Updated stability programme of Ireland, 2005-2008 - Main contents

EN

Official Journal of the European Union

C 82/19

On 14 March 2006 the Council examined the updated stability programme of Ireland, which covers the period 2005 to 2008.

Ireland has experienced an impressively rapid increase in real GDP per capita and employment levels over the last decade. In recent years the Irish economy has continued to grow at just below 5 % p.a., the highest rate in the euro area, while employment is on the rise and inflation has converged rapidly towards the euro-area average. As regards budgetary developments, the fiscal position has been broadly sound, with the general government balance recording surpluses in most years over the last decade and the debt ratio falling significantly (to under 30 % of GDP in 2005).

In its opinion of 17 February 2005, the Council endorsed the budgetary strategy presented in the previous update of the stability programme, covering the period 2004-2007. As regards budgetary implementation in 2005, the previous update targeted a general government deficit of 0,8 % of GDP, while the current update estimates a 0,3 % surplus despite a downward revision of growth. The main reason for the far better outcome in 2005 than initially targeted is to be found on the revenue side.

The programme broadly follows the model structure and data provision requirements for stability and convergence programmes specified in the new code of conduct (2).

The macroeconomic scenario underlying the programme envisages that real GDP growth will remain in a narrow range of between 4,5 % and 5 % over the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. While the current picture suggests a broadly healthy condition of the economy with robust growth to continue, there are some downside risks to the macroeconomic outlook in the medium term. In particular, these are related to global economic prospects, given the openness of the economy; and domestically, to any sharp downturn from the extended residential construction boom. The programme's projection for HICP inflation may be on the low side.

The update confirms the commitment of the Irish government to maintaining sound public finances. Starting from a 0,25 % of GDP surplus in 2005, the budgetary strategy envisages a general government deficit of 0,6 % in 2006 and 0,8 % of GDP in the final two years of the programme. The primary surplus falls from 1,5 % of GDP in 2005 to 0,5 % in the years 2006-2008. The revenue-to-GDP ratio is on a declining trend, while the expenditure ratio initially increases and falls back to the 2005 level only towards the end of the programme period. The investment-to-GDP ratio is projected to increase by 0,5 percentage point of GDP over the period 2005 to 2008. Apart from the better-than-expected 2005 outturn, the new update broadly confirms the budgetary targets of the previous programme.

Following the fiscal expansion planned for 2006, the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to stabilise at...