The IMF staff concluded their 2025 Article IV Mission to Ireland, highlighting the country's effective policies amidst global challenges. The statement from the staff acknowledges the consent for publication by the Irish authorities, yet clarifies that the views they express don't necessarily reflect those of the IMF’s Executive Board. A subsequent report will be prepared for the Executive Board's discussion.
With the current economic climate posing several risks, the IMF outlines several policy recommendations, emphasizing a neutral fiscal stance for 2025 to avoid overheating the economy. "Staying the course will require navigating uncertainties and addressing challenges posed by an increasingly fragmented and shock-prone world," the statement notes. Ireland's economy is expected to grow, even as it contends with geopolitical and economic uncertainties.
The staff's projections, formulated before the U.S. trade policy announcement on April 2, anticipate a 2.7% increase in real GNI* for 2025. However, various risks loom, including the economy's concentration in a few multinational enterprises, potential reversals of globalization, and domestic capacity constraints.
In terms of fiscal policy, the IMF stresses the importance of maintaining fiscal prudence while addressing Ireland’s infrastructure and housing needs. "Windfall CIT receipts should not be used to fund permanent spending," the statement advises. The report calls for a strengthening of the national fiscal framework to safeguard against shocks, with the suggestion to adopt a general government debt anchor ensuring fiscal sustainability.
On the financial sector front, the report finds that financial stability risks, while currently limited, warrant ongoing close monitoring. Banks in Ireland are well-capitalized and possess good asset quality. The IMF cautions against potential vulnerabilities, advocating for continued attention to the evolving financial system to maintain resilience in the face of possible economic shifts.
Structural policies also come under scrutiny. "Ireland is vulnerable to trade and investment shocks," warns the IMF, highlighting the potential impact on output and employment. Strategies to strengthen linkages between multinational enterprises and the domestic economy are recommended alongside fostering fiscal prudence to allow targeted economic support.
Finally, the mission underscores the need for Ireland to address housing shortages and regulatory constraints, aiming to boost supply and support sustainable growth. Overcoming these infrastructure challenges is crucial to meeting rising demand and ensuring access to housing.
The IMF team expressed gratitude to Irish authorities and other stakeholders for their cooperation during the mission. A more comprehensive assessment of Ireland's economic situation will be made available with the forthcoming June Staff Report of the 2025 Article IV Consultation.