GROWTH FORECAST:LOWER THAN expected economic growth in the Republic this year is unlikely to prevent the State from meeting the terms of the €84 billion bailout plan, according to one of the International Monetary Fund's directors.
The IMF, which along with the EU and European Central Bank (ECB) agreed the bailout deal with the Government last year, this week cut its 2011 growth forecasts for the Republic to 0.5 per cent from 0.9 per cent.
The fund’s deputy director, Ajai Chopra, said that this would make no difference to the bailout plan. Under the deal’s terms, the State has agreed to limit its budget deficit – the difference between spending and income – to 10.5 per cent of gross domestic product (GDP), that is the total wealth produced by the economy, this year.
Mr Chopra said it was more important to focus on medium-term growth.
He stressed that the Republic needs to create large numbers of jobs to get its economy back on track.
He was speaking at a press conference given by the bailout’s three backers in Dublin yesterday. The IMF, EU and ECB carried out their first quarterly review of the Government’s economic programme this week.
The reviews are part of the deal and are a means of ensuring that the Republic is meeting the conditions set down in the agreement last year.
In a statement, the three bodies said that targets set for the end of December and the end of March had been met by a comfortable margin.
“The budget deficit is projected at about 10.5 per cent of GDP in 2011, and the authorities reaffirmed their strong commitment to the fiscal consolidation agreed in the EU-IMF-supported programme, as well as to a deficit of 3 per cent of GDP in 2015,” it said.
Representatives of the three organisations stressed several times that the Government had to move ahead with reforming “sheltered sectors” of the economy such as the legal and medical professions.
Under the terms of the agreement, the Government must establish an independent regulator for these professions, end restrictions to entry and compel them to implement systems that make their fees more transparent.
The ECB’s representative, Istvan Szekeley, said that the aim of such measures would be to “make the consumer king” and lower fees by introducing greater competition, which would in turn give people greater spending power.
Asked if the three organisations favoured cutting public service pay, Mr Szekeley said that this was a matter for the Government to deal with in its spending review.
The bailout consists of a €45 billion loan from EU member states, a €22.5 billion loan from the IMF and a €17.5 billion contribution from the Republic’s National Pension Reserve Fund, which was originally intended to pay for public service and welfare pensions.
The money is being distributed in stages.
Following this week’s review, the State will receive €4.5 billion from the bailout fund.
