Post-bailout inspectors warn of risks to growing economy

EU team cites Brexit, tax and trade as four-day mission to Dublin concludes

European Commission officials said signs of overheating could become more apparent  in the Irish economy going forward”. Photograph: Aidan Crawley

European Commission officials said signs of overheating could become more apparent in the Irish economy going forward”. Photograph: Aidan Crawley

 

Significant risks continue to overshadow the Irish economic outlook, European Commission officials have said following their latest post-bailout visit to Dublin.

Concerns relate primarily to outside influences on the economy – particularly the still uncertain nature of UK’s departure from the European Union “as well as changes to the international taxation and trade environment”.

But they also pointed out that “signs of overheating could become more apparent going forward”.

A team from the commission, together with European Central Bank staff, left Dublin on Friday after a four-day visit – the 10th since Ireland exited the bailout. The team included staff from the European Stability Mechanism.

Efforts to reduce legacy non-performing loans “in a decisive manner remain welcome”, the commission said in a statement upon the team’s departure. It said problem loans were declining “although long-term arrears remain a concern”.

On the broader economy, the team said Ireland’s public finances had further improved, underpinned by increasing corporate tax revenue. However, the bugbear of consistent slippages in healthcare budgets drew comment.

It noted the ongoing housing shortage despite the recent increase in supply and said it would be some time before recently announced initiatives fed through to address the problem.

While the noted that the Government plans a broadly balanced budget for 2019, the EU officials said risks remained, not least with the highly volatile and currently very favourable corporation tax receipts. It suggested the Government should take advantage of the growing economy to broaden the tax base and strengthen the proposed rainy-day fund.

Officials expressed ongoing concerns about a draft Bill allowing the Central Bank to cap interest rates on variable-rate mortgages. “If enacted,” they said, “[it] could have negative implications for the transmission of monetary policy, financial stability and bank competition.”