IMF Executive Board Concludes 2018 Article IV Consultation with Ireland
IMF News, June 28, 2018
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- Published: June 28, 2018
Growth and Outlook
- The Irish economy continues to grow at a rapid pace, well above the EU average.
- Broad recovery of (modified) domestic demand: 4 percent in 2017.
- Headline data are distorted by the volatility of multinationals’ activity.
- Strong labor market performance brought the unemployment rate down to below 6 percent by April 2018.
- Ireland’s current account surplus widened to 12½, mainly reflecting activities of multinationals.
- Outlook (abstracting from multinational volatility):
- Growth is projected at about 5 percent in 2018, mainly driven by domestic demand.
- Growth is projected to gradually converge to its potential rate (around 3 percent) over the medium term.
- Solid employment growth would bring unemployment below 5 percent by the end of the forecasting period and underpin a rise in earnings.
- Headline inflation is expected to gradually reach 2 percent.
- Public finances are projected to improve further.
- External current account surplus is estimated to taper off to around 6½ percent of GDP over the medium term.
Public Finances
- Public finances continued to improve on the back of strong output growth.
- Public debt burden declined slightly to 68 percent of GDP.
- Directors encouraged stepping up fiscal consolidation to alleviate demand pressures and build buffers.
- Growth‑friendly consolidation should center around:
- Broadening the tax base.
- Saving temporary revenue windfalls, especially from volatile corporate taxes.
- Maintaining moderate spending growth, while improving its efficiency and addressing social and infrastructure needs.
- Directors welcomed authorities’ plans to establish a Rainy‑Day Fund to increase the resilience of public finances.
- Ireland’s continuous active engagement in implementing the international tax reform agenda was commended.
Financial Sector, Housing, and Structural Issues
- Banks have continued to strengthen financial soundness and remain profitable.
- Nonperforming loans have declined but remain high.
- Loan repayments from the nonfinancial corporate sector continued to outstrip new lending; credit recovery endured as consumer and mortgage loans picked up.
- Housing demand has recovered strongly; supply response has been modest so far, leading to growing pressure on house prices and rents.
- Directors encouraged:
- Boosting efforts to expand housing supply and improve affordability.
- Using taxation more actively to reduce land and property hoarding, with well-targeted measures to improve housing affordability.
- Continued deployment of macroprudential policy as needed to ensure bank and household balance sheets remain resilient to shocks.
- On bank balance sheet repair and Brexit preparedness, Directors supported:
- Measures to accelerate legal processes for arrears resolution.
- Encouraging creditor‑borrower engagement.
- Increasing provisioning requirements.
- Providing binding supervisory guidelines on write‑offs of non‑performing loans.
- Downsizing the government’s stakes in the banking system as market conditions allow.
- Structural bottlenecks: Directors urged addressing these to promote high, sustainable growth through:
- Reducing the sizeable infrastructure gap and prioritizing investment for value‑for‑money.
- Boosting productivity of domestic firms, including greater support for innovation.
- Better aligning educational paths with business needs.
- Increasing female labor force participation by providing affordable child care and supporting removal of gender pay gaps.
Executive Board Assessment (summary)
- Directors welcomed continued strong economic growth, rapid reduction in unemployment, and strengthened public and private balance sheets.
- Main risks: lingering crisis legacies, rising housing prices, and external downside risks—mainly from resurgent global protectionism, adverse effects from Brexit, and ongoing changes in the international tax landscape.
- Policy focus recommended: rebuilding fiscal buffers, guarding against re‑emergence of boom‑bust dynamics, and addressing structural bottlenecks to enhance resilience and foster sustainable growth.
- Directors welcomed publication of additional statistics aimed at filtering out multinationals’ activity and encouraged continued efforts to provide more granular and frequent information.
Key Statistics and Projections (selected, as published)
- Populations (2017, millions): 4.7
- Per capita income (euros): 62,559
- Quota (as of May 31, 2018, millions of SDRs): 3,449.9
- At-risk-of-poverty rate 1/: 16.6
Projections and historical series (annual percentage change, constant prices, unless otherwise indicated)
- Real GDP:
- 2016: 5.1
- 2017: 7.8
- 2018: 5.0
- 2019: 4.1
- 2020: 3.5
- 2021: 3.0
- 2022: 2.8
- Domestic demand:
- 2016: 21.2
- 2017: -7.8
- 2018: 5.7
- 2019: 4.3
- 2020: 3.6
- 2021: 2.9
- 2022: 2.6
- Public consumption:
- 2016: 5.2
- 2017: 1.8
- 2018: 2.4
- 2019: 1.7
- 2020: 1.4
- 2021: 1.3
- Private consumption:
- 2016: 3.1
- 2017: 2.1
- 2018: 2.5
- 2019: 2.3
- Gross fixed capital formation:
- 2016: 60.0
- 2017: -21.8
- 2018: 12.1
- 2019: 7.7
- 2020: 5.9
- Exports of goods and services:
- 2016: 6.8
- 2017: 4.9
- 2018: 4.5
- 2019: 4.2
- Imports of goods and services:
- 2016: 16.4
- 2017: -6.2
- 2018: 5.4
- 2019: 4.8
- Potential Growth:
- 2016: 4.4
- 2017: 7.1
- 2018: 3.8
- 2019: 3.4
- 2020: 3.3
- 2021: 3.2
- Output Gap:
- 2016: 1.1
- 2017: 1.6
- 2018: 1.0
- 2019: 0.6
- 2020: 0.2
- Contribution to growth (selected entries):
- 2016: 13.9
- 2017: -5.9
- 2018: 3.9
- 2019: 2.0
- Inventories:
- 2016: 0.0
- Net exports (selected entries):
- 2016: -9.1
- 2017: 14.5
- 2018: 1.2
- Prices:
- Inflation (HICP) 2016: -0.2
- Inflation (HICP, end of period) 2016: -0.3
- Inflation (HICP, end of period) 2017: -0.1
- GDP deflator 2016: (value not reported)
- Terms-of-trade (goods and services) 2016: -1.7
- Employment and wages:
- Employment (ILO definition) 2016: 3.7
- Unemployment rate (percent):
- 2016: 8.4
- 2017: 6.7
- 2018: 5.5
- Average nominal wage 2016: 2.7
- Public Finance, General Government (percent of GDP):
- Revenue:
- 2016: 26.7
- 2017: 25.8
- 2018: 25.4
- 2019: 25.2
- 2020: 24.8
- 2021: 24.6
- 2022: 24.4
- 2023: 24.2
- Expenditure:
- 2016: 27.2
- 2017: 26.1
- 2018: 25.6
- 2019: 25.3
- 2020: 24.5
- 2021: 23.9
- 2022: 23.6
- Overall balance 2016: -0.5
- Primary balance 2016: (value not reported)
- Structural balance (percent of potential GDP):
- 2016: -1.0
- 2017: -0.9
- 2018: -0.6
- General government gross debt:
- 2016: 72.9
- 2017: 68.1
- 2018: 65.9
- 2019: 63.5
- 2020: 59.9
- 2021: 58.3
- 2022: 55.5
- 2023: 52.5
- General government net debt:
- 2016: 63.8
- 2017: 58.7
- 2018: 56.3
- 2019: 54.5
- 2020: 52.8
- 2021: 50.9
- 2022: 48.3
- 2023: 45.6
- Balance of payments:
- Trade balance (goods):
- 2016: 38.5
- 2017: 36.3
- 2018: 33.2
- 2019: 32.9
- 2020: 32.6
- 2021: 32.5
- 2022: 32.3
- 2023: 32.1
- Current account balance:
- 2016: 12.5
- 2017: 9.9
- 2018: 8.7
- 2019: 7.3
- 2020: 6.9
- 2021: 6.5
- Gross external debt (excl. IFC):
- 2016: 287.5
- 2017: 256.4
- 2018: 234.4
- 2019: 215.0
- 2020: 197.4
- 2021: 181.4
- 2022: 166.5
- 2023: 152.4
- Saving and investment balance:
- Gross national savings:
- 2016: 35.7
- 2017: 36.7
- 2018: 35.5
- 2019: 35.3
- 2020: 34.9
- 2021: 34.7
- 2022: 34.5
- 2023: 34.3
- Private sector 2016: 34.6
- Private sector 2017: 34.2
- Private sector 2018: 33.8
- Private sector 2019: 33.1
- Private sector 2020: 32.2
- Public sector (values not fully reported)
- Gross capital formation:
- 2016: 32.4
- 2017: 26.6
- 2018: 27.5
- 2019: 27.6
- 2020: 27.8
- Monetary and financial indicators:
- Bank credit to private sector (growth rate):
- 2016: -7.6
- 2017: -3.4
- Deposit rates (values not reported)
- Government 10-year bond yield (value not reported)
- Memorandum items:
- Nominal GDP (€ billions):
- 2016: 275.2
- 2017: 295.8
- 2018: 312.2
- 2019: 328.1
- 2020: 344.4
- 2021: 360.2
- 2022: 376.6
- 2023: 393.6
- Modified total domestic demand (percent) 2017: 4.0
- Population growth (percent) (value not reported)
1/ Share of population with an equivalised disposable income (including social transfers) below the threshold of 60 percent of the national median equivalised disposable income after social transfers. Data is as of 2016.
IMF Communications Department: "IMF Executive Board Concludes 2018 Article IV Consultation with Ireland" — Press Release No. 18/264 (June 28, 2018).
