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IMF warns Irish housing market requires "close monitoring"

The executive board of the International Monetary Fund (IMF) has warned the Irish housing market ...
Newstalk
Newstalk

09.50 27 Jun 2017


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IMF warns Irish housing market...

IMF warns Irish housing market requires "close monitoring"

Newstalk
Newstalk

09.50 27 Jun 2017


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The executive board of the International Monetary Fund (IMF) has warned the Irish housing market "requires close monitoring".

The economic body has completed its latest assessment of Ireland's outlook.

It says the economy is facing "substantial, mainly externally-driven downside risks".

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It finds Ireland continues to be among the Eurozone's top growth performers.

It says: "Real GDP expanded by 5.2% in 2016, supported by a healthy expansion of private consumption and buoyant investment, including construction.

"Strong broad-based job creation brought unemployment down to 6.4% in May, its lowest level in a decade, while inflation remained low as the recent pickup in energy prices and upward pressure from services were partly offset by the impact of the Sterling weakness."

It also says Ireland's banks have strengthened their balance sheet "and remain profitable".

It says new lending has picked up for both corporations and households.

But it cautions that better labour market conditions, rising incomes, and recent policy measures have contributed to "increased pressures on house prices and rents in the face of a lagged supply response".

Brexit and housing challenges

The IMF executive directors say strong momentum in the housing market "requires close monitoring" and that persistent pressures may lead to "imbalances".

They welcome efforts to expand housing supply and assist the homeless - noting that "additional measures to reduce building costs, free up land for development, and accelerate loan restructuring for distressed, but viable, firms in the construction sector would help unlock housing supply."

They also say measures to improve housing affordability should be well-targeted.

Overall, the IMF adds: "The outlook remains positive, but with substantial, mainly externally-driven downside risks.

"Real GDP is projected to grow at 3.9% in 2017, propelled by strong domestic demand.

"Over the medium-term, growth is projected to decelerate and converge towards its potential of about 3% narrowing the positive output gap gradually, and inflation is set to stabilise at just below 2%."

But the directors say despite the good news, rising pressures of housing and externally-driven uncertainties - mainly Brexit - pose challenges.

They recommend policies that focus on strengthening economic resilience, and guarding against a re-emergence of boom-bust dynamics.

Concluding its report, the IMF says: "While Ireland's economic statistics conform to international norms, directors underscored the need for indicators of underlying economic activity which suitably account for the operations of foreign-owned multinationals to allow a more accurate assessment of economic developments and policymaking."


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