IRELAND’S NEW DEAL on its EU/IMF bailout could mean it will return to normal lending markets by 2014, according to research from the Economic and Social Research Institute (ESRI).
The economic think tank believes that the country’s debt-to-gross domestic product (GDP) ratio will be significantly lower than previously estimated and that the budget deficit will hit a target of being below 3 per cent of GDP in three years time.
In its 31-page analysis of the debt crisis in Ireland, the ESRI believes the cut in the interest Ireland pays on its bailout will help it return to normal funding mechanisms a year earlier than previously estimated.
In July, Ireland received a cut in the interest it pays on the European portion of its €67.5 billion bailout loans to around 4 per cent from a previous level of 5.8 per cent.
The lower than expected bill for recapitalisation of the banking sector is also a contributory factor to the ESRI’s more positive outlook.
The current deal requires Ireland to impose austerity measures that will cut deficits to under 3 per cent of GDP by 2015 but this could happen a year earlier with the ESRI saying the government will “almost” reach the target in 2014.
However, three more austerity laden budgets lie ahead.
Last week, the ESRI in its economic growth forecasts called for an extra €400 million to be cut from the budget which will be delivered in December.
Under the EU/IMF deal, Ireland is required to cut at least €3.6 million through spending cuts and savings in the next budget but the ESRI said it should be €4 billion.
The ESRI also predicts that the country’s gross debt will peak in 2012 at between 110 per cent and 115 per cent of GDP before falling back to between 105 per cent and 110 per cent by 2015.
While, the country’s net debt will peak at between 100 per cent and 105 per cent of GDP in 2013 and fall to 98 per cent of GDP by 2015, it added.
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