Troika upbeat on Ireland's growth prospects

Officials from the EU/IMF/ECB Troika have issued a statement praising Ireland for remaining "on track" with its recovery programme.

Troika upbeat on Ireland's growth prospects

Officials from the EU/IMF/ECB Troika have issued a statement praising Ireland for remaining "on track" with its recovery programme.

The statement also predicts a return to modest economic growth this year.

"The teams’ assessment is that the programme remains on track and is well financed," said the statement.

"The authorities have continued to steadfastly implement programme policies. Tensions in sovereign bond markets have escalated during the visit, but programme financing is cushioning the impact of this shock on the Irish economy and public finances.

"Recent developments are consistent with a return to positive growth in 2011. Real GDP stabilized in the year to the first quarter, and modest growth is expected in 2011."

The Troika statement also was also upbeat on Ireland's prospects in 2012, though it stopped short of predicting a recovery in domestic spending.

"Strong exports, aided by progress in recovering lost competitiveness, are expected to continue driving the recovery although domestic demand will continue to contract.

"Growth is expected to strengthen next year and beyond as the recovery broadens and spills over into the labour market."

The group was also positive about the measures taken so far to repair Ireland's crippled banking sector.

"Restructuring of banks is ahead of schedule, with the merger of Allied Irish Banks with EBS Building Society, and Anglo Irish Bank with INBS, already completed," said the statement.

"Renewal of the boards and management of banks is underway, and the recapitalization of domestically owned banks is expected be completed by end July, with the fiscal cost reduced by burden sharing with subordinated debt holders.

The crucial area of Ireland's fiscal depict was also discussed.

"On the fiscal front, the cumulative deficit for the first six months of the year was well below the programme ceiling.

"The budget deficit is projected to be below 10.5% of GDP in 2011.

"The Government has established the Irish Fiscal Advisory Council to provide an independent assessment of public finances.

"Later this year, the authorities will publish a medium term fiscal consolidation plan for 2012 to 2015, outlining the revenue and expenditure adjustment consistent with reaching a deficit target of below 3% of GDP in 2015, drawing on the findings of the ongoing Comprehensive Review of Expenditure."

The Troika also had praise for what it called "targeted structural reforms".

"To boost job creation, the Government is working with the social partners to develop reform plans for sectoral wage agreements, which cover sectors where unemployment tends to be high," said the statement.

"The Government also plans to introduce legislative changes to remove restrictions on trade and competition in sheltered sectors, including the legal profession, medical services and the pharmacy profession, in order to lower costs and boost purchasing power."

The statement concluded by outlining the details of further injections of funding to the Irish Exchequer.

"The Government’s programme is supported by loans from the European Union and EU member states amounting to €45bn and a €22.5bn Extended Fund Facility with the IMF. Ireland’s contribution is €17.5bn.

"Approval of the conclusion of this review will allow the disbursement of €4bn in this quarter (€2.5bn by the EU, and €1.5bn by the IMF).

Additional resources in the order of €0.5bn are also scheduled to be disbursed under the UK bilateral loan in the third quarter."

The next program review is scheduled for October 2011.

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