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IMF Urges Ireland To Strengthen Fiscal Buffers

The International Monetary Fund urged Ireland to strengthen its fiscal buffers and continue preparing Brexit.

Concluding the Article IV consultation, the Executive Board of IMF on Monday said although Ireland's outlook remains favorable, there are challenges from domestic capacity constraints and external risks namely a no deal Brexit, escalation of global protectionism, and adapting to ongoing international tax changes.

The board cautioned that Ireland is 'uniquely vulnerable' to a no-deal Brexit. If this risk were to materialize, then the government should allow automatic fiscal stabilizers operate freely and provide targeted support to hard-hit sectors.

Depending on the impact of Brexit in the broader economy, a fiscal stimulus may be called for, the board noted. The countercyclical capital buffer could be released in case of a sharp credit contraction.

Further, IMF underscored the importance of addressing key structural bottlenecks to growth.

Ireland's economic growth is forecast to slow to 4.1 percent in 2019 as one-off factors driving multinational sector-led net exports dissipate. GDP growth is seen at 3.4 percent next year and 3.1 percent in 2021.

Headline inflation is expected to reach 2 percent over the medium term. Public finances are estimated to improve further.

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