New IMF Country Report on Ireland Post author By Philip Lane Post date September 7, 2011 The latest report is here. Categories In Uncategorized 7 Comments on New IMF Country Report on Ireland ← IMF Review → Sharing the Burden of Adjustment 7 replies on “New IMF Country Report on Ireland” Too late! Can someone please answer me this simple but crucial question. Is Irelands GDP 165 BN or 155 BN? Even within this report (which appears to be quite positive) there appear to be a contradiction. At one stage it mentions that the Irish Government is paying in about 17BN (or 11 % of GDP which indicates 155BN) following 5he 24 BN stress test However later it refers to the the almost 35BN (22% GDP which indicates 165BN) already paid into Anglo and Nationwide. I feel this is an important question as if GDP is the higher figure (and presuming growth rates of around 2.5% per annum than the deficit would have to be narrowed by less than 12BN between now and 2015 to reach 3%. However if GDP is 155BN than an “adjustment” of around 13BN would be needed. This would also mean that the net Debt/GDP ratio may be signifcantly over 100% by 2016 or approximately 100% . SO IS GDP 155bn EURO OR 165BN EURO? The section on the banking sector would also indicate to me that policy makers would be wise to resist pressure to start the gradual process of privatising bank shares until the end of 2014 or beginning of 2015. Nominal GDP was 155,992m Real was 160,596 (using 2009 prices) Thats CSO figures…..IMF could be using 2008 prices for real GDP (haven’t check report yet). @Rob S Thank you! Therefore (and I am only “guestsimating”) excluding external factors beyond our control real GDP in 2015 will reasonably be expected to be 180 BN . In that event this would require a 5.4Bn deficit to stay within EZ guidelines which, if I am following events properly, will necessitate a “narrowing” or “adjustment” of 12 BN. If we factor in the 2BN state asset “sales” (hopefully to the NRPF) and this governments desire to “front load austerity” one could even start to feel confident that Ireland will be a wiser but more confident place within 3 years. Factors facilitating this would (IMHO) be: 1) private debt coming under control, 2)public service salaries moderating to a level which ceases to provoke outrage among the rest of the population, 3)gradual reduction of banking capital requirements (once the government knows the full story within the banks) 4) increased competitiveness in the economy, 5) the inevitable revival of housing construction to “normal levels “once demand (after all we have 80000 more people than we previously thought who need housing) returns in 2014-2015. I wonder what we will all be complaining about in 2015! Probably prices and cost of living. At least I hope external factors will develop in such a way that we will still be allowed to complain. Now I am going to say something risky and possibly unpopular among some readers: I think Ireland is getting itś own house in order! By the by:. If you see reports talking about X as a %GDP then they are talking about the nominal figure. @ Livonian I think the IMF, and other research types, often use the pre-crisis GDP to ascertain the ‘cost’ of the overall crisis (ie the 35bn), but current GDP to ascertain the actual hit to the bottom line this year (ie the 17bn), if that makes sense? @Bond and Rob Thank you. Actually now it does start to make sense. I guess this probably means that if the deficit is just under 6BN by 2014 or 2015 the debate over whether the fiscal deficit is within target (3% or “thereabouts”) will be a political rather than an economic one. If the deficit matches infrastructure/capital expenditure and annual NRPF contributions,by that time, which are effectively borrowings on investment I guess none of us should not lose to much sleep over the precise interpretation of how exactly the 3% deficit is calculated. If we can get into that “ballpark” it will also IMHO be easy enough to borrow at reasonable rates (which would have to be done even if we had a 0% deficit. Actually with a bit of flexibility from the Public Service unions (eg 5% wage increase for new employees and 5% wage reduction for existing employees so that there is no inequality between public servants doing the same job) together with the new lower “bailout/stitchup”interest rate Ireland might well have narrowed the deficit sufficiently by 2014. After that we can properly tackle the unemployment problem as it looks to me like our recent immigrants are not “rushing to the airport” despite all media forecasts to the contrary. Current yields on Irish bond rates (8.5%?) may well be starting to look interesting. Comments are closed.