It has made ‘significant progress’ in repairing its financial sector and restoring stability to its public finances but still needs to address persistently high unemployment, according to the European Commission, European Central Bank and International Monetary Fund.
The lenders' tenth review of the economy found the recovery was continuing, with growth of around 1% expected this year and just over 2% in 2014. Better than expected domestic demand was making up for weaker-than-anticipated exports caused by the economic problems of its main trading partners.
The troika also praised Ireland for ‘comfortably’ meeting its deficit target for 2012, and for being on track to meet this year’s target in the first three months of 2013. However, they noted that ‘implementation of Budget 2013 measures, including in the health sector, was essential to meet the government’s commitment to a 2013 deficit ceiling of 7.5% of gross domestic product’.
Improving fiscal performance was ‘key’ to the country re-establishing itself on the financial markets, the troika said. Ireland recently successfully sold a ten-year ‘benchmark’ bond, and funding conditions for banks had also improved, it noted.
The government was also making gradual progress on the ‘normalisation’ of its financial sector. ‘After a disappointingly slow start, banks are working towards meeting ambitious targets to ensure a durable reduction in mortgage arrears and the authorities will need to monitor this process closely,’ the statement said.
Despite this, the troika stressed that Ireland faced ‘remaining challenges’ which required ‘continuing policy efforts’. In particular, they raised concerns over the increasingly structural nature of the country’s high unemployment, which meant people were unable to access available vacancies.
‘Further progress in enhancing engagement with the unemployed, including through the continued rollout of Intreo offices (which provide a single point of contact for all employment and income supports) and a redeployment of case workers, will ensure an even quality of activation and training services throughout the country,’ the troika said.
‘The significant progress Ireland has made in recovering lost competitiveness in recent years should be continued through opening up competition in sheltered sectors such as legal services.’
Completion of the tenth review will enable Ireland to access a further €2.4bn of funding from the troika. It is expected to leave the bailout programme at the end of 2013, and the lenders noted that they had discussed preparations for this process with the Irish authorities.
