European Commission: Remarkable recovery, but issues remain

The European Commission has lauded Ireland’s “remarkable” economic turnaround but warned of a number of pitfalls that could scupper the progress.

In a statement following the conclusion of its fifth post-programme surveillance mission, the commission reaffirmed Ireland’s position as the EU’s fastest growing economy, with growth now coming from a broader base.

Economic growth is expected to moderate somewhat to around 5% in 2016 and a more sustainable rate of almost 4% in 2017.

The commission warned, however, that additional efforts are needed to make the tax system more efficient and growth-friendly through a shift towards less distortionary taxes.

Identifying the surge in corporation tax receipts, which remains somewhat of a mystery, it said there is scope for broadening the tax base with a view to mitigating revenue volatility.

A number of other challenges are also highlighted by the commission, with the Department of Health in the firing line.

According to the report, improving cost effectiveness in healthcare, especially in hospitals and pharmaceuticals, remains a challenge.

The appointment of Simon Coveney as housing minister is noted, but the housing crisis remains a significant problem.

“A new ministry for housing has been created to co-ordinate the broad array of proposed and existing housing policy measures.

"Still, the undersupply of housing remains a prominent issue and needs to be tackled using supply-side measures,” states the report.

It also recommends “careful monitoring” of the property market given the high foreign capital inflows into the commercial real estate market.