## _cr1618

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---

### EXECUTIVE SUMMARY — Outlook and Risks
- Broad-based recovery underway but "crisis legacies" remain: domestic demand not fully recovered; public and private sector debts elevated; unemployment still well above pre-crisis levels; bank repair ongoing.
- Real GDP and employment
  - Real GDP is about 5½ percent above its pre-crisis level.
  - Real GDP expanded by 6.7 percent y/y in 2015 H1.
  - Job growth was 3 percent y/y in Q3; unemployment fell to 8.9 percent in November and is "less than 9 percent."
  - Labor force participation is about 60 percent, "4 percentage points below pre-crisis levels."
- Inflation and external conditions
  - HICP inflation briefly turned positive in May–August before reverting to zero in September and October.
  - 10 year Irish bond yields "have converged back toward 1 percent."
  - S&P raised Ireland’s long-term sovereign rating by one notch to ‘A+’ in June.
- Property markets and vulnerabilities
  - Residential housing prices have risen "by about 33 percent since their nadir in 2013."
  - Cash purchases have accounted for "about half of total housing purchases."
  - Commercial real estate (CRE) prices increased "by 25 percent y/y in Q2"; over half of CRE investment driven by foreign buyers.
  - Vacancy rates for Dublin prime office space are "now lower than before the crisis."
- Growth outlook and risks
  - Staff raised GDP growth forecasts for 2015–16 and the medium-term.
  - Growth projected to decelerate gradually to a potential rate of "2½–3 percent" with the output gap expected to turn positive in 2016.
  - Risks "broadly balanced": near-term risk of disruptive asset price shifts; ECB QE and cash buffers of around "5 percent of GDP" mitigate tightening; prolonged accommodative ECB policy could amplify the Irish business cycle; weak euro area growth, weak emerging markets, and impaired credit channel are additional risks.

### MACRO PROJECTIONS (selected figures from staff projections)
- Real GDP (percent change): 2013: 1.4; 2014: 5.2; 2015: 6.3; 2016: 4.2; 2017: 3.3; 2018: 3.1; 2019: 2.7; 2020: 2.6.
- Final domestic demand (percent change): 2013: -1.5; 2014: 5.2; 2015: 6.2; 2016: 3.7; 2017: 3.5; 2018: 3.4; 2019: 3.2; 2020: 2.8.
- Exports (percent change): 2013: 2.5; 2014: 12.1; 2015: 12.0; 2016: 4.5; 2017: 4.2; 2018: 4.1; 2019: 4.1; 2020: 4.2.
- Imports (percent change): 2013: 0.0; 2014: 14.7; 2015: 12.8; 2016: 4.2; 2017: 4.4; 2018: 4.5; 2019: 4.7; 2020: 4.7.
- Current account (percent of GDP): 2013: 3.1; 2014: 3.6; 2015: 3.8; 2016: 4.2; 2017: 3.8; 2018: 3.5; 2019: 3.2; 2020: 3.1.
- Unemployment rate (percent): 2013: 13.0; 2014: 11.3; 2015: 9.6; 2016: 8.5; 2017: 7.7; 2018: 7.2; 2019: 6.9; 2020: 6.9.
- Output gap (percent): 2013: -5.3; 2014: -3.2; 2015: -0.5; 2016: 0.5; 2017: 0.8; 2018: 1.0; 2019: 0.7; 2020: 0.3.
- HICP (percent): 2013: 0.5; 2014: 0.3; 2015: 0.2; 2016: 1.5; 2017: 1.6; 2018: 1.7; 2019: 1.9; 2020: 2.0.

### FISCAL POLICY — Recent performance and guidance
- 2015 outturns and near-term
  - Large tax outperformance allowed a supplementary budget of "0.7 percent of GDP" (0.3 percent of GDP discretionary spending; 0.4 percent of GDP overruns).
  - Staff estimate a modest structural primary easing of "0.1 percent of GDP."
  - Headline deficit projected at "1.9 percent of GDP" will significantly outperform the "2.7 percent" budget target, allowing exit from the EU Excessive Deficit Procedure.
  - Public debt is set to fall to "97 percent of GDP."
- Budget 2016 path and guidance
  - Budget 2016 aims for a structural balance by 2018 (Ireland’s medium-term objective, MTO).
  - Staff project the overall fiscal deficit will fall to "0.9 percent of GDP in 2016" and reach a surplus of "0.3 percent of GDP in 2018."
  - Staff view a gradual improvement in the structural primary balance—about "0.4 percent of GDP per year on average" until 2018—as appropriate.
  - Revenue outperformance or unanticipated interest savings should be used for debt reduction.
  - Staff estimate a "1.3 percent of GDP improvement in the structural primary balance over 2016–18."
- Composition of Budget 2016 measures (€1.5 billion fiscal space)
  - Expenditure: "Lansdowne Road" wage agreement adds about "€300 million" to spending in 2016; additional €470 million allocated to education and social protection; a 50 cent increase in the minimum hourly wage (an increase of "about 6 percent").
  - Revenue: removal of "42,500 workers" from USC scope by raising entry threshold and reductions in three lowest USC rates and USC bracket changes for lower- and middle-income earners.
  - Staff recommendation: better targeting of expenditure measures to protect vulnerable groups at lower fiscal cost and to create space for growth-enhancing investment.

### BOX 1 — National Accounts and Balance of Payments revisions
- Two main July 2015 revisions:
  - Aircraft leasing accounting change (ESA 2010): recorded as investment and imports in the country of economic ownership; raises imports and gross fixed capital formation and lowers external trade balance; balance sheets of leasing companies included in Ireland’s balance sheet.
  - Upward revision to service component of private consumption expenditures, reflecting additional tax and insurance information.
- Consequences
  - Real GDP growth rates for 2012–14 revised upward; GDP expenditure components changed for the last 10 years; current account balance reduced.
  - Nominal GDP in 2014 was "3 percent higher than previously reported," lowering end-2014 debt-to-GDP to "107.6 percent (from 110.7 percent)."
  - Revised narrative: Ireland avoided a second recession in 2012; recovery solidly rooted since 2013; domestic demand recovery in 2014 stronger than previously reported.

### FINANCIAL SECTOR, HOUSING, AND MACROPRUDENTIAL POLICY
- Banking sector repair and metrics
  - Continued bank balance sheet cleanup is needed to increase resilience and support future lending.
  - Domestic banks started generating profits in 2014 and new lending is picking up from low levels.
  - Nonperforming loans (NPLs) remain high at about one-fifth of gross loans.
  - Pre-provision profitability (excluding nonrecurrent items) at 0.4 percent of average assets remains subdued.
- Key indicators for three main domestic banks (Allied Irish Banks, Bank of Ireland, Permanent TSB)
  - Credit growth 2/: -4.1, -10.2, -10.8, -4.3, -2.3 (2011,2012,2013,2014,2015H1).
  - Return on assets: -1.2, -2.0, -0.8, 0.6, 0.8.
  - Pre-provision profits 3/: 0.6, -0.2, 0.4, 0.5, 0.4.
  - Net interest margin: 0.9, 0.8, 1.2, 1.6, 1.8.
  - NPL ratio: 19.6, 24.8, 27.1, 23.2, 19.8.
  - Coverage ratio 4/: 49.8, 48.5, 51.4, 51.7, 50.9.
  - Texas ratio 5/: 93.0, 115.0, 120.0, 106.0, 95.0.
  - CT1 ratio: 16.4, 14.7, 13.3, 15.5, 16.5.
  - Loan to deposit 6/: 146.0, 124.0, 111.0, 108.0, 107.0.
  - NSFR: 69.0, 82.3, 96.1, 110.5, 110.9.
  - LCR: 71.0, 92.3, 107.7, 109.9, 113.4.
- NPLs, mortgage arrears, and workout challenges
  - Stock of mortgage accounts in deep arrears (over 720 days) reached 55 percent of past-due loans (over 90 days) in mid-2015 from 49 percent at end-2014.
  - About half of CRE loans are still nonperforming.
  - Staff cautioned that write backs should be based on conservative assumptions and collateral reappraisals.
- Macroprudential measures and housing
  - CBI macroprudential measures (announced October 2014, in force February 2015) associated with moderating expectations and reducing speculative demand.
  - Authorities introduced new macroprudential rules; CCB set at zero percent, to be reviewed quarterly.
  - Staff recommended periodic impact assessments and recalibration as conditions change.
- Housing supply and rent measures
  - Government package: streamlined building codes and rebates to developers; increased tenant rights and protections.
  - Staff welcomed measures to reduce building costs, especially for lower-cost homes, but warned that administrative rent measures could deter new construction.

### SECTION — Faster balance sheet clean up is needed (selected actions and outcomes)
- Mortgage resolution impediments: weak borrower-lender cooperation, lengthy legal proceedings, limited utilization of personal insolvency arrangements.
- Legal and policy changes
  - New court rules impose more rigorous standards on creditors initiating repossession proceedings.
  - New legislation may reduce discharge period from three years to one year, potentially accelerating mortgage resolution.
- Public stake disposals and bank capital
  - Allied Irish Banks restructuring includes conversion of preference shares into ordinary equity, new capital issuance, and partial repayment of €1.7 billion to the state; will lift fully loaded CT1 from about 8 percent to over 12 percent of RWA.
  - Bank of Ireland plans to redeem remaining €1.3 billion preference shares in January 2016.
- Financing position and QE interaction
  - Ireland raised €13 billion in long-term bonds in 2015.
  - Government cash balance €14 billion as of end-October.
  - ECB purchases at over €800 million a month would be broadly equivalent to expected Irish sovereign issuance over next 12 months.
  - Gross public debt expected to fall below 100 percent of GDP by end-2015.

### POLICY PRIORITIES AND STAFF RECOMMENDATIONS
- Maintain policy discipline to continue public debt reduction and observe consolidation path set out in Budget 2016 to achieve a structural balance by 2018.
- Use revenue outperformance to accelerate debt reduction rather than finance new recurrent spending.
- Avoid measures that erode tax bases; design revenue and expenditure measures to be better targeted and protective of budget resources.
- Channel associated savings to public investment to support sustainable growth.
- Continue repairing bank balance sheets and ensure bank supervision balances profitability and risk management.
- Periodically assess and recalibrate macroprudential measures as conditions change.
- Boost housing supply; ensure administrative measures on rents do not deter new construction.

### FISCAL OUTLOOK AND FISCAL SPACE (Stability Program Update)
- Baseline change from 0.3 percent to +0.1 percent in real terms, creating space of about €1 billion.
- Authorities added €0.5 billion for tax buoyancy effect and non-indexation of income tax bands, resulting in overall fiscal space of €1.5 billion.
- Key fiscal aggregates (2013–2018)
  - Net lending/borrowing: -5.6, -3.9, -1.9, -0.9, -0.1, 0.3.
  - Interest: 4.3, 4.0, 3.2, 2.9, 2.8, 2.7.
  - Primary balance ex. one-off items: -1.7, 0.0, 1.2, 1.9, 2.7, 3.0.
  - Structural Balance (overall): -3.3, -2.0, -1.5, -0.9, -0.3, 0.0.
  - Cyclical contribution: -2.4, -1.9, -0.5, 0.0, 0.2, 0.3.
  - Structural Primary Balance: 0.7, 1.8, 1.7, 2.0, 2.5, 2.8.
  - ∆ (Annual): 1.9, 1.1, -0.1, 0.2, 0.6, 0.2.
- Memorandum items
  - Output gap: -5.3, -3.2, -0.5, 0.5, 0.8, 1.0.
  - Annual change in output gap: -0.7, 2.2, 2.7, 1.0, 0.3, 0.1.
  - Potential output growth: 2.2, 2.8, 3.5, 3.1, 3.0, 3.0.
  - Unemployment rate: 13.0, 11.3, 9.6, 8.5, 7.7, 7.2.

### TAX POLICY, DISTRIBUTIONAL EFFECTS, AND REVENUE RISKS
- Staff assessment
  - USC changes appear regressive: half of the benefit accrues to households with incomes above €70,000.
  - Staff argued against further reduction of the USC due to risks of tax base erosion and USC’s role in restoring a sustainable revenue base.
- Authorities’ views
  - Ireland’s tax system is very progressive; virtually any change is regressive.
  - Post Budget 2016 estimate: top 1 percent of income earners will pay 22 percent of the total income tax and USC collected, up from 21 percent in 2015.
  - Tax measures benefits were capped at an income level of €70,000.
  - Wage and employment growth expected to help maintain nominal revenues despite fewer workers subject to the USC in 2016.
- Property taxation
  - Staff concerned about procyclical implications of the property valuation freeze.
  - Authorities argued high home ownership and likely extent of increased charges without deferral would be inconsistent with relative stability in tax yield.

### MEDIUM-TERM PLANS, INVESTMENT, AND FISCAL PRIORITIES
- Capital Investment Plan 2016–21: €27 billion for public transportation, health, education, and social housing.
- Capital spending projected to remain around 2 percent of GDP (below EU average of 2.7 percent of GDP).
- Additional planned current spending: an additional €½ billion per year planned for education, social protection, and health.
- Staff concerns: expenditure projections beyond 2016 may not fully incorporate cost of providing current levels of public services; remaining fiscal space should be channeled to debt reduction rather than tax cuts.
- Authorities’ commitments: full public sector investment envelope, including non-exchequer funded projects, will total about 3.4 percent of GNP by end-2020; commitment to rapid debt reduction.

### MACROECONOMIC PERFORMANCE AND OUTLOOK — Additional highlights
- GDP growth: GDP grew 7 percent y/y in 2015 Q3.
- Investment: investment growth of some 36 percent in 2015 Q3, driven by substantial multinational investment in research and development.
- Level of GDP: Irish GDP is now 7.3 percent above its pre-crisis peak of 2007.
- Inflation: HICP fell by 0.1 percent y/y in November; core inflation eased to 1.3 percent y/y from 1.5 percent in October.
- Fiscal outturns vs profile (full-year 2015)
  - Tax Revenue and Social Contributions (profile): €53.9 bn; Outturn: €57.4 bn; Difference: €3.5 bn (1.7 percent of GDP).
  - Expenditure (profile): €62.8 bn; Outturn: €63.9 bn; Difference: €1.2 bn (0.6 percent of GDP).
  - Interest (profile): €7.7 bn; Outturn: €7.0 bn; Difference: -€0.7 bn (-0.3 percent of GDP).
  - General government balance (profile): -6.1 percent of GDP; outturn: -3.8 percent of GDP; difference: 2.3 percent of GDP.

### EXTERNAL SECTOR, FINANCIAL VULNERABILITIES, AND PROJECTIONS
- Current account balance (billions of euros): 2015: 8.1; 2016: 9.3; 2017: 8.9; 2018: 8.4; 2019: 8.1; 2020: 8.1.
- Current account (percent of GDP): 2010: 0.6; 2011: 0.8; 2012: -1.5; 2013: 3.1; 2014: 3.6; 2015: 3.8; 2016: 4.2; 2017: 3.8; 2018: 3.5; 2019: 3.2; 2020: 3.1.
- Trade and external balances (selected)
  - Exports of goods (billions of euros): 2015: 139.1; 2016: 145.3; 2017: 151.8; 2018: 158.3; 2019: 164.5.
  - Imports of goods (billions of euros): 2015: -77.8; 2016: -81.4; 2017: -84.6; 2018: -88.0; 2019: -91.3; 2020: -94.9.
  - Services balance (billions of euros): 2015: -8.3; 2016: -8.8; 2017: -9.8; 2018: -11.6; 2019: -13.9; 2020: -15.1.
  - Primary income balance (billions of euros): 2015: -33.8; 2016: -36.1; 2017: -38.4; 2018: -39.7; 2019: -40.6; 2020: -41.5.
- External and financial vulnerability indicators
  - General government debt (percent of GDP): 2010: 86.8; 2011: 109.3; 2012: 120.2; 2013: 120.0; 2014: 107.6; 2015: 97.6.
  - Government bond yield (10-year, percent, end-period): 2010: 9.2; 2011: 8.5; 2012: 4.5; 2013: 3.5; 2014: 1.2; 2015: 1.0.
  - Non-performing loans (percent of total loans): 2010: 13.0; 2011: 16.1; 2012: 25.0; 2013: 25.7; 2014: 20.7; 2015: 18.8.

*Prepared by IMF staff following the mission to Dublin (November 9–13) and approved December 15, 2015. Source: _cr1618 (IMF staff report excerpt).*

### EXECUTIVE SUMMARY

### _cr1618 - EXECUTIVE SUMMARY

### Outlook and Risks
- Ireland is experiencing a broad-based recovery but "crisis legacies" remain: domestic demand not fully recovered; public and private sector debts elevated; unemployment still well above pre-crisis levels; bank repair ongoing.
- Real GDP and employment
  - Real GDP is about 5½ percent above its pre-crisis level.
  - Real GDP expanded by 6.7 percent y/y in 2015 H1.
  - Job growth was 3 percent y/y in Q3; unemployment fell to 8.9 percent in November and is "less than 9 percent."
  - Labor force participation is about 60 percent, "4 percentage points below pre-crisis levels."
- Inflation and external conditions
  - HICP inflation briefly turned positive in May–August before reverting to zero in September and October.
  - Ireland was largely unaffected by summer global financial market volatility; 10 year Irish bond yields "have converged back toward 1 percent."
  - S&P raised Ireland’s long-term sovereign rating by one notch to ‘A+’ in June.
- Property markets and vulnerabilities
  - Residential housing prices have risen "by about 33 percent since their nadir in 2013."
  - Cash purchases have accounted for "about half of total housing purchases."
  - Commercial real estate (CRE) prices increased "by 25 percent y/y in Q2"; over half of CRE investment driven by foreign buyers.
  - Vacancy rates for Dublin prime office space are "now lower than before the crisis."
- Growth outlook and risks
  - Staff raised GDP growth forecasts for 2015–16 and the medium-term.
  - Growth is projected to decelerate gradually to a potential rate of "2½–3 percent" with the output gap expected to turn positive in 2016.
  - Risks are "broadly balanced": near-term risk of disruptive asset price shifts; ECB QE and cash buffers of around "5 percent of GDP" mitigate tightening; prolonged accommodative ECB policy could amplify the Irish business cycle; weak euro area growth, weak emerging markets, and impaired credit channel are additional risks.

### Macro Projections (selected figures from staff projections)
- Real GDP (percent change): 2013: 1.4; 2014: 5.2; 2015: 6.3; 2016: 4.2; 2017: 3.3; 2018: 3.1; 2019: 2.7; 2020: 2.6.
- Final domestic demand (percent change): 2013: -1.5; 2014: 5.2; 2015: 6.2; 2016: 3.7; 2017: 3.5; 2018: 3.4; 2019: 3.2; 2020: 2.8.
- Exports (percent change): 2013: 2.5; 2014: 12.1; 2015: 12.0; 2016: 4.5; 2017: 4.2; 2018: 4.1; 2019: 4.1; 2020: 4.2.
- Imports (percent change): 2013: 0.0; 2014: 14.7; 2015: 12.8; 2016: 4.2; 2017: 4.4; 2018: 4.5; 2019: 4.7; 2020: 4.7.
- Current account (percent of GDP): 2013: 3.1; 2014: 3.6; 2015: 3.8; 2016: 4.2; 2017: 3.8; 2018: 3.5; 2019: 3.2; 2020: 3.1.
- Unemployment rate (percent): 2013: 13.0; 2014: 11.3; 2015: 9.6; 2016: 8.5; 2017: 7.7; 2018: 7.2; 2019: 6.9; 2020: 6.9.
- Output gap (percent): 2013: -5.3; 2014: -3.2; 2015: -0.5; 2016: 0.5; 2017: 0.8; 2018: 1.0; 2019: 0.7; 2020: 0.3.
- HICP (percent): 2013: 0.5; 2014: 0.3; 2015: 0.2; 2016: 1.5; 2017: 1.6; 2018: 1.7; 2019: 1.9; 2020: 2.0.

### Fiscal Policy: recent performance and policy guidance
- 2015 outturns and near-term
  - Large tax outperformance allowed a supplementary budget of "0.7 percent of GDP" (0.3 percent of GDP discretionary spending; 0.4 percent of GDP overruns).
  - Staff estimate a modest structural primary easing of "0.1 percent of GDP."
  - Headline deficit projected at "1.9 percent of GDP" will significantly outperform the "2.7 percent" budget target, allowing exit from the EU Excessive Deficit Procedure.
  - Public debt is set to fall to "97 percent of GDP."
- Budget 2016 path and guidance
  - Budget 2016 aims for a structural balance by 2018 (Ireland’s medium-term objective, MTO).
  - Staff project the overall fiscal deficit will fall to "0.9 percent of GDP in 2016" and reach a surplus of "0.3 percent of GDP in 2018."
  - Staff view a gradual improvement in the structural primary balance—about "0.4 percent of GDP per year on average" until 2018—as appropriate.
  - Revenue outperformance or unanticipated interest savings should be used for debt reduction.
  - Staff note the assessment of cyclical position is "inherently complicated" for Ireland and estimate a "1.3 percent of GDP improvement in the structural primary balance over 2016–18."
- Composition of Budget 2016 measures (€1.5 billion fiscal space)
  - Expenditure: "Lansdowne Road" wage agreement adds about "€300 million" to spending in 2016; additional €470 million allocated to education and social protection; a 50 cent increase in the minimum hourly wage (an increase of "about 6 percent").
  - Revenue: removal of "42,500 workers" from USC scope by raising entry threshold and reductions in three lowest USC rates and USC bracket changes for lower- and middle-income earners.
  - Staff recommendation: better targeting of expenditure measures to protect vulnerable groups at lower fiscal cost and to create space for growth-enhancing investment.

### Financial Sector, Housing, and Macroprudential Policy
- Banking sector
  - Continued bank balance sheet cleanup is needed to increase resilience and support future lending.
  - Supervisors should ensure bank business models "appropriately balance profit seeking and risk management."
- Macroprudential measures and housing
  - The CBI macroprudential measures announced in October 2014 (in force since February 2015) have been associated with moderating expectations and reducing speculative demand for housing.
  - Macroprudential measures should be "periodically assessed and recalibrated as economic conditions change" to maintain effectiveness.
  - Steps to boost housing supply are welcome, but administrative measures on rents should avoid deterring new construction.

### Box 1 — Recent Changes to National Accounts and Balance of Payments Statistics
- Two main factors behind July 2015 revisions:
  - Accounting of aircraft purchases by leasing companies changed (in line with ESA 2010): recorded as investment and imports in the country of economic ownership irrespective of aircraft registration; this raises imports and gross fixed capital formation and lowers the external trade balance; balance sheets of leasing companies included in Ireland’s balance sheet.
  - Upward revision to the service component of private consumption expenditures, reflecting additional tax and insurance information.
- Consequences of revisions
  - Real GDP growth rates for 2012–14 revised upward; GDP expenditure components changed for the last 10 years; current account balance reduced.
  - Nominal GDP in 2014 was "3 percent higher than previously reported," lowering end-2014 debt-to-GDP to "107.6 percent (from 110.7 percent)."
  - Revised narrative: Ireland avoided a second recession in 2012; recovery solidly rooted since 2013; domestic demand recovery in 2014 stronger than previously reported.

### Policy priorities and recommendations (staff emphasis)
- Maintain policy discipline to continue public debt reduction and observe the consolidation path set out in Budget 2016 to achieve a structural balance by 2018.
- Use revenue outperformance to accelerate debt reduction rather than finance new recurrent spending.
- Avoid measures that erode tax bases; design revenue and expenditure measures to be better targeted and protective of budget resources.
- Channel associated savings to public investment to support sustainable growth.
- Continue repairing bank balance sheets and ensure bank supervision balances profitability and risk management.
- Periodically assess and recalibrate macroprudential measures as conditions change.
- Boost housing supply; ensure administrative measures on rents do not deter new construction.

*Prepared by IMF staff following the mission to Dublin (November 9–13) and approved December 15, 2015.*

### 0.3 percent to +0.1 percent in real terms, creating space of about €1 billion

### _cr1618 - 0.3 percent to +0.1 percent in real terms, creating space of about €1 billion

### Fiscal outlook and fiscal space
- Stability Program Update: baseline change from 0.3 percent to +0.1 percent in real terms, creating space of about €1 billion.
- Authorities added €0.5 billion for the tax buoyancy effect and non-indexation of income tax bands, resulting in overall fiscal space of €1.5 billion.
- Key fiscal aggregates (2013–2018):
  - Net lending/borrowing: -5.6, -3.9, -1.9, -0.9, -0.1, 0.3
  - Interest: 4.3, 4.0, 3.2, 2.9, 2.8, 2.7
  - Primary balance ex. one-off items: -1.7, 0.0, 1.2, 1.9, 2.7, 3.0
  - Structural Balance (overall): -3.3, -2.0, -1.5, -0.9, -0.3, 0.0
  - Cyclical contribution: -2.4, -1.9, -0.5, 0.0, 0.2, 0.3
  - Structural Primary Balance: 0.7, 1.8, 1.7, 2.0, 2.5, 2.8
  - ∆ (Annual): 1.9, 1.1, -0.1, 0.2, 0.6, 0.2
- Memorandum items:
  - Output gap: -5.3, -3.2, -0.5, 0.5, 0.8, 1.0
  - Annual change in output gap: -0.7, 2.2, 2.7, 1.0, 0.3, 0.1
  - Potential output growth: 2.2, 2.8, 3.5, 3.1, 3.0, 3.0
  - Unemployment rate: 13.0, 11.3, 9.6, 8.5, 7.7, 7.2

### Tax policy, distributional effects, and revenue risks
- Staff assessment:
  - USC changes appear regressive: half of the benefit accrues to households with incomes above €70,000.
  - Staff argued against further reduction of the USC due to risks of tax base erosion and USC’s role in restoring a sustainable revenue base.
- Authorities’ views:
  - Ireland’s tax system is very progressive; virtually any change is regressive.
  - Post Budget 2016 estimate: top 1 percent of income earners will pay 22 percent of the total income tax and USC collected, up from 21 percent in 2015.
  - Tax measures benefits were capped at an income level of €70,000 so those with incomes above €70,000 only benefit to the same extent as those at or below that level.
  - Wage and employment growth expected to help maintain nominal revenues despite fewer workers subject to the USC in 2016.
- Property taxation:
  - Staff expressed concerns about procyclical implications of the property valuation freeze.
  - Authorities argued that high levels of home ownership and the likely extent of increased charges in the absence of deferral would be inconsistent with relative stability in the tax yield.

### Medium-term plans, investment, and fiscal priorities
- Medium-term budget includes unallocated fiscal space if structural balance budget is maintained.
- Capital Investment Plan for 2016–21:
  - New infrastructure projects in public transportation, health, education, and social housing outlined in the €27 billion Capital Investment Plan for 2016–21.
  - Capital spending projected to remain around 2 percent of GDP (historically low and below the EU average of 2.7 percent of GDP).
- Additional planned current spending: an additional €½ billion per year planned for education, social protection, and health to cope with demographic trends.
- Staff concerns:
  - Expenditure projections beyond 2016 do not fully incorporate the cost of providing current levels of public services (as highlighted by the Irish Fiscal Advisory Council November 2015 Fiscal Assessment Report).
  - Importance of channeling remaining fiscal space in the outer years to debt reduction rather than tax cuts.
  - Additional potential spending needs to maintain Ireland’s attractiveness for foreign investment.
- Authorities’ commitments:
  - Full public sector investment envelope, including non-exchequer funded projects, will total about 3.4 percent of GNP by end-2020.
  - Commitment to rapid debt reduction.
  - Expectation that upcoming changes to international taxation standards will confirm Ireland as a desirable international investment destination.

### Financial sector and housing market: overview and challenges
- Banking sector repair supported by economic recovery; more remains to be done.
  - Domestic banks started generating profits in 2014 and new lending is picking up from low levels.
  - Asset quality has improved due to rising household incomes, improving corporate profits, and ongoing resolution of distressed loans.
  - Provision coverage declined slightly as collateral values rose, though collateral often remains untested by foreclosures and sales.
  - Loan books continue to contract; profitability remains low and partly driven by provision write backs.
  - Nonperforming loans (NPLs) remain high at about one-fifth of gross loans.
- Central policy challenge: achieve durable bank profitability while maintaining prudent lending.
  - Modest improvement in aggregate pre-provision profitability of the three main domestic banks in 2015 H1 was driven by improving net interest margins on lower funding costs.
  - Pre-provision profitability (excluding nonrecurrent items) at 0.4 percent of average assets remains subdued.
  - Constraints: large tracker mortgage books (half of total mortgage value), modest near-term credit demand, administrative costs related to NPL overhang.
- Regulatory and supervisory focus:
  - Durable profitability needed to support banks’ capacity to generate capital and lend.
  - Ongoing NPL resolution will provide some relief on costs; gradual run off of tracker mortgage book improves net interest income.
  - Supervisors should ensure that banks’ business models balance profit seeking and risk management, and that loan pricing reflects credit risk and barriers to collateral realization.

### Irish banks: key financial indicators (three main domestic banks: Allied Irish Banks, Bank of Ireland, Permanent TSB)
- Indicators (2011, 2012, 2013, 2014, 2015H1):
  - Credit growth 2/: -4.1, -10.2, -10.8, -4.3, -2.3
  - Return on assets: -1.2, -2.0, -0.8, 0.6, 0.8
  - Pre-provision profits 3/: 0.6, -0.2, 0.4, 0.5, 0.4
  - Net interest margin: 0.9, 0.8, 1.2, 1.6, 1.8
  - NPL ratio: 19.6, 24.8, 27.1, 23.2, 19.8
  - Coverage ratio 4/: 49.8, 48.5, 51.4, 51.7, 50.9
  - Texas ratio 5/: 93.0, 115.0, 120.0, 106.0, 95.0
  - CT1 ratio: 16.4, 14.7, 13.3, 15.5, 16.5
  - Loan to deposit 6/: 146.0, 124.0, 111.0, 108.0, 107.0
  - NSFR: 69.0, 82.3, 96.1, 110.5, 110.9
  - LCR: 71.0, 92.3, 107.7, 109.9, 113.4
- Notes:
  - 2/ Annual percent change in end period gross loans and advances.
  - 3/ Excluding nonrecurrent items, as a share of average total assets.
  - 4/ Provision stock to NPLs.
  - 5/ NPLs to sum of provision stock and CT1 capital.
  - 6/ Net loans to customer deposits, in percent.
  - 2/ Figures are not annualized. Table 8 represents comparison with 2014H1.

*Sources: Department of Finance; IMF staff projections; Revenue Commissioner Office; Central Bank of Ireland; IMF staff calculations.*

### 13.       Faster balance sheet clean up is needed to boost banks’ resilience to shocks and

### _cr1618 - 13.       Faster balance sheet clean up is needed to boost banks’ resilience to shocks and

### NPLs, mortgage arrears, and loan workout challenges
- Resolution in the mortgage segment is complicated by weak cooperation between borrowers and lenders, lengthy legal proceedings, and limited (but increasing) utilization of personal insolvency arrangements.
- The stock of mortgage accounts in deep arrears (over 720 days) continues to increase, reaching 55 percent of past-due loans (over 90 days) in mid-2015 from 49 percent at end-2014.
- About half of the CRE loans are still nonperforming, despite promising trends in restructurings and write downs.
- The mission emphasized that rising collateral values should not distract workout efforts and stressed that continued supervisory pressure is needed to push forward loan resolution.
- Authorities noted a decline in the number of accounts in arrears and pointed to new court rules imposing more rigorous standards on creditors initiating repossession proceedings, together with new information and support measures under the government’s mortgage arrears framework, which may shorten the legal process and improve engagement.
- New legislation may facilitate acceleration of mortgage resolution by reducing the discharge period from three years to one year.
- With banks continuing to release provisions as property market conditions improve, staff cautioned that write backs should be based on conservative assumptions and collateral reappraisals.

### Bank profitability, provisioning, and supervisory priorities
- Achieving durable profitability while accelerating balance sheet cleanup would support future lending growth and boost banks’ resilience to shocks.
- Provision releases should be based on conservative assumptions and collateral reappraisals.
- Supervisors must ensure that banks’ business models appropriately balance profit seeking and risk management, and that loan pricing adequately reflects credit risk and barriers to collateral realization.
- Continued supervisory monitoring of CRE financing—where nonbanks play an important role—is important to identify vulnerabilities and potential spillovers to the banking system.
- Periodic impact assessment and recalibration of macroprudential measures will be needed as economic conditions change.

### Macroprudential policy and lending standards
- The authorities have introduced new macroprudential rules to support the resilience of banks and households and to prevent reemergence of procyclical dynamics between mortgage lending and housing prices.
- Authorities noted it was premature to assess the full impact of the measures because only a fraction of loan drawdowns have been subject to the new rules so far due to lagged effects.
- Staff recommended periodic impact assessments and recalibration of the measures to ensure their effectiveness.
- Continued tracking of loans to CRE buyers and developers would help illuminate supply and demand dynamics going forward.

### Housing market measures and risks to construction incentives
- The government launched a policy package to boost supply (including streamlined building codes and rebates to developers for qualifying projects) and stabilize rents (increasing tenant rights and protections).
- Staff welcomed measures that would help reduce building costs and could jump start construction activity, particularly of lower-cost homes where profit margins are tighter.
- The mission warned that administrative measures on rents could reduce rates of return on investment properties and thus dissuade construction.

### Public stake disposals, bank capital, and sovereign debt reduction
- The restructuring of Allied Irish Banks’ capital base comprises conversion of preference shares into ordinary equity, new capital issuance, and a partial repayment of €1.7 billion to the state.
- Once implemented, the restructuring will lift the bank’s fully loaded common equity tier 1 ratio from about 8 percent of risk weighted assets to over 12 percent, thereby positioning the bank for divestment.
- The Bank of Ireland announced plans to redeem the remaining €1.3 billion preference shares (owned by private investors) in January 2016 to allow the bank to renew dividend payments to investors.
- Authorities indicated that the disposals timeline for all public stakes depends on several factors, including maximization of returns to the taxpayer.

### Financing position, QE, and medium-term debt outlook
- Ireland raised €13 billion in long-term bonds in 2015.
- Revenue over-performance helped increase the government’s cash balance to €14 billion as of end-October—more than double the outstanding obligations to the Fund and equivalent to over 12 months of projected gross financing needs.
- The ECB’s QE is proceeding as planned and, if secondary market purchases under the QE continued at the current rate of over €800 million a month, would be broadly equivalent to expected Irish sovereign issuance of long-term bonds over the next 12 months.
- Gross public debt is now expected to fall below 100 percent of GDP by end-2015—a full two years earlier than anticipated at the time of the 3rd PPM discussion.
- The 2021–23 period—when the remaining liabilities to the IMF fall due—has relatively modest gross financing needs, further lowering risks to the Fund.

### Staff appraisal: macroeconomic and fiscal assessment
- Ireland is enjoying the fastest growth in the European Union, but challenges remain.
- The recovery accelerated in 2015 and has become more broad-based, with domestic demand overtaking net trade as the dominant driver of growth.
- Employment expansion is continuing and the unemployment rate has fallen below 9 percent.
- Financing conditions remain exceptionally favorable, but upward pressures on house prices are continuing.
- Vulnerabilities remain elevated due to high public and private debt burdens, lending importance to the unfinished task of rebuilding economic resilience.
- While sharing some fruits of the recovery is appropriate, fiscal discipline must be maintained to rebuild room for policy maneuver.
- The fiscal plans in Budget 2016 and consolidation consistent with reaching a structural balance in 2018 are broadly appropriate; maintaining structural balance thereafter would be the minimum required to ensure a prudent pace of debt reduction.
- Any future fiscal space should be used to accelerate debt reduction and to rebuild buffers to allow Ireland’s small and open economy to face external shocks.

*Source: _cr1618 (IMF staff report excerpt).*

### introduction of the new macroprudential measures...

### introduction of the new macroprudential measures...

### Housing market and mortgage dynamics
- The stock of mortgage loans continues to fall.
- Mortgage Approvals (Millions of euros): charted values span 500, 1000, 1500, 2000, 2500, 3000 (series labeled 2011 2012 2013 2014 2015 with "Number (RHS)" and "Value" axes). Sources: BPFI; and Haver Analytics.
- Number and Value of Residential Mortgage Loans (Billions of euros): charted with scale 890–950 (Value) and 100–160 (Number, thousands, rhs) over quarters 2012Q2–2015Q2. Sources: Central Bank of Ireland; and Haver Analytics.
- Mortgage Value (PDH) (Percent of households gross disposable income; calculated as 4-qurter rolling sum): charted values include 115, 120, 125, 130, 135 across 2009Q3–2014Q3. Sources: Central Bank of Ireland; CSO; and Haver Analytics. Historical average noted for 2009Q3-2015Q2.

### Price-to-rent and price-to-income indicators
- Price-to-rent Ratio (Index, 2010=100; nominal house prices divided by rent prices): charted from 30 to 150 across 1990Q1–2014Q1. Source: OECD; and IMF staff calculations. Historical average for 1990Q1-2015Q1 indicated; current level described as "just below its historical average".
- Price-to-Income Ratio (Deviation of last 4 quarters from long-term average for the period 1990Q1-2015Q1): deviations shown across countries BEL GB R NOR SWE FRA DNK NL D IT A EA FIN ESP IRL GRE PRT (range -30 to 40).
- Price-to-Income Ratio (Index, 2010=100; nominal house prices divided by nominal disp. income per head): charted from 60 to 150 across 1990Q1–2014Q1. Source: OECD; and IMF staff calculations. Historical average for 1990Q1-2015Q1 indicated.
- Summary statements from the source:
  - "Price-to-rent ratio is just below its historical average."
  - "and so is price-to-income ratio."
  - "House prices have risen faster than rents recently... though affordability continues to improve."

### Macroeconomic performance and projections (selected indicators)
- Real GDP (annual percent change): 2010: 0.4; 2011: 2.6; 2012: 0.2; 2013: 1.4; 2014: 5.2; 2015: 6.3; 2016: 4.2.
- Final domestic demand (annual percent change): 2010: -4.6; 2011: -0.1; 2012: 1.0; 2013: -1.5; 2014: 5.2; 2015: 6.2; 2016: 3.7.
- Private consumption (annual percent change): 2010: 0.8; 2011: -0.7; 2012: -0.8; 2013: -0.3; 2014: 2.0; 2015: 3.3; 2016: 3.1.
- Employment (annual average): 2010: -4.0; 2011: -1.8; 2012: -0.6; 2013: 2.4; 2014: 1.7; 2015: 2.5; 2016: 2.0.
- Unemployment rate (in percent): 2010: 13.9; 2011: 14.6; 2012: 14.6; 2013: 13.0; 2014: 11.3; 2015: 9.6; 2016: 8.5.
- Harmonized index of consumer prices (annual average): 2010: -1.6; 2011: 1.2; 2012: 1.9; 2013: 0.5; 2014: 0.3; 2015: 0.2; 2016: 1.5.
- Irish resident private sector credit (end-period, annual percent change): 2010: -3.4; 2011: -2.9; 2012: -4.0; 2013: -4.9; 2014: -4.9; 2015: ...... (not completed in source).
- House prices (annual percent change): 2010: -10.5; 2011: -16.7; 2012: -4.5; 2013: 6.4; 2014: 16.3; 2015: ...... (not completed in source).

### Public finances (selected aggregates, in percent of GDP unless indicated)
- Net lending/borrowing (excl. one-off items): 2010: -10.9; 2011: -8.5; 2012: -8.0; 2013: -6.0; 2014: -4.0; 2015: -2.0; 2016: -0.9.
- Primary balance (excl. bank support): 2010: -10.2; 2011: -5.1; 2012: -3.9; 2013: -1.3; 2014: 0.1; 2015: 1.3; 2016: 1.9.
- General government gross debt (in percent of GDP): 2010: 86.8; 2011: 109.3; 2012: 120.2; 2013: 120.0; 2014: 107.6; 2015: 97.1; 2016: 91.5.
- General government net debt (in percent of GDP): 2010: 66.6; 2011: 77.6; 2012: 86.7; 2013: 89.8; 2014: 88.2; 2015: 79.8; 2016: 75.3.
- Net lending/borrowing (annual amounts, billions of euros, Table 3): Net lending/borrowing (excl. fin. sector support) 2010: -21.9; 2011: -14.7; 2012: -13.9; 2013: -10.0; 2014: -7.3; 2015: -4.0; 2016: -2.1.
- Revenue (in billions of euros, Table 3): 2010: 55.5; 2011: 57.3; 2012: 59.1; 2013: 60.8; 2014: 65.0; 2015: 69.8; 2016: 71.8.
- Taxes (in billions of euros): 2010: 38.1; 2011: 39.0; 2012: 41.1; 2013: 42.5; 2014: 46.4; 2015: 49.9; 2016: 52.1.

### Medium-term scenario highlights (2017–20 projections, selected series)
- Real GDP projections: 2017: 3.3; 2018: 3.1; 2019: 2.7; 2020: 2.6.
- Employment projections (annual percent change): 2017: 1.9; 2018: 1.6; 2019: 1.6; 2020: 1.2.
- Unemployment rate (percent) projections: 2017: 7.7; 2018: 7.2; 2019: 6.9; 2020: 6.9.
- Current account (percent of GDP) projections: 2017: 3.8; 2018: 3.5; 2019: 3.2; 2020: 3.1.
- Gross national saving (in percent of GDP) projections: 2017: 24.7; 2018: 25.1; 2019: 25.4; 2020: 26.3.
- General government gross debt (percent of GDP) projections: 2017: 97.1; 2018: 88.1; 2019: 83.9; 2020: 80.7.
- Nominal GDP (in billions of euros) projections: 2017: 223.2; 2018: 233.8; 2019: 244.0; 2020: 253.7.

### Fiscal structure (Table 3 selected items)
- Social contributions (in billions of euros): 2010: 9.5; 2011: 10.0; 2012: 9.7; 2013: 10.3; 2014: 10.9; 2015: 11.9; 2016: 12.4.
- Social benefits (in billions of euros): stable around 28.8–28.6 across 2010–2016, with 2016 at 28.6.
- Interest (in billions of euros): 2010: 4.9; 2011: 5.9; 2012: 7.2; 2013: 7.7; 2014: 7.5; 2015: 6.7; 2016: 6.4.
- Gross fixed capital formation (in billions of euros): 2010: 5.5; 2011: 4.0; 2012: 3.3; 2013: 3.0; 2014: 3.7; 2015: 4.1; 2016: 4.2.

### Observations and context provided in the source
- "House prices have risen faster than rents recently" while affordability indicators continue to show improvement.
- Multiple indicators (price-to-rent, price-to-income, mortgage value relative to disposable income) are provided with historical averages for the period 1990Q1-2015Q1 or 2009Q3-2015Q2 to contextualize recent dynamics.
- Data sources cited throughout: BPFI; Haver Analytics; Central Bank of Ireland; OECD; IMF staff calculations; Central Statistics Office; Department of Finance; Bloomberg; and CSO where specified.

*Italic: Source — _cr1618 - introduction of the new macroprudential measures... (PDF content provided).*

### 0.5 percent of GDP lower over 2019-2020 if a neutral fiscal stance (stable structural primary balance) was maintained.

### _cr1618 - 0.5 percent of GDP lower over 2019-2020 if a neutral fiscal stance (stable structural primary balance) was maintained.

### Macroeconomic performance and outlook
- GDP growth: GDP grew 7 percent year-on-year in 2015 Q3.
- Investment: investment growth of some 36 percent in 2015 Q3, driven by substantial multinational investment in research and development.
- Exports and imports: Exports continue to expand at double-digits; stronger imports (partly reflecting increased service imports related to intangible investments) led to a negative contribution of net trade in Q3.
- Level of GDP: The Irish GDP is now 7.3 percent above its pre-crisis peak of 2007.
- Inflation:
  - HICP fell by 0.1 percent year-on-year in November.
  - Core inflation (excluding energy and unprocessed food) eased to 1.3 percent year-on-year from 1.5 percent in October.

### Fiscal position and public finance
- 2015 outturn vs budget profile:
  - Full-year revenues came out €3.5 billion above the initial budget profile.
  - Corporate income tax receipts: €2.3 billion above profile and about 50 percent higher than in 2014.
  - Expenditure: rose by €1.2 billion over the initial budget profile (slightly below the supplementary budget envelope); a lower than planned interest bill partly offset a larger increase in current primary spending.
- Deficit: The 2015 deficit should fall close to 1.5 percent of GDP—below staff’s projection of 1.9 percent of GDP.
- Fiscal scenario note: 0.5 percent of GDP lower over 2019-2020 if a neutral fiscal stance (stable structural primary balance) was maintained.

### External sector and balance of payments (highlights from Table 5)
- Current account balance (billions of euros): 2015: 8.1; 2016: 9.3; 2017: 8.9; 2018: 8.4; 2019 (proj): 8.1; 2020 (proj): 8.1.
- Current account balance (percent of GDP): 2010: 0.6; 2011: 0.8; 2012: -1.5; 2013: 3.1; 2014: 3.6; 2015: 3.8; 2016: 4.2; 2017: 3.8; 2018: 3.5; 2019: 3.2; 2020: 3.1.
- Balance of goods and services (billions of euros): 2015: 45.1; 2016: 48.9; 2017: 50.9; 2018: 52.2; 2019: 53.1; 2020: 54.5.
- Trade balance (billions of euros): 2015: 57.7; 2016: 60.7; 2017: 63.8; 2018: 67.0; 2019: 69.6; 2020: 69.6.
- Exports of goods (billions of euros): 2015: 139.1; 2016: 145.3; 2017: 151.8; 2018: 158.3; 2019: 164.5.
- Imports of goods (billions of euros): 2015: -77.8; 2016: -81.4; 2017: -84.6; 2018: -88.0; 2019: -91.3; 2020: -94.9.
- Services balance (billions of euros): 2015: -8.3; 2016: -8.8; 2017: -9.8; 2018: -11.6; 2019: -13.9; 2020: -15.1.
- Primary income balance (billions of euros): 2015: -33.8; 2016: -36.1; 2017: -38.4; 2018: -39.7; 2019: -40.6; 2020: -41.5.

### External and financial vulnerability indicators (selected)
- Exports (annual percent change, value in euros): 2010: 7.8; 2011: 5.9; 2012: 12.2; 2013: 2.1; 2014: 2.3; 2015: 18.3.
- Imports (annual percent change, value in euros): 2010: 6.1; 2011: 2.6; 2012: 18.9; 2013: -0.4; 2014: 15.0; 2015: 16.0.
- Current account balance (percent of GDP): 2010: 0.6; 2011: 0.8; 2012: -1.5; 2013: 3.1; 2014: 3.6; 2015: 3.8.
- General government debt (percent of GDP): 2010: 86.8; 2011: 109.3; 2012: 120.2; 2013: 120.0; 2014: 107.6; 2015: 97.6.
- Government bond yield (10-year, percent, end-period): 2010: 9.2; 2011: 8.5; 2012: 4.5; 2013: 3.5; 2014: 1.2; 2015: 1.0.
- Non-performing loans (percent of total loans): 2010: 13.0; 2011: 16.1; 2012: 25.0; 2013: 25.7; 2014: 20.7; 2015: 18.8.
- Regulatory Tier 1 capital to risk-weighted assets of domestic banks (percent): 2010: 11.5; 2011: 16.6; 2012: 16.7; 2013: 17.3; 2014: 20.1; 2015: 20.5.
- Annual credit growth rates (to Irish resident private sector, percent): 2010: 1/-3.4; 2011: -2.9; 2012: -4.0; 2013: -4.9; 2014: -4.4; 2015: -4.0.

### Monetary and banking sector indicators (selected)
- Aggregate balance sheet of domestic market credit institutions (end-period, € bn): Total assets: Dec-10: 747; Dec-11: 639; Dec-12: 550; Dec-13: 474; Dec-14: 420; Oct-15: 388.
- Irish Resident Broad money (M3): Dec-10: 182; Dec-11: 182; Dec-12: 180; Dec-13: 201; Dec-14: 175; Oct-15: 189.
- Net foreign assets (billions of euros): Dec-10: -480; Dec-11: -340; Dec-12: -142; Dec-13: 20.
- Wholesale funding (billions of euros): Dec-10: 317; Dec-11: 235; Dec-12: 159; Dec-13: 135; Dec-14: 126; Oct-15: 109.
- Credit to deposits (in percent): Dec-10: 199.2; Dec-11: 207.6; Dec-12: 189.9; Dec-13: 162.0; Dec-14: 141.7; Oct-15: 117.9.

### Banking sector financials (PCAR/main banks, 2014H1–2015H1)
- Total assets: 2014H1: €265.8 bn; 2015H1: €256.0 bn.
- Net loans: 2014H1: €176.2 bn; 2015H1: €172.3 bn.
- Deposits: 2014H1: €164.9 bn; 2015H1: €163.8 bn.
- Net equity: 2014H1: €21.7 bn; 2015H1: €25.0 bn.
- Gross NPLs: 2014H1: €53.0 bn; 2015H1: €38.6 bn.
- Gross NPLs to gross loans (percent): 2014H1: 25.9; 2015H1: 19.8.
- Provisions to gross NPLs (percent): 2014H1: 52.7; 2015H1: 50.9.
- Core tier 1 capital (CT1) (percent of RWA): 2014H1: 17.3; 2015H1: 13.4.
- Return on equity: 2015H1: 4.2 (profile information shows return on equity 2.6 in 2014H1).

### Macroprudential and regulatory developments
- Countercyclical Capital Buffer (CCB): set at zero percent, to be reviewed on a quarterly basis.
- Other Systemically Important Institutions (O-SII) Buffer: will apply to the Bank of Ireland and Allied Irish Banks and will be phased in gradually from July 2019 until it reaches 1.5 percent in 2021.

### Sectoral price developments
- Commercial real estate (CRE) prices: rose by 22 percent in 2015 Q3 (compared to 30 percent at end-2014); CRE prices remain 49 percent below their peak at end-2007.

### Key fiscal profile figures (full-year 2015 fiscal performance, initial profile vs outturn)
- Tax Revenue and Social Contributions (profile): €53.9 bn; Outturn: €57.4 bn; Difference: €3.5 bn (1.7 percent of GDP).
- Expenditure (profile): €62.8 bn; Outturn: €63.9 bn; Difference: €1.2 bn (0.6 percent of GDP).
- Current primary (profile): €51.4 bn; Outturn: €53.1 bn; Difference: €1.7 bn (0.8 percent of GDP).
- Capital (profile): €3.6 bn; Outturn: €3.8 bn; Difference: €0.2 bn (0.1 percent of GDP).
- Interest (profile): €7.7 bn; Outturn: €7.0 bn; Difference: -€0.7 bn (-0.3 percent of GDP).
- General government balance (estimated, excluding transactions with no general government impact): profile -6.1 percent of GDP; outturn -3.8 percent of GDP; difference 2.3 percent of GDP.

*Source: IMF staff report supplement (January 7, 2016) — staff calculations and projections as presented in the provided document.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr1618.pdf_