The International Monetary Fund (IMF) has advised the Irish Government to consider a more targeted €14 billion Budget 2024 package to safeguard vulnerable groups and mitigate further inflation. This recommendation comes in light of supply-side constraints and a high inflation rate of 5.5%.
The IMF also proposed enhancements to public investment efficiency and simplification of judicial reviews to reduce project uncertainties. It has further suggested that the Government’s Housing for All strategy should be reinforced by measures addressing affordability, land use, and construction productivity, along with clearer, faster approval processes.
Despite a strong labor market, weakening external demand, and excess household savings, the IMF forecasts a slowdown in Irish economic growth from its current high base. The GDP growth is projected at 1.2% this year, with an increase to 2.6% in 2024.
The IMF has voiced concerns over Ireland’s progress towards its 2030 emission reduction targets. It recommended implementing carbon tax legislation to accelerate progress.
On the inflation front, the rate of Irish consumer price increases is not expected to fall back to the European Central Bank’s (ECB) 2% annual target until 2025. As inflation recedes, the IMF suggests phasing out one-off cost of living measures while real income recovery supports private consumption.
Following an official visit, the IMF commended Ireland’s resilience to shocks like Covid-19 and inflation, predicting moderate GDP growth of 1.5% in 2023 and 2.7% in 2024, down from 12% in 2021-22. The Modified Gross National Income is expected to rise by 2.5% in 2023-24, with inflation averaging at 5.3% in 2023 and 3.2% in 2024 before reaching ECB’s long-term target of 2% by late 2025.
The IMF also highlighted potential risks from tighter financial conditions, weakened external demand, rising commodity prices, conflicts in Ukraine and Gaza, changes in the international tax environment, and potential retrenchment by multinationals. It encouraged fiscal prudence to support disinflation and buffer against risks like an aging population, climate change, and financial stability risks.
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