Bailout provides ‘window to deal with fiscal and banking problems’

THE joint EU/IMF bailout agreement effectively gives Ireland “a window to deal with its fiscal, banking and competitiveness problems,” the Central Bank said yesterday.

The institution — via its latest quarterly economic bulletin — said that Ireland’s controversial rescue package was basically necessary in order to help place the country in the direction “needed to ensure a return to sustainable growth”.

“Ireland now has a window of time in which to convince international markets that its fiscal adjustment is well under control, that risks in the banking system are contained and the banks’ balance sheets are scaled down and that the economy’s competitiveness improvements have been consolidated,” it said.

However, yesterday’s commentary also said that the exact pace and timing of Ireland’s economic recovery — or, indeed, any real pick-up — “cannot be forecast very precisely”.

Although the Central Bank still anticipates growth this year and next, yesterday’s commentary saw it lower its forecast, now expecting only a 1% GDP rise this year, rather than 2.4%, as previously stated.

It added that “a range” of both stronger and weaker outcomes are also “quite plausible”, going on to say that “the level of uncertainty surrounding the growth outlook remains high”.

“The already evident divergence in sectoral performance, across the economy, is set to continue with growth likely to be largely confined to the export sector in 2011,” yesterday’s bulletin said.

The Central Bank also agrees with the IMF when it comes to the prospects of global economic growth — saying that while the danger of a double-dip global recession has waned, recovery will be two-speed with higher growth coming from emerging nations and slower rises evident amongst developed countries.