Ireland: 2007 Article IV Consultation: Staff Report; Staff Supplement; and Public Information Notice on the Executive Board Discussion
IMF Staff Country Reports, September 24, 2007
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- Ireland: 2007 Article IV Consultation: Staff Report; Staff Supplement; and Public Information Notice on the Executive Board Discussion
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Bibliographic details
- Published: September 24, 2007
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451818857.002
Overview
- Publication date: September 24, 2007
- Central assessment: Economic performance of Ireland remains strong, supported by sound policies.
- Core concern: Recent growth has become more reliant on house building and competitiveness has eroded.
- Accompanying trends identified: Rapidly rising housing prices, surging bank credit to property-related sectors, and strong wage growth.
- Banking system status: Continues to perform well, but rapid credit growth has led to vulnerabilities.
Key findings
- Growth and labor markets:
- The growth rate of real GNP per capita continues to be one of the highest among advanced economies.
- The unemployment rate is one of the lowest.
- Housing and credit:
- Economic growth increasingly reliant on house building.
- Rapidly rising housing prices were accompanied by surging bank credit to property-related sectors.
- Wages and competitiveness:
- Strong wage growth has coincided with evidence of eroding competitiveness.
- Financial sector vulnerabilities:
- Despite continued good performance, the banking system faces vulnerabilities due to rapid credit growth.
Risks and vulnerabilities
- Overreliance on the housing sector for growth.
- Escalating exposure of banks to property-related lending.
- Loss of competitiveness driven by wage dynamics relative to productivity.
Policy implications and recommendations (implied by assessment)
- Reinforce macroprudential monitoring and oversight of rapid credit expansion to property-related sectors.
- Address wage and competitiveness concerns to sustain external competitiveness.
- Consider measures to moderate housing market overheating and reduce systemic exposure of banks to property risks.