Global Markets Ireland Overview June 212 TREASURY SPECIALISTS PRODUCTS RESEARCH DEVELOPED FOR YOU
Produced by the Bank of Ireland Economic Research Unit (ERU)
Contents SECTION ONE Ireland by numbers 2 SECTION TWO Irish economy - recovering at slow and uneven pace 4 2a Ireland returns to growth in 211 5 2b Exports - main driver of growth in the Irish economy 6 2c Domestic economy constrained 7 2d Special feature: Irish housing market 11 SECTION THREE Government Programme on course 13 3a Ireland s public finances have improved 14 3b Ireland successfully completes sixth review of EU/IMF programme 15 1
2 SECTION ONE Ireland by numbers
1. Irish economy by numbers GDP overview - first year of growth since 27 (annual volume change) 29 21 211 212(f) GDP -7.% -.4%.7%.6%* - Q1 (q-o-q) - Q2 (q-o-q) - Q3 (q-o-q) - Q4 (q-o-q) 1.1% 1.1% -1.1% -.2% Reuters consensus forecast.5% Irish Government forecast.7% EU forecast.5% GNP -9.8%.3% -2.5% 1.%* * Bank of Ireland ERU External sector - continuing to drive growth 29 21 211 212(f) Annual export (bn) 145.9 157.7 165.3 172.7 Real export growth (annual volume change) -4.2% 6.3% 4.1% 2.5% Annual import (bn) 121. 127.9 131.7 134.9 Real import growth (annual volume change) -9.3% 2.7% -.7%.5% Total exports/imports as a % of GDP 166% 183% 19% 192% Merchandise/services export split 53%/47% 52%/48% 52%/48% 52%/48% EUR/GBP average for year.89.86.87.81 Competitiveness - Irish unit labour costs (annual change) -2.4% -6.9% -4.1% -1.9% Balance of Payments (m) -4,697 761 127 1, * EU Commission Government finances - remain on target 29 21 211 212(f) General Government Balance (% of GDP) -14.% -31.2% -13.1% -8.3% Underlying Government Balance (% of GDP) -11.5% -1.9% -9.4% -8.3% Exchequer Balance (m) -24,641-18,745-24,917-18,655 Exchequer Balance (% of GDP) -15.3% -12.% -15.9% -11.7% Tax revenue (m) 33,43 31,753 34,27 36,375 % change in tax (annual change) -19.% -3.9% 7.2% 6.9% Public Spending (m) 59,985 54,984 64,222 59,55 General Government Debt (% of GDP) 65.1% 92.5% 18.2% 117.5% Consumption/investment - subdued domestic environment to remain 29 21 211 212(f) Personal consumption (annual volume change) -6.9% -.8% -2.7% -1.% Retail sales (annual volume change) -13.8% 1.4% -.9%* n/a Total investment (annual volume change) - Buildings and construction (annual volume change) - Machinery & equipment (annual volume change) -28.7% -34.9% -19.3% -24.9% -33.1% -15.3% -1.6% -15.6% -14.5% House completions (number of housing units) 26,42 14,62 1,48 1,5 * Reuters consensus Labour market - unemployment stabilising at elevated levels 29 21 211 212(f) Total labour force (s) 2,187.3 2,139.5 2,114. 2,114. Total employment (s) 1,928.6 1,847.9 1,89.7 1,81. Unemployment (% of labour force) 11.8% 13.6% 14.4% 14.4% Inflation - set to ease 29 21 211 212(f) CPI (annual average change) -4.5% -1.% 2.6% 1.9% HICP (annual average change) -1.7% -1.6% 1.1% 1.8% Source: CSO, Irish Department of Finance, EU Commission and Bloomberg. Forecasts by Bank of Ireland ERU unless stated. All Government finance forecasts by Irish Department of Finance. -1.% -5.% 5.% 3
4 SECTION TWO Irish economy - recovering at slow and uneven pace
2a. Ireland returns to growth in 211 The Irish recovery has been slow and uneven with modest but volatile growth expected this year. Ireland recovering at slow and uneven pace 8 Real GDP rose by.7% in 211, the first full year of growth since 27. However, it was very much a tale of two halves with stronger growth in the first half of the year succeeded by two quarters of negative growth in the second half The negative growth in Q3 and Q4 211 was partly due to the expected deceleration of the pace of growth in exports as a result of the slowdown in growth in some of Ireland s key markets 6 4 2-2 -4-6 -8-1 s.a. % qoq % yoy Q1 7 Q2 7 Q3 7 Q4 7 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Q3 9 Q4 9 Q1 1 Q2 1 Q3 1 Q4 1 Q1 11 Q2 11 Q3 11 Q4 11 The slowdown in the UK and the Euro Area represent clear downside risks to Ireland in 212. However, that said the US is expected to expand at a reasonable pace this year. Export growth remains the main positive for the economy and is likely to be the most significant driver of growth in the short to medium term Domestic demand remains sluggish although it did register a small increase in Q4 211. The domestic economy is likely to decline once again in 212, albeit by a more modest pace than in recent years The Irish consumer is likely to remain subdued due to high unemployment, a modest decline in average earnings and a decline in real income. However, there is some light at the end of the tunnel as recent data suggests that employment and wages may stabilise Graph shows: Seasonally adjusted quarterly GDP growth and annual GDP growth Source: CSO Irish Economy Forecasts (%) 21 211 212(f) Personal Consumption -.8-2.7-1. Government Consumption -3.8-3.7-4. Capital Formation -24.9-1.6-1. Exports 6.3 4.1 2.5 Imports 2.7 -.7.5 GDP -.4.7.6 GNP.3-2.5 1. Source: CSO, BoI ERU forecasts Investment should register only a small decline this year as most of the contraction in the construction sector is now behind us Government spending will contunue to fall as further fiscal consolidation is implemented. It is estimated the Government will have to enact another circa 9bn in austerity measures in the three year period 213-215 to return the Government deficit to sustainable levels Employment registered an unexpected gain in Q4 211 but the situation remains fragile as a significant decline in unemployment is not expected A very modest rise in GDP of.6% is forecast for 212. The quarter on quarter growth path could be quite volatile this year before strengthening to circa 2.5% growth in 213 5
2b. Exports - main driver of growth in the Irish economy Export growth slowed in 211 due to a slow down in the economies of some of Ireland s key markets. However, it still remains the main positive in the Irish economy, continuing to offset falls in domestic demand. Exports slow but remain resilient 15 12 9 Exports rose by 4.1% in 211 with imports falling by.7%. Net exports added 4.5 percentage points to growth offsetting falls in consumer spending, government spending and investment However, the pace of export growth fell sharply throughout the year from 2.8% in Q1 (q-on-q) to culminate in a 1.1% fall in exports in Q4 (q-on-q) 6 3-3 -6 Q4 9 Q1 1 Q2 1 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Q3 9 Q3 1 Q4 1 Q1 11 Q2 11 Q3 11 Q4 11 The fall mainly occurred on the merchandise side and in part reflected specific factors in the pharmaceutical industry (branded drugs going off patent), sluggish growth in the IT sector and the deceleration in the pace of global growth The uncertain global outlook also represents a clear risk to any export forecast for 212 particularly as the Euro Area, which accounts for some 4% of Irish merchandise exports, is expected to contract The US, which accounts for 23% of Irish exports, is expected to grow by over 2% in 212. Also, some 16% of exports go to the UK, which is forecast to expand modestly this year The global economy is forecast to expand in 212, albeit at a slower pace than in 211. The IMF estimates that the global economy grew by 3.9% in 211,will grow by 3.5% in 212 and 4.1% in 213 The Irish economy is now in broad balance as income exceeds spending in both the household and corporate sectors, offsetting the public sector deficit Graph shows: Export growth year-on-year (volume terms) Source: CSO Composition of Irish exports for 211; services, chemicals and pharma of increased importance Graph shows: Merchandise and Service Exports adjusted for Balance of Payments terms Source: CSO Ireland s current account returned to surplus in 21 8 6 bn Chemicals and Pharmaceuticals (31%) Other Merchandise Exports (21%) Service Exports (48%) Ireland s current account has posted small surpluses in each of last two years from a -5.6% of GDP deficit in 28. The current account surpluses are forecasts to grow larger in the coming years The Department of Finance expect the current account will post a surplus of circa 1.8bn in 212 up from a marginal surplus of 123m in 211 4 2-2 -4-6 -8-1 -12 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212(f) 213(f) 214(f) 215(f) BOI s ERU forecast export growth will slow to 2.5% in 212 with imports growing by.5% Source: CSO and Department of Finance 6
Jun 7 Sep 7 Dec 7 Mar 8 Jun 8 Sep 8 Dec 8 Mar 9 Jun 9 Sep 9 Dec 9 Mar 1 Jun 1 Sep 1 Dec 1 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 April 12 2c. Domestic economy constrained Dramatic falls in domestic demand are most likely behind us and a more moderate decline is expected for 212. The domestic economy has remained constrained by high unemployment, falling Government spending and the sharp fall in investment In 211, the domestic economy contracted by 4.1%, however a surprise increase was registered in Q4 211 due to a 14% increase in investment and a.5% increase in consumer spending Wages may be flat at best and the expected decline in inflation may not be as sharp as initially thought, given the rise in oil prices in the first quarter of 212 Countering this, there are some signs employment is stabilising so BOI s ERU are forecasting a smaller fall (1%) in consumer spending in 212. Household spending is being restrained as precautionary savings are increased and debt is paid down Another fall in investment is expected this year, although a much smaller decline at just 1.% against a 1.6% fall in 211. The continued fall in the building and construction should be somewhat offset by a recovery in machinery and equipment for business The Government s continued implementation of austerity measures saw spending fall by 3.7% in 211 with another 4% decline due this year. Government spending has fallen in 11 of the past 12 quarters and it is not likely this pattern will change in the immediate future Irish GDP component weighting Consumer spending rose in Q4 211 1-1 -2-3 -4-5 -6 Graph shows: Personal Consumption growth quarter-on-quarter Source: CSO Consumer confidence remains at low ebb 1 9 8 7 6 29 21 211 Personal Consumption 53 53 51 Government Spending 18 17 16 Investment 16 12 11 Exports 91 97 1 Imports -75-78 -77 Graph shows: GDP component weighting in real terms Source: Bank of Ireland ERU Q4 9 Q1 1 Q2 1 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Q3 9 Q3 1 Q4 1 Q1 11 Q2 11 Q3 11 Q4 11 Domestic demand is forecast to decline by 1% in 212 from a 4.1% decline in 211. Overall a smaller decline in domestic demand is due this year, with a smaller fall in consumption and investment offsetting a larger fall in Government spending 5 4 3 2 1 Graph shows: Consumer confidence Source: ESRI 7
Signs of stabilisation in labour market The labour market showed signs of stabilising through much of 211 with unemployment appearing to level out at an average of 14.4% Irish employment numbers have fallen by 16% from their peak in 27 to Q3 of 211. However, Q4 211 was a much different story with employment growing unexpectedly. Over 1, new jobs were created and in addition the sharp fall in Q3 was revised down from a loss of 2, jobs to 14, This positive development added to the slowdown in job losses in 211 providing support to the view that the labour market may be at or close to a turning point The jobs gains were broad based across a number of sectors including manufacturing, hospitality and financial services offsetting losses in the retail, education and transport sectors. This trend provides evidence that demand for labour is coming from the export sector and a revival in the tourism industry Employment still falling as unemployment steadies Employment % change 6 4 2-2 -4-6 -8-1 Employment (% Change) Unemployment rate (rhs) 21 22 23 24 25 26 27 28 29 Graph shows: Average annual unemployment rate as a % of total labour force Average annual % change in total persons employed Source: CSO, ERU forecasts 16 14 12 Unemployment stabilising 21 211 212 16 14 12 1 8 6 4 2 Unemployment % change The supply of labour has also contracted sharply in recent years, partly due to a fall in the participation rate and partly to net emigration. The labour force rose in Q4 211 meaning that the 1, new jobs did little to change the unemployment rate which remained at 14.6% at year end 1 8 6 4 2 The upside employment surprise in the final quarter meant that the average fall in employment in 211 was 2.1% leaving the unemployment rate at 14.4% for the year as a whole Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Q2 25 Q3 25 Q4 25 Q1 26 Q2 26 Q3 26 Q4 26 Q1 27 Q2 27 Q3 27 Q4 27 Q1 28 Q2 28 Q3 28 Q4 28 Q1 29 Graph shows: Unemployment rate as a % of total labour force Source: CSO, BoI ERU forecast Q2 29 Q3 29 Q4 29 Q1 21 Q2 21 Q3 21 Q4 21 Q1 211 Q2 211 Q3 211 Q4 211 Q1 212 Flat employment growth is expected this year with unemployment remaining stable at 14.4% 8
Inflation falling back slower than expected Inflation picked up over the course of 211, with the annual rate of CPI inflation ending the year at 2.5% from 1.3% a year earlier. CPI inflation averaged 2.6% for the year as a whole The acceleration in the rate of inflation was largely down to two factors - higher mortgage interest rates and higher energy costs - both of which are not influenced by the domestic economic environment Mortgage interest costs increased sharply in the first half of 211, reflecting higher ECB rates and an increase in the cost of funds for Irish banks. The cost fell back in late 211 and early 212 helped by cuts in the ECB repo rate Irish Inflation Forecast (%) 29 21 211 212(f) Quarter 1-1.1-3.4 2.3 2.2 Quarter 2-4.5-1.4 2.9 2.1 Quarter 3-6.1.2 2.6 1.9 Quarter 4-5.8.9 2.9 1.6 Annual -4.5-1. 2.6 1.9 HICP -1.7-1.6 1.1 1.8 Graph shows: annual % change in CPI on a quarterly basis + annual HICP % change Source: CSO, BoI ERU forecasts Mortgage inflation may therefore represent a significant deflationary influence on CPI, even in the absence of any further ECB rate reductions Domestic inflationary pressure is at a low level as the consumer continues to retrench and wage inflation will be marginally positive at best The path of energy inflation is likely to be much more volatile and it now accounts for over 11% of the CPI s basket of goods. The annual energy inflation rate remains in a 9% - 1% range since the end of 211, reflecting a combination of higher wholesale fuel costs, a rise in VAT and an increase in excise duty The higher than expected energy prices in Q1 212 has meant that inflation rates have not fallen as fast as initially assumed. Oil prices have fallen back a little of late and in the absence of another significant upward move it is expected annual energy inflation will slow through 212 providing an additional deflationary influence, albeit a volatile one Foreign exchange movements could push up inflation particularly should the euro decline against sterling. However, given the weakness of the consumer environment retailers may try to absorb any increase in import price and not pass it on to consumers It is expected that Irish CPI will slow in the latter half of the year but the higher than expected Q1 outturn means that the annual average may be circa 1.9% for 212 9
Property market downturn continues A bottom to the residential property market does not appear to be imminent. Prices in Q4 211 declined by 5.4% meaning that property prices declined by 16.7% in 211 as a whole The demand for house purchases is influenced by price expectations and the recent price data is not indicative of any near-term change in the trend There is an underlying demand for housing and that is pushing up rents modestly. Rents rose at a quarterly rate of 1.8% in March. Supply clearly still exceeds demand, at least for house purchases, and would-be buyers may well prefer to rent given the uncertainty surrounding the economic outlook, particularly in relation to the labour market The number of house completions fell to under 1,5 in 211 and may be around a cycle low Affordability is at its strongest for over a decade. However, the decision on whether to buy or rent is influenced by other factors such as the economic outlook and expectations on near term house price changes, with both acting as negative influences at this time While declining average earnings are having a small adverse impact on affordability, this has been dwarfed by the fall in house prices and lower interest rates over the past number of years House prices continue to fall Peak Peak to trough Last quarter CSO House Price Index Q3 7-5% -4.1% Q1 12 Daft.ie Q2 7-53% -1.65% Q1 12 Private Rents (CSO) Apr 8-26% 1.8% Q1 12 Graph shows: % change in house prices Source: Daft.ie, CSO change in national average house price Daft.ie change in national average asking price Private rents, change in private rents in CPI index Substantial improvement in affordability 5 45 4 35 3 25 2 15 1 5 199 1991 1992 1993 1994 Graph shows: Measure of affordability over time Source: Bank of Ireland ERU 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 According to the BOI s ERU affordability model, the average new 25-year mortgage in 211 cost 26.7% of income to service from a high of over 44% at the peak of the cycle and as such is below the average since 1975 A long term recovery in the housing market is very much dependent on an improvement in the unemployment rate over time 1
2d. Special feature: Irish Housing Market The data for the housing market at this time presents a mixed message, with some indicators pointing to a bottom, however as prices are continuing to decline this suggests a further deterioration in the market in 212. Prices continue to fall Residential house prices fell by 4.1% in Q1 212 taking the overall peak to trough decline to 49.9%. Prices have fallen in every month, bar one, since December 27. The latest data suggests that property prices in Dublin may be stabilising while prices outside the capital continue to fall. In the three months to April, property prices in Dublin were flat, the first 3 month period where prices did not decline since late 27. In contrast, the rate of decline in property prices outside of Dublin in the three months to April was 5.5%. The near-term trend still looks negative, although some fundamental indicators imply that the market may be bottoming. The house price to rent ratio is now below its long run average and the rental yield is over 5% on BOI s ERU model, the highest since 22. The consensus view is that prices will continue to decline this year, albeit at a decelerating pace, before stabilising in 213. BOI s ERU forecast is similar with a 6% fall pencilled in for 212. The national index for Q1 indicates that residential prices have now fallen by 49.9% from the peak and it is the scale of that fall which prompts the conclusion in some studies (OECD and the IMF) that house values are now at or close to fair value. However, the experience of the past decade might caution against the idea of an equilibrium price for housing in a market which is heavily driven by credit and expectations of price change. Some indicators point to stabilisation Rents appear to have stabilised and are modestly appreciating The most recent data from the CSO shows that private rents were up 1.8% at the end of Q1 212 versus the end of Q4 211. Rents have risen 4% in Q1 212 (year on year). There is an underlying demand for housing and that is pushing up rents. The current presumption that house prices will continue to fall is a key impediment to a recovery in the housing market as it is keeping would-be buyers renting until some of the uncertainty surrounding the housing market and their own economic outlook has been removed. New home construction also seems to have bottomed The quarterly total has been stable at just over 2,5 per quarter since the first quarter of 211. House completions were just under 1,5 in 211 and it is expected that a similar level will be seen this year down from a peak of about 9, completions in 26. If housing completions pick up slightly in 212 then house building will make a positive, but small, contribution to Irish growth for the first time since 26. House completions are below the long term average and below levels seen in other historical weak house building periods in Ireland. This low level of house building is below the depreciation rate assumed by the Department of the Environment meaning that the housing stock in Ireland is actually declining. Income growth is the key driver of housing and mortgage demand and until employment is seen to be on a rising trend mortgage lending is unlikely to increase significantly. Consequently BOI s ERU envisage only a modest pick up in lending for house purchase in 212, to 2.3bn, with support stemming from further improvements in affordability. 11
Affordability continues to improve Affordability is mainly a product of three variables: interest rates, house prices and income Interest rates Affordability in Ireland has further benefited from the weakness in the Euro Area economy. Interest rates which were picking up in early 211 reversed course as the ECB decided to cut rates and the average interest rate for mortgage lending in Ireland ended the year at 3%. The ECB is unlikely to tighten policy in 212 meaning that the average interest rate for mortgage lending this year is likely to remain around 3% and in line with prevailing rates in 29 and 21. House prices Affordability is also impacted by the average size of a new mortgage for house purchases, in turn strongly influenced by the trend in house prices. Consequently, the former has fallen sharply from a cycle peak of 27, in 28 to 189, in 211. House prices are still declining and the average mortgage for the year may fall further to a forecast 173,. Incomes Average gross incomes have fallen in 21 and 211 but the falls are not commensurate with fall in mortgage costs. BOI s ERU model shows an average new mortgage for house purchase absorbed 26.7% of income in 211, against 28% in 21 and a long-term average (since 1973) of 29.4%. BOI s ERU forecast that cost will fall to 24.2% of income in 212, the lowest since 1997. Affordability is a useful indicator of mortgage demand but there are another few critical factors at play. The most important is the supply of credit which has been constrained with a number of lenders exiting the Irish market. Another key factor is confidence, and the decision to buy or rent will always be heavily influenced by expectations on house prices and the general economic outlook regardless of the improvement in affordability. The majority of available indicators point to a stabilisation in the housing market in the short term. The outlier is house prices which is the key indicator. It can t be said that a turning point has been reached unless a sustained period is seen where prices do not decline, with this most likely to happen in the Dublin housing market before the rest of the country. A long term recovery in the housing market is linked to an significant improvement in people s outlook for housing which will not happen until there is a sustained recovery in the labour market and consumer confidence. 12
SECTION THREE Government Programme on course 13
3a. Ireland s public finances have improved Ireland s public finances have improved but it will still be several years before the deficit falls to sustainable levels. The General Government deficit for 211 was 2.5bn or 13.1% of GDP. The underlying deficit (excluding bank recapitalisation costs) was closer to 14.7bn or 9.4% of GDP which was well within the Troika target deficit of 1.6% Tax revenues were 8m ahead of Government targets for Q1 212. However, 45m was due to procedural changes relating to corporation tax and income tax This implies that underlying tax receipts were 35m (4.5%) ahead of profile, and 1% above Q1 211, against a full year Budget target of 5.3%. In particular, income tax receipts were particularly strong on an underlying basis due to previous budget changes VAT was also over 1m ahead of profile and has grown at an annual pace of 5.9%, against a 2.6% forecast for the year as a whole. This growth may slow if retail sales figures continue to weaken Current spending ran over target in Q1 212, up over 5m from profile. The Government maintains this was due to temporary factors and full year spending targets will be within Budget by year end The main risks to Budget targets come from weaker than expected economic growth The Government in March announced that it would not be making the 3.6bn cash payment to IRBC on the Promissory note, but instead would meet the payment via a Government bond This has no impact on the General Government deficit figures as it has already been accounted for in previous deficit figures. It will, however, lessen the exchequer deficit and improve the Government s cash position this year The Government maintains the aim to reduce the General Government deficit to <3% of GDP by 215. This will involve another circa 9bn in austerity measures from 213-215 General Government debt was 18.2% of GDP at the end of 211. It is forecast to peak at 12% of GDP in 213, before starting to fall back, declining to 117% by 215 Irish Government Deficit as a % of GDP General Current Capital 211-13.1-7.3-8.8 212-8.3-6.5-5.2 213-7.5-5.2-3.6 214-4.8-2.9-3.2 215-2.8 -.9-2.9 Source: Budget 212, Irish Department of Finance General based on general government debt standards, Current and Capital based on Exchequer standards (i.e. totals will not sum) 25 2 15 1 Taxes vs Spending 5-5 -1-15 -2-25 Q1 7 Q2 7 Q3 7 Q4 7 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Q3 9 Q4 9 Q1 1 Q2 1 Q3 1 Q4 1 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Graph shows: annual percentage change in tax revenues and current spending Source: Irish Department of Finance Government Deficit - set to decline 1 5-5 -1-15 -2-25 -3-35 -4 Current Spending Tax Revenue 2 21 22 23 24 25 26 27 28 29 21 211 212(f) 213(f) 214(f) 215(f) Graph shows: General Government Balance % of GDP The red line represents Stability & Growth Pact 3% deficit limit Source: Irish Department of Finance 14
3b. Ireland successfully concludes the sixth review of the EU/IMF Programme Ireland has continued to achieve all of the targets set out under the EU/IMF Programme of Assistance. In April 212, Ireland successfully concluded its Q1 review of the Programme, with staff teams from the EC, ECB and IMF stating that policy implementation remains on track and continues to be strong. To date, over 1 actions have been completed under the Programme and over 7% of the available funds have been drawn down. The following developments were identified for the purposes of the review: Fiscal consolidation efforts remain on track 211 General Government deficit (excluding bank support costs) now estimated at 9.4% of GDP, well within the programme ceiling of 1.6% Targets for end March 212 on the Exchequer primary balance and net debt also met, reflecting prudent budget design and implementation Budget on track for achieving the 212 deficit ceiling of 8.6% of GDP The Irish Government is advancing its jobs growth agenda The Government is establishing a working group to review and adapt their strategy for growth and job creation In February 212, the Government announced two new approaches to labour activation. One outlined in the Pathways to Work strategy, while the other Action Plan for Jobs set out measures to facilitate job creation Progress in this area is essential to bring down the level of unemployment Ongoing work to restore the health of the Irish financial system Efforts to strengthen the quality of bank assets are intensifying through strategies for dealing with mortgage and SME loan arrears. The introduction of personal insolvency reform is due later in 212 Permanent TSB is moving ahead with completing its Restructuring Plan with a formal Restructuring Plan to be submitted to the EC by the end of June 212 Reflecting normalisation of the banking system, the Central Bank will align the next PCAR exercise with the EBA stress tests due to be held in 213 However, challenges remain within the Irish economy Economic growth is expected to remain modest in 212, at circa.5% The benefits of continued competitiveness gains may be limited by relatively low trading partner growth Domestic demand to continue to decline This Government is focused on creating jobs and restoring Ireland s economic sovereignty; the successful implementation of the Programme as well as endorsing the upcoming stability referendum will put us on this path. Joint statement - Michael Noonan, Minister for Finance & Brendan Howlin, Minister for Public Expenditure and Reform 26 April 212 Ireland s Programme implementation continues to be strong. Fiscal targets for 211 were met with a healthy margin and the consolidation remained on track in the first quarter of 212. Statement by the European Commission, the ECB & IMF on the review mission to Ireland 26 April 212 15
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