{
  "title": "IMF Survey : Ireland’s Economy Back from the Brink, But Continued Progress Needed",
  "publication": "IMF News, December 19, 2013",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/socar121913a",
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  "summary": "The successful completion of Ireland’s EU/IMF-supported program has left the country in a much stronger position than when its program began, say the IMF’s Ajai Chopra and Craig Beaumont.  ",
  "publishDate": "2013-12-19",
  "sections": [
    {
      "heading": "Overview and program outcome",
      "content": "- Publication date: December 19, 2013.\n- The EU/IMF-supported program began in December 2010 and its successful completion has left Ireland \"in a much stronger position\" than at the start.\n- Program success owed to full commitment by the Irish authorities and people, steady policy implementation, and close collaboration with EU and ECB counterparts."
    },
    {
      "heading": "Banking sector: stabilization, remaining weaknesses",
      "content": "- Immediate priority was to recapitalize and stabilize the banking system, achieved early in the program and stemming deposit outflows.\n- Banking system had assets of almost 500 percent of GDP when the program started.\n- Progress made in reducing banking system size and recapitalizing viable banks; NAMA (asset management company) was established to deal with large problem loans, especially in the property sector.\n- Remaining issues:\n  - Nonperforming loans remain high and progress in resolving impaired assets has been slow.\n  - Bank profitability remains weak.\n  - Banks are not yet supporting the economy with adequate lending.\n  - More rapid progress in dealing with mortgage arrears (residential mortgages in arrears) would have been worthwhile."
    },
    {
      "heading": "Fiscal consolidation and public finances",
      "content": "- Budget consolidation started before the program.\n- Over 2009–13, the structural primary deficit has been reduced by about 10 percentage points of GDP.\n- Resulting trajectory:\n  - Ireland should be able to achieve a primary balance in 2014.\n  - Sovereign debt projected to peak at about 124 percent of GDP in 2013 and should soon be on a declining path.\n- Households’ debts amount to almost 200 percent of disposable income.\n- Ireland contributed €17.5 billion of the total program financing package of €85 billion."
    },
    {
      "heading": "Economic activity and labor market",
      "content": "- Signs of growth emerging and unemployment has started falling after peaking (unemployment kept rising until it peaked in early 2012).\n- Growth and market signals:\n  - Export-driven growth was quite strong in 2011 at 2.2 percent.\n  - Market-confirming events included well-subscribed bond issues in January and March (a 10-year issue at a 4.15 percent yield, trading at about 3.5 percent).\n- Projections:\n  - Growth projected to rise to about 1¾ percent in 2014—a little below consensus estimates.\n  - Growth projected to be about 2½ percent in the medium term.\n- Revival of domestic demand expected to be modest in the near term and a protracted process due to strained private balance sheets and gradual easing of fiscal consolidation.\n- Improving financial-sector health expected to support recovery, though near-term contributions from renewed lending are not expected to be significant."
    },
    {
      "heading": "Policy and institutional reforms",
      "content": "- Institutional reforms implemented:\n  - Strengthened medium-term fiscal framework.\n  - Established a credible and well-functioning fiscal council.\n  - Revamped regulation and supervision of the financial sector.\n- Irish authorities released a medium-term economic strategy covering 2014 to 2020."
    },
    {
      "heading": "Euro-area context and market access",
      "content": "- Regaining market access began in mid-2012 with Treasury bills issuance and strengthened after policy signals such as ECB President Draghi’s Outright Monetary Transactions.\n- Ireland benefited from improved euro-area conditions and its own steadfast policy implementation.\n- Ireland’s prospects are closely tied to the eurozone: progress on demand and supply deficiencies in the eurozone, achieving the ECB’s inflation target, reducing fragmentation, and improving monetary union architecture are important for Ireland’s outlook."
    },
    {
      "heading": "Social and political impacts",
      "content": "- The bailout had a dramatic social and political impact: the negotiating government resigned, elections were held in February 2011, and a new coalition government formed in March 2011 with a strong mandate to implement the program.\n- Social fallout intertwined with the banking crisis; program prevented a sharper economic deterioration that was likely at end-2010.\n- Dialogue with labor unions and organizations dealing with vulnerable groups was conducted though some counterparts felt concerns were insufficiently addressed.\n- Authorities were encouraged to design fiscal consolidation measures with fairness and equity in mind."
    },
    {
      "heading": "Five preliminary lessons for global policymakers (as stated)",
      "content": "1. Confront systemic banking crises quickly: identify viable vs nonviable institutions, resolve nonviable banks, and recapitalize and restructure viable ones; transparency (stress tests and asset-quality diagnostics) is critical.\n2. It is unfair to place the burden of supporting banks primarily on domestic taxpayers while senior unguaranteed bond holders are paid out; imposing losses on senior unsecured creditors is increasingly accepted in later resolution principles.\n3. Fiscal consolidation should be steady, gradually phased, and embedded in a well-specified medium-term plan that allows automatic stabilizers to operate; excessively rapid consolidation harms growth.\n4. Feedback loops among weak balance sheets of banks, government, households, and companies can stagnate activity and increase deflationary pressures; breaking these loops may require greater union-wide solidarity in a monetary union.\n5. Government design and ownership of program policies is critical for implementation and social/political cohesion; Irish-designed program components aided compliance."
    },
    {
      "heading": "Forward-looking priorities and recommendations",
      "content": "- Continue private balance sheet repair and fiscal consolidation; these processes will take time.\n- Strengthen efforts to resolve nonperforming loans and mortgage arrears, improve bank profitability, and restore lending to support domestic consumption and investment.\n- Pursue a balanced growth strategy that combines exports with a revival of domestic demand to create jobs and reduce unemployment.\n- Maintain sound policies and implement the medium-term economic strategy for 2014–2020.\n- In the eurozone context, pursue actions to reduce fragmentation, achieve the ECB’s inflation objective, and enhance monetary union architecture to support Ireland’s recovery.\n\nIMF Survey : Ireland’s Economy Back from the Brink, But Continued Progress Needed — December 19, 2013\n\n---\n\n Content in this bundle\n\n- Cr13366pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Country Focus\n- Read the press release\n- Ireland and the IMF\n- Conference call with mission chief\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar121913a"
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    "Published: December 19, 2013",
    "Publication date: December 19, 2013.",
    "The EU/IMF-supported program began in December 2010 and its successful completion has left Ireland \"in a much stronger position\" than at the start.",
    "Program success owed to full commitment by the Irish authorities and people, steady policy implementation, and close collaboration with EU and ECB counterparts.",
    "Immediate priority was to recapitalize and stabilize the banking system, achieved early in the program and stemming deposit outflows.",
    "Banking system had assets of almost 500 percent of GDP when the program started.",
    "Progress made in reducing banking system size and recapitalizing viable banks; NAMA (asset management company) was established to deal with large problem loans, especially in the property sector.",
    "Remaining issues:",
    "Budget consolidation started before the program.",
    "Over 2009–13, the structural primary deficit has been reduced by about 10 percentage points of GDP.",
    "Resulting trajectory:",
    "Households’ debts amount to almost 200 percent of disposable income.",
    "Ireland contributed €17.5 billion of the total program financing package of €85 billion.",
    "Signs of growth emerging and unemployment has started falling after peaking (unemployment kept rising until it peaked in early 2012).",
    "Growth and market signals:",
    "Projections:",
    "Revival of domestic demand expected to be modest in the near term and a protracted process due to strained private balance sheets and gradual easing of fiscal consolidation.",
    "Improving financial-sector health expected to support recovery, though near-term contributions from renewed lending are not expected to be significant.",
    "Institutional reforms implemented:",
    "Irish authorities released a medium-term economic strategy covering 2014 to 2020.",
    "Regaining market access began in mid-2012 with Treasury bills issuance and strengthened after policy signals such as ECB President Draghi’s Outright Monetary Transactions.",
    "Ireland benefited from improved euro-area conditions and its own steadfast policy implementation.",
    "Ireland’s prospects are closely tied to the eurozone: progress on demand and supply deficiencies in the eurozone, achieving the ECB’s inflation target, reducing fragmentation, and improving monetary union architecture are important for Ireland’s outlook.",
    "The bailout had a dramatic social and political impact: the negotiating government resigned, elections were held in February 2011, and a new coalition government formed in March 2011 with a strong mandate to implement the program.",
    "Social fallout intertwined with the banking crisis; program prevented a sharper economic deterioration that was likely at end-2010.",
    "Dialogue with labor unions and organizations dealing with vulnerable groups was conducted though some counterparts felt concerns were insufficiently addressed.",
    "Authorities were encouraged to design fiscal consolidation measures with fairness and equity in mind.",
    "Continue private balance sheet repair and fiscal consolidation; these processes will take time.",
    "Strengthen efforts to resolve nonperforming loans and mortgage arrears, improve bank profitability, and restore lending to support domestic consumption and investment.",
    "Pursue a balanced growth strategy that combines exports with a revival of domestic demand to create jobs and reduce unemployment.",
    "Maintain sound policies and implement the medium-term economic strategy for 2014–2020.",
    "In the eurozone context, pursue actions to reduce fragmentation, achieve the ECB’s inflation objective, and enhance monetary union architecture to support Ireland’s recovery.",
    "[Cr13366pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2013/_cr13366pdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[Read the press release](http://www.imf.org/external/np/sec/pr/2013/pr13507.htm)",
    "[Ireland and the IMF](http://www.imf.org/external/country/irl/index.htm)",
    "[Conference call with mission chief](http://www.imf.org/external/np/tr/2013/tr110813.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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