{
  "title": "IMF Executive Board Concludes Sixth Post-Program Monitoring Discussion with Ireland",
  "publication": "IMF News, February 3, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/02/03/pr1735-imf-executive-board-concludes-sixth-post-program-monitoring-discussion-with-ireland",
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  "summary": "On February 2, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Post-Program Monitoring Discussion with Ireland and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
  "publishDate": "2017-02-03",
  "sections": [
    {
      "heading": "Executive Board assessment and conclusion",
      "content": "- On February 2, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Post-Program Monitoring Discussion with Ireland and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.\n- Despite risks to the outlook, Ireland’s capacity to repay the Fund is strong, given:\n  - robust economic and fiscal performance,\n  - large cash buffers,\n  - manageable financing needs, and\n  - favorable market financing conditions.\n- Key risks noted:\n  - Brexit-related risks,\n  - a sustained low growth-low inflation environment in Europe,\n  - external political uncertainties and rising anti-globalization sentiment,\n  - ongoing developments in corporate tax treatment at the international level,\n  - challenging political context for the new minority government."
    },
    {
      "heading": "Recent economic performance and outlook",
      "content": "- 2016 performance:\n  - Output expanded by 4.8 percent y/y in the first three quarters of 2016, mainly driven by domestic demand.\n  - Broad-based employment gains lowered the unemployment rate to 7.2 percent in December.\n  - Headline inflation hovered in negative territory during most of the year, reflecting declining energy prices.\n  - The current account surplus widened somewhat in the first three quarters of 2016.\n- Outlook:\n  - Robust domestic demand is projected to drive continued healthy growth and support further moderation in unemployment.\n  - Inflation, which turned slightly negative in 2016, is expected to edge up gradually.\n  - The impact of multinational operations on headline GDP complicates assessment of domestic activity; staff welcomes work on alternative measures for domestic activity."
    },
    {
      "heading": "Fiscal policy findings and recommendations",
      "content": "- Fiscal targets and stance:\n  - The government’s fiscal targets are broadly appropriate.\n  - The moderate adjustment planned in 2017 strikes a balance between deficit reduction and addressing public expectations for a growth dividend.\n- Fiscal prudence recommended:\n  - Expenditure increases beyond those already programmed would need to be offset by tax increases or cuts in other spending to meet the deficit target.\n  - Maintain moderate growth in expenditures, save any revenue windfalls, and ensure potentially temporary revenue gains are not used to fund permanent expenditure increases.\n- Authorities’ commitments welcomed:\n  - Reach medium-term deficit target of 0.5 percent of GDP by 2018.\n  - Establish a “rainy-day” fund beginning in 2019.\n  - Reduce debt-to-GDP to 45 percent within a decade.\n- Targeted support for growth:\n  - Within a tight envelope, fiscal policy could be more supportive of growth through well-targeted increases in capital expenditure.\n  - Capital expenditure is noted as already well below peers; well-targeted increases are needed to buttress competitiveness and support welfare (economic and social infrastructure).\n- Housing and tax guidance:\n  - Housing Action Plan and related efforts to address housing shortages, high rents, and homelessness are welcome.\n  - Fiscal incentives related to housing should be limited and closely monitored to avoid fueling demand and price pressures.\n  - Plans for a phased elimination of the Universal Social Charge should not come at the expense of the breadth and stability of the tax base."
    },
    {
      "heading": "Banking sector, nonperforming loans, and financial stability",
      "content": "- Banking sector conditions:\n  - Credit to the private sector has continued to fall but at a declining rate.\n  - Balance sheet repair of domestic banks has continued but profitability remains weak.\n  - Capital and liquidity positions of domestic banks have improved but, with low underlying profitability, banks remain vulnerable to shocks.\n  - The UK’s decision to leave the EU could put further pressure on domestic banks’ profitability.\n- Bank restructuring and government stakes:\n  - Disposal of the government’s stakes in Irish banks, which would support public debt reduction, should continue once market conditions are supportive.\n- Nonperforming loans (NPLs) and mortgage arrears:\n  - NPLs are declining overall, but resolution of deep mortgage arrears should be accelerated.\n  - Intensified supervisory oversight of banks’ internal management of NPL resolution should continue.\n  - The “advice and arrears” scheme recently introduced by the government shows promise in improving borrower-creditor engagement.\n  - Further steps to make legal proceedings more efficient are critical to accelerate resolution."
    },
    {
      "heading": "Macroprudential policy and housing market risks",
      "content": "- Continued vigilance recommended to safeguard macro-financial stability, especially regarding the property market.\n- Macroprudential measures and recalibration:\n  - The macroprudential measures introduced in 2015 strengthen resilience of banks and households to adverse shocks.\n  - The recalibration of the macroprudential framework is reasonable given early experience and current housing market dynamics.\n  - Progress toward full implementation of the CCR and replacing the LTI limit with a DTI limit remains key to ensure prudent lending (DTI better captures borrowers’ repayment capacity)."
    },
    {
      "heading": "Ireland: Selected Economic Indicators, 2014–18 (Est. / Projections)",
      "content": "- Output/Demand (Annual percentage change, constant prices, unless noted otherwise)\n  - Real GDP: 2014: 8.4; 2015: 26.3; 2016: 4.6; 2017: 3.2; 2018: (blank)\n  - Domestic demand: 2014: 7.7; 2015: 9.9; 2016: 6.8; 2017: 3.4; 2018: (blank)\n  - Public consumption: 2014: 5.4; 2015: 1.1; 2016: 5.8; 2017: 2.5; 2018: 2.0\n  - Private consumption: 2014: 1.7; 2015: 4.5; 2016: 3.1; 2017: 2.9; 2018: (blank)\n  - Gross fixed capital formation: 2014: 18.1; 2015: 32.5; 2016: 11.7; 2017: 6.2; 2018: 5.0\n  - Exports of goods and services: 2014: 14.4; 2015: 34.5; 2016: 2.1; 2017: 4.1; 2018: (blank)\n  - Imports of goods and services: 2014: 15.3; 2015: 21.7; 2016: 5.1; 2017: (blank); 2018: (blank)\n- Potential Growth: 2014: 3.7; 2015: 24.6; 2016: 3.5; 2017: 3.3\n- Output Gap: 2014: -1.7; 2015: -0.4; 2016: 0.6; 2017: 0.5; 2018: 0.4\n- Prices\n  - Inflation (HICP): 2014: 0.3; 2015: 0.0; 2016: -0.2; 2017: 0.8; 2018: 1.4\n  - GDP deflator: 2014: -1.2; 2015: 4.9; 2016: -0.9\n- Employment and wages\n  - Employment (ILO definition): 2014: 2.6; 2015: 1.5; 2016: (blank)\n  - Unemployment rate (percent): 2014: 11.3; 2015: 9.5; 2016: 7.9; 2017: 7.1; 2018: 6.9\n  - Nominal wages: 2014: 0.1; 2015: 0.9; 2016: 2.3\n- Public Finance, General Government (In percent of GDP)\n  - Revenue: 2014: 34.1; 2015: 27.6; 2016: 27.2; 2017: 27.4; 2018: 26.9\n  - Expenditure: 2014: 37.8; 2015: 29.5; 2016: 28.2; 2017: 27.9\n  - Overall balance: 2014: -3.7; 2015: -1.9; 2016: -0.5; 2017: -0.3\n  - Primary balance: 2014: 0.7; 2015: 1.8\n  - Structural balance (percent of potential GDP): 2014: -3.2; 2015: -1.1; 2016: -0.7\n  - General government gross debt: 2014: 105.4; 2015: 78.7; 2016: 76.4; 2017: 75.0; 2018: 73.6\n- Monetary and financial indicators (In percent)\n  - Bank credit to private sector (growth rate): 2014: -16.8; 2015: -13.2; 2016: …\n  - Deposit rates: 2014: 1.9; 2015: 1.3\n  - Government 10-year bond yield: (blank)\n- Balance of payments\n  - Trade balance (goods): 2014: 21.1; 2015: 43.2; 2016: 41.6; 2017: 42.2; 2018: 42.0\n  - Current account balance: 2014: 10.2; 2015: 7.8; 2016: 6.0; 2017: 5.7\n  - Gross external debt: 2014: 926.4; 2015: 870.8; 2016: 830.5; 2017: 788.6; 2018: 744.1\n- Sources for the table: Central Statistics Office; Department of Finance; Eurostat; and IMF staff.\n\nIMF Executive Board concludes sixth Post-Program Monitoring discussion with Ireland (Press Release No. 17/35, February 3, 2017).\n\n---\n\n\n References\n\n- The Executive Board\n- Ireland and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/02/03/pr1735-imf-executive-board-concludes-sixth-post-program-monitoring-discussion-with-ireland"
    }
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    "Published: February 3, 2017",
    "On February 2, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Post-Program Monitoring Discussion with Ireland and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
    "Despite risks to the outlook, Ireland’s capacity to repay the Fund is strong, given:",
    "Key risks noted:",
    "2016 performance:",
    "Outlook:",
    "Fiscal targets and stance:",
    "Fiscal prudence recommended:",
    "Authorities’ commitments welcomed:",
    "Targeted support for growth:",
    "Housing and tax guidance:",
    "Banking sector conditions:",
    "Bank restructuring and government stakes:",
    "Nonperforming loans (NPLs) and mortgage arrears:",
    "Continued vigilance recommended to safeguard macro-financial stability, especially regarding the property market.",
    "Macroprudential measures and recalibration:",
    "Output/Demand (Annual percentage change, constant prices, unless noted otherwise)",
    "Potential Growth: 2014: 3.7; 2015: 24.6; 2016: 3.5; 2017: 3.3",
    "Output Gap: 2014: -1.7; 2015: -0.4; 2016: 0.6; 2017: 0.5; 2018: 0.4",
    "Prices",
    "Employment and wages",
    "Public Finance, General Government (In percent of GDP)",
    "Monetary and financial indicators (In percent)",
    "Balance of payments",
    "Sources for the table: Central Statistics Office; Department of Finance; Eurostat; and IMF staff.",
    "[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Ireland and the IMF](http://www.imf.org/external/country/IRL/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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