IMF Suggests Reduced Budget 2024 Package for Ireland Amid High Inflation

The International Monetary Fund (IMF) has recommended that the Irish Government contemplate a more focused €14 billion Budget 2024 package aimed at protecting vulnerable populations and alleviating further inflation. This advice comes in response to ongoing supply-side constraints and a notable inflation rate of 5.5%.

The IMF has also suggested improvements in the efficiency of public investment and the simplification of judicial reviews to help diminish project uncertainties. Additionally, it urged the Government to bolster its Housing for All strategy by incorporating measures that target affordability, land use, and construction productivity, along with more streamlined approval processes.

Despite a robust labor market, diminishing external demand, and surplus household savings, the IMF anticipates a slowdown in Ireland’s economic growth from its current elevated level. The GDP growth is estimated to be 1.2% this year, rising to 2.6% in 2024.

Concerns have been raised by the IMF regarding Ireland’s advancement towards its 2030 emission reduction goals. To enhance this progress, the organization has recommended the introduction of carbon tax legislation.

Regarding inflation, the IMF does not foresee Irish consumer price increases returning to the European Central Bank’s (ECB) annual target of 2% until 2025. As inflation begins to decline, the IMF advocates for the gradual removal of one-time cost of living measures while real income recovery continues to bolster private consumption.

After an official visit, the IMF praised Ireland’s ability to handle shocks such as the Covid-19 pandemic and inflation, projecting moderate GDP growth of 1.5% for 2023 and 2.7% for 2024, a decrease from the remarkable 12% growth seen in 2021-22. The Modified Gross National Income is expected to grow by 2.5% in the 2023-24 period, with inflation averaging 5.3% in 2023 and 3.2% in 2024 before reaching the ECB’s long-term target of 2% by late 2025.

The IMF highlighted potential risks arising from tighter financial conditions, reduced external demand, soaring commodity prices, conflicts in Ukraine and Gaza, shifts in the international tax landscape, and possible cutbacks by multinational corporations. It urged the government to practice fiscal prudence to foster disinflation and prepare for challenges such as an aging population, climate change, and financial stability concerns.

This article was generated with the support of AI and reviewed by an editor.