IMF Executive Board Concludes 2019 Article IV Consultation with Ireland
IMF News, June 17, 2019
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- Published: June 17, 2019
Economic performance and recent developments
- Real GDP growth in 2018: 6.8 percent, boosted by multinational sector‑led net exports.
- (Modified) domestic demand expansion in 2018: 3.3 percent.
- Unemployment: pushed below 6 percent in 2018 with strengthening net inward migration.
- Inflation: gradually rising due to sustained demand pressures and dissipating effects of past sterling depreciation.
- Public finances: improved further, supported by strong output growth and abundant unforeseen corporate income tax proceeds.
- Public debt: declined by almost 4 percentage points to below 65 percent of GDP (105 percent of GNI*).
- Current account surplus (2018): widened moderately to 9.1 percent of GDP, mainly reflecting activities of multinationals.
- Banking sector: downsized, well capitalized and liquid; profitability under pressure; credit to the economy has only recently begun to expand.
- Nonperforming loans: declined but remain high.
- Nonbank financial sector: investment funds and other financial intermediaries continue to grow rapidly, lifting the overall size of Ireland’s financial sector above its pre‑crisis level.
- Household balance sheets: improved on the back of strong income growth.
- Housing market: housing prices continued to grow, but at a slower pace amid signs that the supply of housing has begun to respond to rising demand.
Outlook and projections
- Outlook conditionality: broadly positive provided Brexit proceeds in an orderly manner.
- Growth projections:
- 2019: projected to slow to about 4 percent as one‑off factors driving MNEs’ net exports dissipate.
- Medium term: projected to gradually converge to a potential rate of close to 3 percent, thereby closing the positive output gap.
- Employment and labor market:
- Further employment growth will tap foreign labor inflows and reduce unemployment to about 5 percent.
- This employment growth is expected to support earnings and private consumption.
- Inflation: headline inflation expected to reach 2 percent over the medium term.
- Public finances: estimated to improve further over the medium term.
- External position: current account surplus projected to subside to below 5 percent of GDP over the medium term.
Executive Board assessment — risks and policy priorities
- Main external downside risks: a no‑deal Brexit, escalation of global protectionism, and adapting to ongoing international tax changes.
- Fiscal policy guidance:
- Accelerate fiscal consolidation to alleviate demand pressures and build buffers given the advanced cyclical position and external risks.
- Save additional corporate tax revenue.
- Broaden the tax base to reduce dependency on uncertain revenues.
- Reform personal income taxation to make it more efficient.
- Enforce spending limits and ensure value‑for‑money in public infrastructure investments.
- Support establishing the Rainy‑Day Fund as a fiscal tool for unforeseen events.
- Commit to using all proceeds from financial sector divestments to reduce public debt.
- Brexit contingency:
- If a no‑deal Brexit materializes, let automatic fiscal stabilizers operate freely and provide targeted support to hard‑hit sectors.
- A fiscal stimulus may be called for, depending on the severity of the downturn in the broader economy.
- In case of a sharp credit contraction, the countercyclical capital buffer could be released.
- Financial sector and macroprudential policy:
- Continue efforts to improve bank asset quality; prioritize NPL reduction via accelerated legal processes, creditor‑borrower engagement, and enhanced supervisory efforts.
- Welcome the proactive use of macroprudential policy tools and endorse expanding the toolkit with a systemic risk buffer and debt‑based measures.
- Encourage further strengthening of the AML/CFT framework.
- Nonbank financial intermediation:
- Improve data collection on the large and fast‑growing nonbank sector, closely monitor risk build‑up, and develop system‑wide stress testing.
- Emphasize continued engagement in international cooperation given the sector’s global reach.
- Maintain close cooperation with the EU and the U.K. to avoid cliff‑edge risks related to Brexit.
- Structural reforms and labor market:
- Address key structural bottlenecks to growth.
- Continue efforts to boost housing supply, including rationalizing building regulations.
- Boost productivity in domestic firms through direct funding of innovation, employee training programs, and infrastructure investments.
- Increase female employment, notably through the affordable child care program.
- Further align educational paths with business demand for high‑skilled jobs.
- Other recommendations:
- Continue implementing the international tax reform agenda.
- Develop an ambitious strategy to achieve Ireland’s climate change commitments.
- Strengthen the long‑term financial soundness of the Social Insurance Fund.
Selected economic indicators and key statistics (2016–24, as presented)
- Population (2018, millions): 4.8
- Per capita income (euros): 37,545
- Quota (as of Apr. 30, 2018, millions of SDRs): 3,449.9
- At‑risk‑of‑poverty rate 1/: 16.6
- Output and demand (annual percentage change, constant prices, unless otherwise indicated):
- Real GDP: 2016: 4.9; 2017: 7.2; 2018: 6.8; 2019: 4.1; 2020: 3.4; 2021: 3.1; 2022: 2.9; 2023: 2.7
- Domestic demand: 2016: 22.7; 2017: -13.0; 2018: 4.4; 2019: 3.8; 2020: 3.3; 2021: 3.0; 2022: 2.8
- Public consumption: 2016: 3.5; 2017: 3.9; 2018: 6.4; 2019: 1.7; 2020: 2.5; 2021: 2.1; 2022: 2.3
- Private consumption: 2016: 3.7; 2017: 1.9; 2018: 2.4
- Gross fixed capital formation: 2016: 53.2; 2017: -30.2; 2018: 7.8; 2019: 5.9; 2020: 5.2
- Exports of goods and services: 2016: 7.7; 2017: 8.9; 2018: 4.6; 2019: 4.3; 2020: 4.2
- Imports of goods and services: 2016: 18.5; 2017: -9.3; 2018: 4.5
- Potential growth: 2016: 8.5; 2017: 6.0; 2018: 3.2
- Output gap: 2016: 0.7; 2017: 1.5; 2018: 1.3; 2019: 1.1; 2020: 0.5; 2021: 0.2; 2022: 0.0
- Prices:
- Inflation (HICP): 2016: -0.2; 2017: 0.3; 2018: 1.2
- GDP deflator: 2016: -0.8; 2017: 0.4; 2018: 1.4
- Employment and wages:
- Employment (ILO definition): 2018: 3.6
- Unemployment rate (percent): 2016: 8.4; 2017: 6.7; 2018: 5.8; 2019: 5.4; 2020: 5.0
- Public finance (percent of GDP):
- Revenue: 2016: 27.0; 2017: 26.1; 2018: 25.8; 2019: 25.9; 2020: 25.5; 2021: 25.3; 2022: 24.7; 2023: 24.6; 2024: 24.5
- Expenditure: 2016: 27.6; 2017: 26.3; 2018: 26.0; 2019: 25.0; 2020: 24.2; 2021: 24.0; 2022: 23.8
- Overall balance: 2016: -0.7; 2017: -0.3
- Primary balance: 2016: 1.6
- Structural balance (percent of potential GDP): 2016: -1.5; 2017: -0.5; 2018: 0.1; 2019: 0.6
- General government gross debt: 2016: 73.5; 2017: 68.6; 2018: 64.8; 2019: 62.3; 2020: 58.8; 2021: 57.0; 2022: 54.0; 2023: 51.1; 2024: 48.0
- General government net debt: 2016: 59.8; 2017: 55.8; 2018: 53.1; 2019: 51.5; 2020: 49.5; 2021: 46.7; 2022: 44.1; 2023: 41.2
- Balance of payments and external indicators:
- Trade balance (goods): 2016: 38.9; 2017: 36.7; 2018: 34.5; 2019: 32.8; 2020: 32.0; 2021: 31.7; 2022: 31.5; 2023: 31.4
- Current account balance: 2016: -4.2; 2017: 9.1; 2018: 7.9; 2019: 6.9; 2020: 6.3
- Gross external debt (excl. IFC): 2016: 294.4; 2017: 255.0; 2018: 221.3; 2019: 209.7; 2020: 200.3; 2021: 191.5; 2022: 183.3; 2023: 176.3; 2024: 169.8
- Saving and investment balance:
- Gross national savings: 2016: 33.7; 2017: 33.2; 2018: 35.0; 2019: 35.6; 2020: 35.2; 2021: 34.9; 2022: 34.6; 2023: 34.3; 2024: 33.9
- Private sector saving: 2016: 32.4; 2017: 33.3; 2018: 34.0; 2019: 33.5; 2020: 33.1; 2021: 32.7; 2022: 32.3; 2023: 31.9
- Gross capital formation: 2016: 37.9; 2017: 24.8; 2018: 25.1; 2019: 26.5; 2020: 26.9; 2021: 27.1; 2022: 27.2; 2023: 27.4; 2024: 27.5
- Memorandum items:
- Nominal GDP (€ billions): 2016: 272.9; 2017: 293.7; 2018: 318.3; 2019: 335.4; 2020: 351.8; 2021: 369.4; 2022: 387.7; 2023: 405.9; 2024: 425.0
Italic: IMF Executive Board summary of the Article IV consultation with Ireland concluded on June 14, 2019.
