Ireland: 2022 Article IV Consultation-Press Release; Staff Report; and Informational Annex

This 2022 Article IV Consultation with Ireland highlights that the economy has rebounded strongly from the pandemic. The financial sector weathered the pandemic crisis well thanks to high capital buffers and effective policy support. The impact of the pandemic on borrowers’ financial position has started to dissipate, but uncertainty remains. While the outlook is strong, uncertainty is substantial due to the indirect impacts of the war in Ukraine. Several pre-pandemic challenges remain: housing shortages, infrastructure, social and green investment gaps, and the need to strengthen multinational enterprises’ inward linkages to broaden growth and make it more inclusive. There is also a need to address the Global Financial Crisis legacy effects on the financial system and tackle the factors contributing to high lending interest rates. The fiscal stance is broadly appropriate. However, in the short term, two-way fiscal flexibility is needed to strike a balance between supporting the economy and containing inflation. In case growth disappoints, automatic stabilizers should be allowed to fully operate and fiscal space deployed, if necessary, through high-quality measures. Structural reforms should aim to remove bottlenecks, increase productivity, and reduce inequities. In particular, housing supply policies should be further strengthened, with a focus on boosting productivity in the construction sector and improving the planning and permit processes.