IMF says Irish economy rebounding
An IMF staff team visited Dublin, from February 29 to March 15 for the 2016 Article IV consultation discussions with the authorities.
Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision. In jurisdictions with financial sectors deemed by the IMF to be systemically important, including Ireland, financial stability assessments under the Financial Sector Assessment Program (FSAP) are a mandatory part of Article IV surveillance, and are supposed to take place every five years. IMF FSAPs are currently being conducted in a number of Euro area countries including Ireland, Germany, the Netherlands and Finland.
An International Monetary Fund (IMF) mission, headed by Daniel Hardy, visited Ireland during December 2015 and March 2016 to conduct an assessment under the FSAP. The mission held discussions with the Central Bank of Ireland (Central Bank); the Department of Finance; representatives of other government agencies; and representatives of the non-government financial and nonfinancial sectors. It held discussions also with the European Central Bank; the European Banking Authority; the European Insurance and Occupational Pension Authority; and the European Systemic Risk Board. It is anticipated that a final report will be presented to the IMF's Executive Board in late July.
The context is of an Irish economy that is clearly rebounding. Since the crisis that began in 2008, the banking system has consolidated and shrunk. Over the same period, the internationally-oriented funds management sector has grown significantly. The regulatory and supervisory environment has been transformed by post-crisis reforms, notably the establishment of the European Banking Union.
The vulnerabilities of the Irish financial system reflect in large part the significant openness of the sector and the economy in general. Recent indicators of economic slowdown in some major countries must be of concern to a country such as Ireland that is dependent on trade in goods and services, and foreign direct investment. In particular, the tight linkages with the U.K. financial system warrant the ongoing attention of the authorities. The crisis legacies of heavy private and public debt burdens (especially for households with high loan-to-value ratios), a persistent stock of impaired loans, and high albeit declining unemployment mean that a large negative external shock could have a significant impact on the financial system.