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© 2007 International Monetary Fund

September 2007

IMF Country Report No. 07/325

Ireland: 2007 Article IV Consultation—Staff Report; Staff Supplement; and Public Information Notice on the Executive Board Discussion

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2007 Article IV consultation with Ireland, the following documents have been released and are included in this package:

  • The staff report for the 2007 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on June 27, 2007, with the officials of Ireland on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on August 2, 2007. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • A staff supplement of September 11, 2007, updating information on recent economic developments.

  • A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its September 14, 2007 discussion of the staff report that concluded the Article IV consultation.

The document listed below has been or will be separately released.

Selected Issues Paper

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Staff Report for the 2007 Article IV Consultation

Prepared by the Staff Representatives for the 2007 Consultation with Ireland

Approved by Robert Ford and Michael Hadjimichael

August 2, 2007

Executive Summary

Background and outlook: Economic performance remains impressive, though in recent years economic growth became increasingly reliant on house building. Competitiveness eroded somewhat, though it is still broadly appropriate. The rise in euro area interest rates has prompted a welcome cooling of the housing market, which will help to rebalance economic growth and reduce inflation, though there is a risk of a sharper slowdown. The key policy challenges are therefore to support adjustment to sustainable growth.

Fiscal policy: Fiscal stabilizers have ample room to operate fully, but discretionary measures that weaken the underlying fiscal position should be avoided. The authorities and staff agreed on the importance of maintaining fiscal prudence. Over the medium term, it will be important to further improve the quality of spending and review the tax base. As age-related spending will rise considerably in the long term, improving public understanding of fiscal pressures and a better approach to pension planning are needed.

Financial system: Banks have large exposures to the property market, but stress tests suggest that cushions are adequate to cover a range of shocks. Financial regulation and supervision have improved over the past year with the introduction of a new liquidity management framework for banks and the strengthening of capacity for insurance supervision. The authorities and staff shared the view that continued careful monitoring of banks’ risk management practices is essential.

Labor market policies: The authorities and staff concurred that wage moderation—in both the social partnership agreement and the forthcoming public sector pay benchmarking exercise—and firm-level wage flexibility are crucial to minimizing the expected rise in unemployment and seizing new growth opportunities.


  • I. Introduction

  • II. Strong Growth in 2006, Though Housing Market Started to Cool

  • III. Growth Slowdown Ahead, with Risks on the Downside

  • IV. Ample Room for Fiscal Stabilizers, but Population Aging Ahead

  • V. Banks have Large Exposures to Property, but Big Cushions Too

  • VI. Labor Market Flexibility is Crucial to Facilitating Adjustment

  • V. Staff Appraisal

  • Tables

  • 1. Selected Economic Indicators

  • 2. Summary of Balance of Payments

  • 3. Contributions to GDP Growth

  • 4. General Government Finances

  • 5. Indicators of External and Financial Vulnerability

  • Figure

  • 1. Banking System Developments

  • Boxes

  • 1. Fund Policy Recommendations and Implementation

  • 2. Spillovers to Ireland

  • 3. Long-Term Fiscal Sustainability

  • 4. Finance and Growth

  • Appendices

  • I. Staff Analytical Work, 2002–07

  • II. Sustainability Exercise

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Staff Report for the 2007 Article IV Consultation with Ireland—Informational Annex

Prepared by the European Department

August 2, 2007


  • I. Fund Relations

  • II. Statistical Issues

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Staff Report for the 2007 Article IV Consultation

Supplementary Information

Prepared by European Department

Approved by Alessandro Leipold and Michael Hadjimichael

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Public Information Notice (PIN) No. 117


September 24, 2007

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

Ireland: 2007 Article IV Consultation: Staff Report; Staff Supplement; and Public Information Notice on the Executive Board Discussion
Author: International Monetary Fund