Statement following the conclusion of the third post-programme surveillance mission to Ireland
Staff from the European Commission, in liaison with staff from the European Central Bank (ECB), visited Ireland to carry out the third post-programme surveillance (PPS) mission from 27 April to 1 May. This was coordinated with the International Monetary Fund's (IMF) third post-programme monitoring (PPM) mission. The European Stability Mechanism (ESM) also participated in the meetings on aspects related to its Early Warning System.
The economic and financial situation continues to strengthen. In 2014, Ireland became the fastest growing EU country as real GDP surged by 4.8%. Growth for the first three quarters of 2014 was primarily driven by net exports, in particular the strong trade links with the US and the UK, and by investment while private consumption started picking up towards the end of the year. The strongest rise in economic activity since 2007 reflects the policy efforts to rebalance the Irish economy. The property market continued to recover, with residential prices rising by 16.3% in 2014.
In 2015 and 2016, economic growth is expected to remain buoyant at around 3½ %. Domestic demand is set to gradually replace net exports as the main growth driver. Interest rates on government bonds have fallen to new lows, which helped accelerate the early replacement of most outstanding IMF credits through market issuances.
Public finances improved in 2014. The general government deficit was 4.1% of GDP, well within the ceiling of 5.1% of GDP recommended under the Excessive Deficit Procedure (EDP). In 2014, the public sector debt-to-GDP ratio declined for the first time since 2006 to 109.7% of GDP, down from 123.2% in 2013. This marked reduction largely reflects the liquidation of the Irish Banking Resolution Corporation (IBRC) along with sustained economic growth and low interest rates.
This week the government presented the 2015 update of the stability programme, which sets out the fiscal strategy for the coming years. For 2015, the update reiterates the government's commitment to correct the excessive deficit in a timely fashion. Beyond 2015, the programme targets a decline of the headline deficit towards a balanced budget in 2018. The deficit target for 2016 incorporates the effect of expansionary measures of EUR 1.2 billion or around 0.6% of GDP.
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