of the residual." ### Data adequacy assessment ratings (Table 1 / heatmap) - Heatmap top-level rating string (as presented): AAAABAA - Sectoral headings preserved as in source: National Accounts; Prices; Government Finance Statistics; External Sector Statistics; Monetary and Financial Statistics; Inter-sectoral Consistency; Median Rating - Coverage cell rating string (as presented): AAAAB - Consistency cell rating string (as presented): AA - Frequency and Timeliness cell rating string (as presented): AABAA - Data Quality Characteristics — Granularity: A (with explanatory note that the top/bottom cells refer to different subsectors for GFS and MFS) - Data Quality Characteristics — Questionnaire Results / Assessment: (detailed questionnaire results referenced; note: "When the questionnaire does not include a question on a specific dimension of data quality for a sector, the corresponding cell is blank.") - Note on methodology: - "The overall data adequacy assessment is based on staff's assessment of the adequacy of the country’s data for conducting analysis and formulating policy advice, and takes into consideration country-specific characteristics." - "The overall questionnaire assessment and the assessments for individual sectors reported in the heatmap are based on a standardized questionnaire and scoring system (see IMF Review of the Framework for Data Adequacy Assessment for Surveillance, January 2024, Appendix I)." - Granularity clarifications: "The top cell for 'Granularity' of Government Finance Statistics shows staff's assessment of the granularity of the reported government operations data, while the bottom cell shows that of public debt statistics. The top cell for 'Granularity' of Monetary and Financial Statistics shows staff's assessment of the granularity of the reported Monetary and Financial Statistics data, while the bottom cell shows that of the Financial Soundness indicators." ### Table of Common Indicators for Surveillance (Table 3) — metadata highlights - Table timestamp: "(As of April 25, 2025)" - The table presents fields including: Date of Latest Observation; Date Received; Frequency of Data; Frequency of Reporting; Expected Frequency; Expected Timeliness; Data Provision to the Fund; Publication under the Data Standards Initiatives through the National Summary Data Page. - Sample series listed (as presented in the table): Reserve/Base Money; Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest Rates; Consumer Price Index; Revenue, Expenditure, Balance and Composition of Financing ‒ General Government; Revenue, Expenditure, Balance and Composition of Financing ‒ Central Government; International Investment Position; Stocks of Central Government and Central Government-Guaranteed Debt; External Current Account Balance; Exports and Imports of Goods and Services; GDP/GNP; Gross External Debt; Exchange Rates; International Reserve Assets and Reserve Liabilities of the Monetary Authorities. - Frequency and timeliness coding definitions preserved as in source: (“D”) daily; (“W”) weekly or with a lag of no more than one week after the reference date; (“M”) monthly or with lag of no more than one month after the reference date; (“Q”) quarterly or with lag of no more than one quarter after the reference date; (“A”) annual.; ("SA") semiannual; ("I") irregular; ("NA") not available or not applicable; and ("NLT") not later than. - Table footnote on SDI sources: "Based on the information from the Summary of Observance for SDDS and SDDS Plus participants, and the Summary of Dissemination Practices for e-GDDS participants, available from the IMF Dissemination Standards Bulletin Board (https://dsbb.imf.org/). For those countries that do not participate in the Data Standards Initiatives, as well as those that do have a National Data Summary Page, the entries are shown as '...'" ### Recent changes, gaps, and corrective actions - Changes since the last Article IV consultation: - "The CBI has commenced updating its ML risk understanding by improving data collection on cross-border payments." - "There have been further financial data imrpovements, including a more detailed classification of the OFI sector in the quarterly financial accounts." - Other data gaps: Remaining gaps mostly pertain to the "OFI residual" segment. - Corrective actions and capacity development priorities (staff recommendation as presented): - "To enhance financial monitoring and surveillance, the CBI should continue to collaborate with the CSO and other regulators to reduce data gaps for non-bank financing entities and their cross-border activities as well as to identify both foreign and domestic linkages, including those involving OFI residual entities." ### Summary judgment - Overall: "The data provided to the Fund are adequate for surveillance," with some acknowledged shortcomings related to non-bank financial sectors and OFI residuals and ongoing efforts to improve classification and cross-border payment data. *Source: Annex VI. Data Issues (1irlea2025001-print-pdf) — Ireland: Staff Report for the 2025 Article IV Consultation — informational annex.* ### 2024. The core of the plan is the establishment of a national fiscal framework that supports ### 2024. The core of the plan is the establishment of a national fiscal framework that supports ### Fiscal framework and fiscal strategy - Core objective: establishment of a national fiscal framework that supports long-term debt sustainability while enabling continued investment in housing, climate action, and infrastructure. - Medium-term spending path: commitment to a net expenditure growth path averaging 5.3 percent annually over the medium term. - Structural target: path calibrated to achieve a structural primary balance of 2.3 percent of GDP by 2028. - Savings and buffers: - Continued running of budgetary surpluses (in general government terms) to build enhanced buffers against shocks to the economy. - Two savings mechanisms: - Future Ireland Fund: for long-term structural needs such as population ageing and climate transitions. - Infrastructure, Climate and Nature Fund: for counter-cyclical use during future economic downturns. - EU alignment and oversight: - Deliberate alignment with evolving EU fiscal norms. - Commitment to produce a new Medium-Term Fiscal & Structural Plan to be published later this year, setting out the Government's fiscal strategy for the next five years. - Staff recommendations will feed into formulation of the new Plan. - Government to publish its annual Summer Economic Statement, setting out budgetary parameters for Budget 2026. - Policy aim: ensure public finances remain on a sustainable trajectory in an increasingly challenging and uncertain economic landscape. ### Financial sector resilience and supervision - Banking sector performance: - Domestic bank profitability remains resilient. - NPL ratios continue to be at low levels. - Capital buffers remain above regulatory requirements. - Supervisory developments: - Central Bank of Ireland (CBI) introduced a new supervisory model in January 2025 that remains risk-based and delivers a more integrated approach. - Authorities welcome staff’s assessment that macroprudential settings are appropriate. - CBI conducts regular monitoring and assessment of macroprudential policies. - Countercyclical Capital Buffer (CCyB): - In February 2025, the CBI maintained the CCyB rate at 1.5 percent. - Future CCyB decisions will be based on macro-financial conditions consistent with the CBI strategy for the CCyB. - Outcome of the next CCyB review to be published in the Financial Stability Review in June 2025. - Other supervisory measures: - December 2024 Financial Stability Review: arising from the CBI’s 2024 O-SII review, six institutions were identified as systemically important and required to maintain an associated supplementary capital buffer. - Recalibration of mortgage measures introduced in 2022 have yielded intended outcomes, supporting sustainable lending standards in the mortgage market. - Non-bank financial sector and funds: - Considerable progress in assessing and reducing risks from non-banks. - CBI announced two macroprudential measures relating to cohorts of investment funds covering Irish property funds and GBP-denominated liability driven investment (LDI) funds. - Objective: address financial stability concerns with Irish property funds and ensure resilience of Irish-authorized GBP denominated LDI funds. - Ongoing CBI engagement domestically and internationally, including with the European Commission’s consultation on a macroprudential framework for NBFI in Europe, a May 2024 conference on macroprudential policy for investment funds, and contribution to the FSB’s workstream on leverage in NBFI. - Recognition of the positive role of the non-bank sector and investment funds in diversification, capital provision, and economic growth. - FSAP implementation: - Authorities progressing implementation of the 2022 FSAP recommendations, with all key recommendations either on track or completed. - Measures include improved collaboration with stakeholders at domestic and European levels, strengthening the CBI’s supervisory toolkit, improved monitoring of non-bank lenders, and further enhancing resourcing capacity and supervision of AML/CFT. ### Structural reforms, competitiveness, and infrastructure - Policy focus: enhance competitiveness of the domestic economy through targeted policies and infrastructure delivery. - Infrastructure investment: - Government investing in productive capital to boost stock of infrastructure in energy supply, water, housing, and transport to eliminate bottlenecks and support employment-creating inward investment. - An early review of the National Development Plan prioritized and to be published in July; review will focus on delivery of transformative, critical and growth-enhancing infrastructure over the next five years, allocate funding to update capital expenditure ceilings out to 2035, and significantly increase investment in national infrastructure. - Competitiveness agenda: - Programme for Government mandates development of the Action Plan on Competitiveness and Productivity covering industrial policy, regulatory burden reduction, infrastructure, energy, trade, and innovation. - Plan expedited to align key decisions with the upcoming budgetary process for swift implementation. ### Housing and planning - Housing strategy: - Government updating multi-annual, multi-billion euro Housing for All plan out to 2040 to provide clarity and policy stability for long-term planning. - New Planning and Development Act implemented on phased basis, with majority of provisions to be commenced over the next 12 months. - Act includes statutory timelines for decision making, streamlining of judicial review processes, and reform of the national planning body to provide greater certainty. - Revision to the National Planning Framework (NPF) approved to set the agenda for accelerated housing delivery. - New Housing Activation Office to support infrastructure required to enable increased housing supply and address barriers and blockages. ### Health sector reforms and fiscal efficiency - Challenge drivers: ageing population and rising pharmaceutical costs will increase demands on the health system. - Productivity and Savings Taskforce: - Set up to drive savings and productivity improvements across the Health Services Executive. - Associated Action Plan published in April 2025 focuses on implementation of existing and new reforms with emphasis on value for money and better services within existing resources. ### Labor force participation and inclusion - Labor force expansion: - Labor force increased by 17 percent to over 2.9 million since Q4 2019. - Female participation: - Female labor force participation rate increased by over 5 percentage points since 2019 (compared to 2.2 percentage points for males). - Policy implications: - With slowing population gains from natural demographic change and expected slowdown in net migration, authorities recognize importance of maximizing labor force contributions of existing working-age population and productivity. - Targeted efforts to reduce barriers such as childcare costs and skills mismatches emphasized. ### Digitalization and AI strategy - National digital policy: - Programme for Government commits to update the National Digital Strategy to consolidate digital policy and regulatory responsibilities and lead delivery across Departments and Agencies. - Authorities intend to invest to make Ireland an EU center of expertise for digital and data regulation and a regulatory hub for companies operating across the EU Digital Single Market. - AI strategy: - ‘AI - Here for Good’: the National Artificial Intelligence Strategy comprises 8 strands, including driving adoption of AI in Irish enterprise and AI education, skills and talent, with specific strategic actions led by nominated Government Departments, State agencies and other bodies. ### Climate action and carbon transition - Climate Action Plan 2025: - Government approved Climate Action Plan 2025 in April 2025, the third statutory update since the Climate Action and Low Carbon Development (Amendment) Act 2021. - Plan sets out pathway to transition to a more sustainable and low carbon economy, providing detailed framework for implementing carbon budgets and sectoral emissions ceilings. - Direction of travel presented for sectors including electricity, transport, industry, and agriculture to signal needed investments to industry and stakeholders. ### Conclusion and policy outlook - Authorities committed to sustaining momentum of strong sustainable economic growth and fiscal prudence through sound macroeconomic management. - Recognition of Irish economy’s resilience amid consecutive crises, but acknowledgement of further policy challenges across fiscal policy, the financial sector, climate and digital transitions, and an uncertain international economic environment. - Authorities welcome and appreciate the IMF’s advice as they address these challenges. *Source: 1irlea2025001-print-pdf - 2024. The core of the plan is the establishment of a national fiscal framework that supports* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1irlea2025001-print-pdf.pdf_