From Department of Finance; Department of Public Expenditure, NDP Delivery and Reform
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The Annual IMF Article IV Mission took place in Ireland over a two-week period from Tuesday 26 April to Thursday 5 May 2022, during which an IMF team visited Ireland for a series of engagements with public and private sector bodies. Throughout the visit, which marked Ireland’s first in-person Article IV Review since May 2019, the IMF team discussed the country's economic and financial policies with Ministers Donohoe and McGrath, Central Bank Governor Maklouf as well as senior officials from government departments and agencies and the Central Bank. The IMF also met the IFAC, the ERSI, Oireachtas members and representatives of the private sector. Discussions were constructive and engaging across a wide range of issues.
As noted in the Concluding Statement, Ireland’s economy had begun to recover strongly from the pandemic last year, but it is now faced with a new set of challenges arising from the Russian invasion of Ukraine. Ministers Donohoe and McGrath agreed with the IMF’s view that the government must strike a balance between countering the headwinds from the war in Ukraine and containing inflationary pressures.
Other challenges facing the country include pressures in the housing market, shortages of labour supply and the need to advance the implementation of Ireland’s ambitious climate action agenda. The IMF Statement also emphasises the need for high quality, targeted public expenditure in order to reach Ireland’s full output potential.
On conclusion of the Mission, Minister Donohoe said:
“Ireland’s strong economic recovery from the pandemic prior to Russia’s invasion of Ukraine was clear evidence that the government’s swift and coordinated response during the COVID-19 crisis was successful in preserving jobs and helping businesses to survive. However, we are now faced with a new set of complex and inter-related challenges. Supply issues arising from the pandemic already contributed to higher inflation which has been added to by the impact of the war in Ukraine and the resultant energy and commodity price increases.
"While the government is continuing to provide targeted support to households to address the challenges facing the Country, it must be stressed that resources are limited and that fiscal policy must be carefully balanced to avoid further inflationary pressures and a harmful wage-price spiral.
"The Irish authorities had fruitful and constructive discussions over the course of the Mission and I look forward to the Article IV Report being published over the summer after consideration by the Board of Directors of the IMF. I also welcome the Concluding Statement which reiterates the importance of carefully balanced fiscal policy in the near-term while also addressing the long-term fiscal and structural challenges which lie ahead for Ireland.”
Minister McGrath said:
"Our economy has emerged from the pandemic in a position of strength with unemployment falling and growing domestic demand. We now must face a new set of challenges with the rise in the cost of living and the war in Ukraine. We must strike the appropriate balance between supporting the economy and containing inflationary pressures. As this is a challenge faced by many advanced economies, engagement with the IMF on this shared concern is valued.
"The recent rise in prices is putting many people and businesses under immense pressure and in response, between the Budget and new measures, the government has committed significant resources to assist those impacted most. This approach seeks to ensure that in addressing the immediate short term challenges posed by inflation we do so within a fiscal framework that will ensure the sustainability of the public finances. We cannot embed within the permanent expenditure base levels of increases in spending that could undermine the fiscal sustainability that is necessary to deliver improvements in public services and infrastructure for our people.
"It is important that we build on reforms introduced over the last number of years to ensure expenditure delivers value for money and improved outcomes.”
Both Ministers look forward to the publication of the IMF Article IV Report in early July which will contain a more detailed analysis of the Irish economy and financial sector.