The Troika gave the country’s economic progress a thumbs-up and maintained their advice that the Government should put unexpected extra income into cutting debt, rather than cutting tax and increasing spending.
Representatives of the country’s largest creditors — the IMF, European Commission, ECB and the bailout fund, the ESM — spent three days in Dublin.
In the first of two assessments this year, the European Commission’s statement noted that the country became the fastest- growing in the EU last year with a GDP surge of 4.8%.
It expects increasing domestic demand will gradually replace net exports as the main driver of growth and noted the drop in interest payments due to lower borrowing rates on the market and the early repayment of the IMF loan.
It noted that the Government during the week restated its aim to cut the deficit to 2.3%, less than the target of 3.3%, and to 1.7% next year, eliminating the budget deficit by 2018.
For the first time since 2006, public sector debt fell, dropping to 109.7% of GDP from 123%, largely due to the liquidation of IBRC. It should fall to 105% this year and below 85% by 2020.
The deficit target for next year “incorporates the effect of expansionary measures of €1.2bn or around 0.6% of GDP”.
It advised Finance Minister Michael Noonan on the unexpected additional income.
“A more ambitious budgetary target for 2016 would accelerate the reduction of the high Government debt-to-GDP ratio and help protect against future shocks”.
The commission will assess the stability programme update over the next few weeks, and present its conclusions at the end of May.
Mr Noonan convinced the commission to revise how it assesses two factors in economic forecasts — population and growth.
Based on its old methods, it assumed Ireland’s population would fall by 20%, while growth was estimated at just 0.6%.
However, the commission concluded: “The legacies of the crisis demand further continued and determined policy efforts, in particular in the areas of fiscal adjustment, financial sector repair and restructuring”.
It welcomed the Central Bank’s new mortgage lending rules and urged acceleration of loan restructuring. The commission will visit again in the autumn.
© Irish Examiner Ltd. All rights reserved