an oifig buiséid pharlaiminteach parliamentary budget office · box 5: real effective exchange...

An Oifig Buiséid Pharlaiminteach Parliamentary Budget Office

European Semester 2018 – and how it interacts with Ireland’s Budget 2019

Briefing Paper 1 of 2018

http://www.oireachtas.ie

Séanadh

Is í an Oifig Buiséid Pharlaiminteach (OBP) a dullmhaigh an doiciméad seo mar áis do Chomhaltaí Thithe an Oireachtais ina gcuid dualgas parlaiminteach. Ní bheartaítear é a bheith uileghabhálach ná críochnúil. Féadfaidh an OBP aon fhaisnéis atá ann a bhaint as nó a leasú aon tráth gan fógra roimh ré. Níl an OBP freagrach as aon tagairtí daon fhaisnéis atá á cothabháil ag tríú páirtithe nó naisc chuig aon fhaisnéis den sórt sin ná as ábhar aon fhaisnéise den sórt sin. Tá baill foirne an OBP ar fáil chun ábhar na bpáipéar seo a phlé le Comhaltaí agus lena gcuid foirne ach ní féidir leo dul i mbun plé leis an mórphobal nó le heagraíochtaí seachtracha.

Disclaimer

This document has been prepared by the Parliamentary Budget Office (PBO) for use by the Members of the Houses of the Oireachtas to aid them in their parliamentary duties. It is not intended to be either comprehensive or definitive. The PBO may remove, vary or amend any information contained therein at any time without prior notice. The PBO accepts no responsibility for any references or links to or the content of any information maintained by third parties. Staff of the PBO are available to discuss the contents of these papers with Members and their staff, but cannot enter into discussions with members of the general public or external organisations.

Relevance of the European Semester to Ireland – Budget 2019 3

Executive Summary 4

Commission Opinion on Ireland’s Budget 6

Official Commission Opinion 7

Staff Working Document 7

Macroeconomic Developments 7

Fiscal Developments 8

Implementation of Fiscal Structural Reforms 12

Conclusions 12

Alert Mechanism Report 13

Summary of Ireland’s Scoreboard in the Alert Mechanism Report 13

Net International Investment Position (NIIP) 16

Real Effective Exchange Rate (REER) 17

House Price Index 21

Private Sector and General Government Debt 22

Annual Growth Survey 25

Context of the 2018 Annual Growth Survey 25

Boosting investment to support the recovery and to increase long-term growth 25

Structural reforms for inclusive growth, upward convergence and competitiveness 26

Responsible fiscal policies to support sustainability and convergence 26

The Next Steps 26

27Appendix 1 – Macroeconomic Indicator Scoreboard for Ireland 2007-2016

Publications 28

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Table of Contents

Tables of Figures

Boxes

Box 1: Draft Budgetary Plan Procedure 6

Box 2: Calculation of the Structural Balance 8

Box 3: The Alert Mechanism Report 13

Box 4: Net International Investment Position 16

Box 5: Real Effective Exchange Rates 17

Figures

Figure 1: Number of Breaches in the 2018 Alert Mechanism Report by indicator and country 15

Figure 2: International Investment Position 16

Figure 3: Ireland’s REER 2005-2016, Index: 2010 18

Figure 4: Average Comparative Private Consumption Levels as a proportion of 2010 levels 19

Figure 5: Ireland and the European Union’s Real Effective Exchange Rates (2007=100%) 20

Figure 6: HPI Annual Percentage Change 22

Figure 7: NIIP, Public and Private Sector Debt 23

Figure 8: General Government Debt 2016-2021 24

Tables

Table 1: Euro area Stability and Growth Pact (SGP) Compliance 7

Table 2: Budget 2018 and European Commission macroeconomic forecasts for 2017 and 2018 8

Table 3: Structural Effort required and forecasted 9

Table 4: Reduction of Government Debt to the Debt Criterion 10

Table 5: Stability and Growth Pact Preventative Arm Compliance Table 10

Table 6: Ireland’s Alert Mechanism Scoreboard Breaches 13

Table 7: Net International Investment Position Breakdown 16

Table 8: Ireland Export Commodities and Prices 21

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9European Semester 2018 – and how it interacts with Ireland’s Budget 2019

2

The European Semester is the annual budgetary cycle of EU economic and fiscal policy co-ordination. It involves

all the principal European institutions:

n European Council;

n Council of Ministers;

n European Commission; and

n European Parliament.

It also involves the governments of the EU Member States – Ireland participated in the Semester process for the first

time in 2014. Ireland did not participate in the process until 2014 due to being in the EU/IMF Financial Assistance

Programme, which was completed in December 2013. Ireland subsequently exited the Excessive Deficit Procedure,

or Corrective Arm of the Stability and Growth Pact, in May 2016.

The European Semester has an important bearing on the Irish budgetary process. The European Semester process

informs policy priorities for the coming year, and requires Ireland to present its draft Budget to the European

Commission for comment on or before 15 October each year.

The European Semester begins in November of the preceding year. The Commission compiles its broad budgetary,

economic and social policy priorities for the EU in the Annual Growth Survey (AGS), which Member States are invited

to follow.

The Alert Mechanism Report (AMR) accompanies the publication of the AGS and evaluates Member State economic

policies against internal and external indicators under various themes. The aim is to identify excessive imbalances or

risks in EU economies. If excessive imbalances are detected, the Commission may decide to carry out more in-depth

analysis in respect of specific Member States. In-depth reviews are included with the Country Reports published in

the following February. Other documents may accompany the AGS and the AMR and may differ from year to year.

The Country Reports are published in February, and the conclusions of the reports are used as the basis for negotiating

the Country-specific Recommendations (CSR) that will be published in May. The Member State is expected to incorporate

these Recommendations into its policy priorities for the coming Budget.

For a detailed explanation of the European Semester process, please see the Oireachtas Library & Research Service

Note, EU Economy and Fiscal Policy Coordination (European Semester and the Two-Pack/Six-Pack measures) of 24

September 2015.

The Parliamentary Budget Office has published an infographic (1 of 2018) in advance of this Briefing paper. The

infographic provides a calendar view of the key budgetary documents that will be published in 2018. This includes each

of the European Semester documents, starting with the country assessments in February. In combination with this

briefing paper, the Parliamentary Budget Office has also published a Note, giving an overview of the relevance of the

European Semester to the budgetary process in Ireland.

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Relevance of the European Semester to Ireland – Budget 2019

http://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/LRS_Note_European_Semester_140555.pdfhttp://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/LRS_Note_European_Semester_140555.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2018/2018-01-10_budgetary-cycle-2018_en.pdf

This Briefing paper addresses the Autumn 2017 Package that was published on 22 November 2017, which

contained the:

n Annual Growth Survey (AGS) 2018;

n Alert Mechanism Report (AMR) 2018;

n Draft Joint Employment Report;

l Employment Guidelines

n Recommendation for the Euro Area; and

n Communication on the Draft Budgetary Plans of the euro area.

In addition to these Union-wide reports, the Commission also published an Opinion on each Member State’s Draft

Budgetary Plan.

This PBO Briefing Paper will focus on the:

1. Commission Opinion on Ireland’s Draft Budgetary Plan 2018;

2. Alert Mechanism Report (AMR) 2018 in respect of Ireland; and,

3. Annual Growth Survey (AGS) 2018 in respect of Ireland.

The Commission has concluded in respect of Ireland that:

n Ireland’s Draft Budgetary Plan 2018 is broadly compliant with the requirements of the Stability and Growth

Pact (SGP);

n Ireland is projected to achieve the Medium Term Objective (MTO) of a structural deficit of -0.5% of GDP

in 2018;

n There is a risk of deviation from the Expenditure Benchmark pillar of the Stability and Growth Pact; and,

n The Irish government should, “stand ready to take further measures within the national budgetary process

to ensure that the 2018 budget will be compliant with the Stability and Growth Pact”.1

1 Annexes to the Communication from the Commission 2018 Draft Budgetary Plans: Overall Assessment, p.3.

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Executive Summary

HYPERLINK "https://ec.europa.eu/info/sites/info/files/economy-finance/com-2017-800-annex-en.pdf

In the Alert Mechanism Report (AMR), the Commission has identified what it views as a number of macro-

economic risks in respect of Ireland:

n A large negative Net International Investment Position (NIIP), representing that both the public and

private sectors are highly indebted to foreign creditors;

n Decreasing Real Effective Exchange Rate (REER) with our trading partners, implying that the cost

of goods and services in Ireland is decreasing relative to our key trading partners;

l This indicator is considered a sign of low domestic demand by the European Commission,

but statistics show that Ireland’s domestic demand is growing.

n Increasing House Prices; and

n High levels of Public and Private Debt.

At a Union-wide level, the Commission’s Annual Growth Survey is heavily influenced by the Five Presidents’ report

and the developments being made towards reforming the Economic and Monetary Union (EMU).

The priorities of the Annual Growth Survey fall into three areas:

1. Boosting Investment

The Commission is announcing the injection of a further €10 billion into the Investment Plan for Europe, a vehicle

for combined public-private investment in European industries, mostly through the European Fund for Strategic

Investments (or EFSI). In parallel, €2.5 billion in capital is being invested in the European Investment Bank.

2. Structural Reform

The European Commission are moving forward with an amendment to the regulations underlying the European

Structural and Investment Funds.2 This amendment will allow Member States to use the 6% Performance Reserve

to fund Structural Reforms. This does not comprise an increase to the fund, just the ability of Member States to

re-allocate funding to Structural Reforms.

3. Fiscal Responsibility

In the context of Fiscal Responsibility, the European Commission reiterates its priorities for VAT reform and

the Common Consolidated Corporate Tax Base. The necessity to reduce Public Debt levels is reiterated by the

European Commission, but the Annual Growth Survey also proposes that Member States should explore using

debt at the current low interest rates to finance investment.

2 Regulation (EU) 1303/2013 (the ‘Common Provisions Regulation’).

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5

https://ec.europa.eu/commission/sites/beta-political/files/5-presidents-report_en.pdfhttps://ec.europa.eu/commission/priorities/jobs-growth-and-investment/investment-plan-europe-juncker-plan_en

Box 1: DRAFT BUDGETARY PLAN PROCEDURE

Each year, as part of the European Semester process, the European Commission gives an opinion on Ireland’s

Draft Budgetary Plan. This comprises of two documents:

1. The Official Opinion

2. A Staff Working Document

The Draft Budgetary Plan is Ireland’s Annual Budget, modified to fit a harmonised European template. The Irish

Fiscal Advisory Council’s endorsement of the Budget’s macroeconomic forecast is required as part of this

procedure.

In its Official Opinion, the Commission provides an overall conclusion as to whether or not Ireland is compliant

with its obligations under the Stability and Growth Pact. It also provides an opinion as to whether or not Ireland

is satisfactorily pursuing the objectives identified in relation to the Country Specific Recommendations.

In the Staff Working Document, the Commission secretariat provides details about the macroeconomic and fiscal

factors that influence the Commission’s opinion.

Legal Basis: The Commission produces this opinion under the terms of Regulation (EU) 473/2013, which sets

out common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of any

excessive deficit of the Member States in the euro area. Within these rules, the Commission is required to produce

its opinion by 30 November in most cases.

In the event of any serious non-compliance, the Commission will consult with the national government within one

week of the submission of the budget, and adopt its opinion within two weeks of the submission. The Member

State would then have to re-draft its budgetary plan within three weeks of the Commission adopting its opinion,

giving a total turnaround of five weeks.

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Commission Opinion on Ireland’s Budget

Official Commission Opinion

The Official Commission Opinion is a short, high-level document that summarises the Commission’s overall opinion

on Ireland’s budget. The detailed information is provided in the accompanying Working Document.

In summary, the Commission has ruled Ireland’s Budget to be “broadly compliant” with the requirements of the Stability

and Growth Pact and notes that the 2018 structural effort3 “is above the recommended … effort”. However, it also stated

that, “over 2017 and 2018 together, the expenditure benchmark pillar suggests that Ireland is at significant risk of some

deviation from the requirements”.4

Ireland’s position in respect of which the Commission has adopted Opinions under the Stability and Growth Pact is set

out in Table 1.

Table 1: Euro area Stability and Growth Pact (SGP) Compliance

Compliant Broadly Compliant Risk of non-compliance SGP Corrective arm

Germany, Lithuania, Latvia, Luxembourg, Finland and

the Netherlands

Estonia, Ireland, Cyprus, Malta, and Slovakia

Belgium, Italy, Austria, Portugal, Slovenia

France (at risk of non-compliance) and Spain

(broadly compliant)

Source: 2018 Alert Mechanism Report.

In its opinion, the Commission also refers to the Country Specific Recommendations, saying that the measures to limit

the scope of tax expenditures and broaden the tax base were mixed, and a more detailed discussion of the Country

Specific Recommendations would be carried out as part of the Country Report (due for publication in February 2018).

Staff Working Document

Macroeconomic Developments

The key difference between the macroeconomic forecasts in Budget 2018 and those in the Commission’s working

document relates to assumptions about investments in intangible assets. Budget 2018 assumes that investments in

intangibles (especially overseas Intellectual Property) will decrease in the second half of 2017. This has an impact on

both domestic demand and imports, with Budget 2018 having less optimistic growth expectations for both because of

this drop in investment.

In other areas, the expectations for macroeconomic developments are broadly aligned.

3 Structural Effort refers to the effort made by the national government to reduce the deficit in respect of its structural balance (see Box 2).

4 Commission Opinion of 22.11.2017 on the Draft Budgetary Plan of Ireland, p. 3.

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Table 2: Budget 2018 and European Commission macroeconomic forecasts for 2017 and 2018

Macro-economic Indicator: 2017 2018

Budget 2018 Commission Budget 2018 Commission

Real GDP (% change) 4.3 4.8 3.5 3.9

Gross Fixed Capital Formation (% change) -3.7 3.5 6.1 5.6

Exports (% change) 3.5 3.9 4.8 4.5

Imports (% change) -1.0 2.2 5.5 4.7

Source: European Commission Staff Working Document.

Fiscal Developments

Deficit Developments

Budget 2018, as recalculated by the European Commission, forecasts a structural balance for 2017 and 2018 of -1.1%

and -0.6% respectively. The Commission’s Autumn Forecast 2017 estimates structural balances of -1.3% and -0.5% for

the same years.

Box 2: CALCULATION OF THE STRUCTURAL BALANCE

The Structural Balance is the general government balance of revenue and expenditure, adjusted for cyclical

impacts and net of any one-off or temporary measures. Different international bodies have different methods for

calculating the cyclically adjusted balance. For the purposes of the Stability and Growth Pact, the Commission’s

methodology is used, which corrects the budget balance to GDP ratio using two inputs:

1. The difference between the potential and actual output in the economy.

2. How the current position of the economy in the business cycle affects public revenue and expenditure.

A detailed description of the calculation of the structural balance is provided in “European Economy:

The cyclically adjusted budget balance used in the EU fiscal framework: an update”.

Risks to the structural balance of government finances partly revolve around the volatile and pro-cyclical nature of the

majority of revenue raising measures in Budget 2018. The Commission’s Autumn Forecast indicates that Ireland will

reach its Medium Term Objective of a structural balance of -0.5% of GDP in 2018. To compare this to national estimates,

the Commission uses a ‘commonly agreed methodology’5 to recalculate the structural balance based on the underlying

figures in Budget 2018. This recalculated structural balance for 2018 forecasts a structural balance of -0.6% of GDP in

2018. This is beyond the threshold, albeit marginally.

5 The commonly agreed methodology is detailed in European Economy: The cyclically adjusted budget balance used in the EU fiscal framework: an update.

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8

http://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp478_en.pdfhttp://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp478_en.pdfhttp://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp478_en.pdfhttp://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp478_en.pdf

Measures in the Budget

The Commission notes that changes to income tax will amount to reduced revenue of 0.1% of GDP, and new spending

will account for another 0.4%. These expenditures (both tax and direct) are partially financed by revenue raising measures.

The combined revenue raising measures in Budget 2018 will produce an additional 0.3% of GDP, providing a net impact

to the budget balance of -0.2% of GDP. However, concerns have been raised by the Irish Fiscal Advisory Council that the

increased revenues expected from commercial stamp duty and capital allowances for intangible assets are pro-cyclical

in nature and may not be sustainable over a longer timeframe.6 As the PBO stated in its Post-Budget Commentary, “the

increase in the Stamp Duty may change behaviour and lead to a fall in transactions in the future” and that “this forms

part of the basis of the economic rationale for the change.”7 Other taxes have a similar behavioural intention (e.g. Excise

Duties on Alcohol and Cigarettes), with the stated intention of reducing the behaviour that is taxed over time. As such,

if these taxes achieve their stated objectives, the revenue would be expected to decrease over time.

Compliance with the Stability and Growth Pact

The Debt Criterion

The Commission observes that the debt-to-GDP ratio (the key indicator of the debt rule for fiscal compliance purposes)

will continue to decrease, reaching 69% in 2018. They note that the improvement against projections is a result of higher

nominal GDP in 2016 than expected, and a lower absolute level of debt.

Ireland is subject to a three-year transition period from 2015, following the exit of the excessive deficit procedure.

During this period, Ireland is expected to adjust its structural balance, i.e. decreasing the reliance on debt to finance

expenditure.

Ireland is comfortably within the required adjustment for both 2017 and 2018:

Table 3: Structural Effort required and forecasted

Year Required Adjustment Forecast Structural Adjustment8

2017 -0.4% of GDP 0.6% of GDP

2018 -2.0% of GDP 0.8% of GDP

Source: European Commission Staff Working Document.

Ireland is also expected to comply with the debt reduction benchmark at the end of the transition period (starting 2019).

Until then, Ireland is expected to show sufficient change in the structural balance to indicate the ability to meet the debt

reduction benchmark from 2019. However, the Commission has noted that there is insufficient information in the Draft

Budgetary Plan to assess Ireland’s compliance with this transitional arrangement for the debt criterion.

The Department of Finance does provide details about projected public debt up to 2021, and long-term strategies for

the national debt in the Annual Budget and the first annual report on public debt developments, published June 2017.

6 Fiscal Assessment: November 2017, Irish Fiscal Advisory Council.

7 Post-Budget Commentary, PBO, p. 15.

8 Forecast for adjustment is based on Commission calculation of a Structural Balance of -0.5% of GDP in 2018.

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Table 4: Reduction of Government Debt to the Debt Criterion

Indicator 2016 2017 2018 2019 2020 2021

General Government Debt 72.8% 70.1% 69.0% 67.1% 63.5% 61.2%

Change in General Government Debt Ratio 4.1% 2.7% 1.1% 1.9% 3.6% 2.3%

Debt Adjustment Criterion9 0.8% 0.6% 0.5% 0.5% 0.4% 0.2%

Source: Budget 2018, Department of Finance, PBO calculations.9

Regarding compliance with the Medium Term Objective, the situation is more complex. Table 5 over details the

performance in 2016, and forecasts for 2017 and 2018 under each of the pillars of the Stability and Growth Pact.

Table 5: Stability and Growth Pact Preventative Arm Compliance Table10

All figures in % of GDP 2016 2017 2018

Initial Position

Medium Term Objective 0 -0.5 -0.5

Structural Balance -1.9 -1.3 -0.5

2016 2017 2018

COM DBP COM DBP COM

Structural Balance Pillar

Minimum Adjustment Required 0.6 0.6 0.6

Real or Forecasted Adjustment 0.3 0.8 0.6 0.5 0.8

Deviation from the minimum required -0.3 0.2 0.0 -0.1 0.2

Average deviation over two years N/A 0.0 -0.1 0.1 0.1

Expenditure Benchmark Pillar

10 year reference rate of GDP growth 0.1 1.2 2.4

Deviation over one year, adjusted for one offs11 -0.5 0.2 -0.6 0.1 -0.2

Average deviation over two years, adjusted for one offs N/A -0.3 -0.6 -0.1 -0.4

Key:

Significant Deviation Some Deviation Compliant Structural Effort in 2018

Source: Commission Staff Working Document.

9 The Stability and Growth Pact requires that Member States adjust their Debt Ratio by 1/20th of the difference between the current Debt Ratio and the Debt Criterion (60% of GDP).

10 COM = Commission 2017 Autumn Forecast; DBP = Draft Budgetary Plan 2018 (essentially Budget 2018).

11 Deviation of the growth rate of public expenditure, net of one off, temporary or legally mandated revenue raising measures. A negative sign denotes expenditure growth in excess of reference rate.

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Structural Balance Pillar

Under this pillar, Ireland must adjust its structural balance by 0.6% of GDP per year, until it reaches the Medium Term

Objective (MTO) of -0.5% of GDP.

Ireland, under this pillar, is largely compliant over a one-year and a two-year timeframe for both 2017 and 2018. This

means that Ireland is reducing its budget deficit to the MTO as quickly as is required by the Stability and Growth Pact.

In 2018, the Commission forecast of 0.8% is the structural effort for that year (see the highlighted cells in Table 5 above).

This is the change in the structural balance from one year to the next. The Commission has noted that the structural

effort appears to be beyond that required for 2018, as an effort of 0.6% would bring the structural balance to the MTO.

However, the Department of Finance’s own figures (as re-calculated by the Commission) show that the structural effort

is estimated to be 0.5%. This will bring the structural balance to 0.6%, above the MTO. The discrepancy between these

two figures is due to slightly different macroeconomic forecasts for 2018 (see Table 2 of this paper).

Which of these two forecasts for 2018 proves to be closer to the actual outcome may have implications for Budget 2019.

If the Commission re-calculation of the Department of Finance data is borne out, the MTO will not be reached in 2018.

All else being equal, this would require a further structural effort of 0.1% of GDP to meet the MTO in Budget 2019.

Expenditure Benchmark Pillar

The Expenditure Benchmark Pillar records the rate of change in government expenditure, and compares it to a 10-year

reference rate of GDP growth. If a country has not reached the MTO, expenditure growth must be far enough below this

reference rate to allow the structural deficit to adjust towards the structural balance.

In Ireland’s case, the Commission’s assessment is that the rate of expenditure growth has exceeded this reference rate

by 0.6% in 2017 and 0.2% in 2018. In Table 5 above, this is shown in the cells highlighted red and amber respectively.

This means that Ireland is deviating significantly in 2017 and to some degree in 2018.

A key issue for calculation of the Structural Balance is the classification of Discretionary Revenue Measures. Any

revenue raising measures that are considered one-offs are not included in the Expenditure Benchmark calculation

by the European Commission, leading to divergence between the Commission and Department of Finance estimates

of the Expenditure Benchmark.12

An example of this is the additional revenue generated by not indexing income tax bands and rates. This is treated as a

policy decision and is therefore included as a discretionary revenue-raising measure by the Department of Finance but

not by the Commission. The revenue raised by non-indexation of the income tax system is estimated to be €550 million

on a full year basis.13 The Commission does note that when this additional revenue is included that the average

deviation is below but close to the applicable significant deviation threshold of 0.25% of GDP.14

The Commission has noted that the expenditure benchmark may provide a more appropriate yardstick for fiscal

policy in Ireland, due to, “the very open nature of the Irish economy, and the volatility of potential GDP estimates.”15

The Commission means by this that there is likely to be distortion in the calculation of the structural balance, making

it a less meaningful measure in the Irish case.

12 Fiscal Assessment Report, November 2017, Irish Fiscal Advisory Council, p. 103.

13 Commission Staff Working Document, p. 14.

14 Ibid.

15 Commission Staff Working Document, p. 11.

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Implementation of Fiscal Structural Reforms

The European Council Recommendations of July 2017 requested that Ireland:

“Pursue a substantial fiscal effort in 2018 in line with the requirements of the preventive arm of the Stability

and Growth Pact. Use any windfall gains arising from the strong economic and financial conditions, including

proceeds from asset sales, to accelerate the reduction of the general government debt ratio. Limit the scope

and the number of tax expenditures and broaden the tax base.”16

This fiscal recommendation can be split into two distinct areas:

1. Use of any windfall gains to repay public debt;

2. Limiting the scope of tax expenditures and broadening the tax base.

Under the first area, Ireland has made substantial payments of outstanding debt from the proceeds of the sale of 28%

of the public share in Allied Irish Bank (AIB) in July 2017, and a further €500 million in bonds cancelled by the NTMA.17

The Commission notes this, and comments that these repayments will aid Ireland in reaching the Medium Term Objective

as they result in reductions in interest payments due.

However, the Commission is more critical about progress made on limiting tax expenditures and broadening the tax

base. While the reduction of the cap on the amount of capital allowances for intangibles and the introduction of the

‘sugar tax’ represent a broadening of the tax base, other tax relief measures that range from reductions to Income Tax,

USC, refunds on residential stamp duty and other personal tax relief measures would serve to have the opposite effect.

The Commission is especially concerned that Budget 2018 fails to reduce revenue volatility and that the increase to

stamp duty on commercial property and the reduction of the capital allowance on intangible assets would increase the

share of volatile and pro-cyclical revenue within the tax base. The Commission warns against using increased revenue

from these sources to fund permanent current expenditure, as this would not be sustainable during a market downturn.

This concern is shared by the Irish Fiscal Advisory Council, which advises, “permanent expenditure increases should be

funded by revenue-raising measures that can be considered sustainable over the long run.”18

Conclusions

The Commission’s overall opinion is that Ireland is making sufficient progress towards complying with the debt

requirements and structural balance pillar in 2017 and 2018. The Commission forecasts that Ireland will reach the

Medium Term Objective in 2018. However, under the expenditure pillar the Commission has raised concerns about the

possibility of significant deviation in 2017 and some deviation in 2018. The next goal for public finances will be to reach

the target debt-to-GDP ratio of 60%. Ireland is expected to reach this in 2021-2022.19 In the longer term, the government

has given two different targets. Firstly, a target ratio of 55% and, secondly, a new target of 45% will be set after “the

major capital projects have been completed”.20

16 Council Recommendation of 11 July 2017, p.5.

17 In total, the National Treasury Management Agency cancelled €4bn in bonds during 2017. The NTMA has cancelled €9.5bn of bonds from 2014-2017, with €15.5bn still outstanding. See their press release for more detail.

18 Fiscal Assessment Report, November 2017, Irish Fiscal Advisory Council, p. 8.

19 Annual report on public debt developments, Department of Finance, p. 19.

20 Budget 2018: Macroeconomic and Fiscal Outlook, Department of Finance, p. 28.

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http://www.ntma.ie/news/2017/12/13/ntma-cancels-e500-million-of-the-irish-floating-rate-treasury-bond-2047/

Box 3: THE ALERT MECHANISM REPORT

The Alert Mechanism Report provides a summary of the position of Member States across 14 Macroeconomic

Indicators. Each of these indicators is quantified for each country and reflected in a scoreboard, where each

indicator is compared to an agreed threshold. In the Alert Mechanism Report, the Commission decides whether

to carry out an in-depth review of each Member State.

Imbalances identified in the Alert Mechanism Report have the potential to impact upon budgetary priorities

for the year after the following year, i.e. n + 2.21

The Alert Mechanism Report is published in November, and the Country Specific Recommendations are adopted

in July of the following year, i.e. n + 1. As a result, they should be included in deliberations about the budget for

the year after the Country Specific Recommendations are adopted (n +2). Therefore, the AMR published in 2017

should have an impact on Budget 2019.

The Commission has decided to carry out an in-depth review of Ireland, to be published in February 2018.

Summary of Ireland’s Scoreboard in the Alert Mechanism Report

Ireland is in breach of the threshold in respect of the five macroeconomic indicators set out in the table below:22

Table 6: Ireland’s Alert Mechanism Scoreboard Breaches (see Appendix for full scoreboard)

Indicator NIIP23 Consolidated Private Sector

Debt

General Government Gross Debt

REER24 House Price Index

Measure % of GDP % of GDP % of GDP 3-year % change

1 year % change

Thresholds -35% 133% 60.00% ±5% 6%

Ireland -176.20% 278.10% 72.80% -6.60% 6.60%

Source: Alert Mechanism Report 2018, European Commission.

21 Where ‘n’ is the base year.

22 See Appendix 1 to this paper for the Macroeconomic Indicator Scoreboard for Ireland 2007-2017.

23 Net International Investment Position.

24 Real Effective Exchange Rate.

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Alert Mechanism Report

The other indicators, which Ireland has not breached in 2017’s Autumn Package, are:

n Current Account Balance;25

n Export Market Share;

n Nominal Labour Unit Cost;

n Private Sector Credit Flow;

n Unemployment Rate;

n Total Financial Sector Liabilities;

n Activity Rate;

n Long-term unemployment; and

n Youth unemployment.

In February 2017’s in-depth review, the Commission concluded that Ireland was experiencing macroeconomic

imbalances. In the Annual Growth Survey, the Commission expressed concerns relating to “vulnerabilities from large

stocks of public and private debt and net external liabilities, despite improvements in flow variables.”26 The Commission

also comments that in addition to this, Ireland is beyond the acceptable threshold for the indicators outlined in Table 6

above. The next section of this paper will discuss each of these five macroeconomic indicators.

For context, the rate of breach for each indicator across the Member States of the European Union is shown below in

Figure 1. The number of indicators each Member State is in breach of is also shown.

25 Ireland is currently at risk of breaching this indicator in future, scoring 5.5% of GDP, against a threshold of 6%.

26 Alert Mechanism Report 2018, p. 30.

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Figure 1: Number of Breaches in the 2018 Alert Mechanism Report by indicator and country27

0

2

4

6

8

10

12

14

16

Curr

ent A

ccou

nt

NII

P

REE

R

Expo

rt M

arke

t Sha

res

Uni

t Lab

our C

osts

Hou

se P

rice

s

Priv

ate

Cred

it F

low

Priv

ate

Deb

t

Gov

ernm

ent D

ebt

Une

mpl

oym

ent R

ate

Fina

ncia

l Sec

tor L

iabi

litie

s

Acti

vity

Rat

e

LT U

nem

ploy

men

t

Yout

h U

nem

ploy

men

t

Not Subject to an in-depth review in 2018

Subject to an in-depth review in 2018

0

1

2

3

4

5

6

7

8

AT BE

BG CY CZ

DE

DK EE EL

ES FI

FR HR

HU IE IT LT LV LU MT

NL PL PT RO SE SI

SK

UK

27 Indicators for which Ireland is in breach are highlighted in green.

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Net International Investment Position (NIIP)

Box 4: NET INTERNATIONAL INVESTMENT POSITION

The Central Statistic Office defines the International Investment Position as, “a point in time statistical statement

of the value and composition of the stock of an economy’s foreign financial assets, or the economy’s claims on the

rest of the world, and the value and composition of the stock of an economy’s financial liabilities (or obligations to

the rest of the world)”.28

The Net International Investment Position is a calculation based on this, which gives an impression of an

economy’s overall exposure to foreign creditors, in both the public and private sectors. According to the CSO, this

will also give “a measure of that portion of an economy’s net worth attributable to or derived from, its relationship

with the rest of the world.”29

Figure 2: International Investment Position

Non-Financial Companies

Other Financial Intermediaries

Monetary Financial Insatuaons

Monetary Authority

General Government

€0

€1000

€2000

€3000

€4000

€5000

€6000

Billions

Assets Liabilities

Table 7: Net International Investment Position Breakdown

Debt Holder € billions

General Government -128.1

Monetary Authority 5.9

Monetary Financial Institutions 21.2

Other Financial Intermediaries 63.7

Non-Financial Companies -454.5

Net Position -€491.7

Source: Central Statistics Office.

Source: Central Statistics Office.

28 Internal Investment Position: Background Notes, Central Statistics Office, p. 3.

29 Ibid.

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Ireland’s Net International Investment Position is detailed in Table 7. As this table illustrates, Ireland’s net exposure

is the result of imbalances in the General Government and Non-Financial Companies sectors.

This Net Position has not changed significantly since 2015, when it was -€542.2bn. The largest change to this indicator

in that period was an increase in the foreign assets held by Financial Intermediaries, who have grown from a position of

€36.3bn in Q4 2015 to €63.7bn in Q4 2016.

Similar to GDP, the private sector debt ratio has been heavily affected by large multinational corporations since 2014.30

Private sector debt peaked at 400.7% of GDP in 201531, and has since declined to 265.3%. Current figures do not provide

a breakdown of private sector debt into domestic and non-domestic debtors, so it is difficult to calculate the real

domestic risk associated with Ireland’s negative international investment position.

Real Effective Exchange Rate (REER)

Box 5: REAL EFFECTIVE EXCHANGE RATES

The Real Effective Exchange Rate (REER) is “an average of the bilateral RERs (Real Exchange Rates) between the

country and each of its trading partners, weighted by the respective trading shares of each partner.”32

The Macroeconomic Imbalance Procedure scoreboard tracks the change in this figure over three years with 42

trading partners, with a change of greater than 5% in either direction triggering a breach. A positive figure would

denote a reduction in relative competitiveness, and a negative figure signifies a drop in the value of the currency

compared to a country’s main trading partners.

There will also be divergent REERs between Eurozone countries, as the cost of living in those countries is not

growing at equal rates.

Ireland’s Real Effective Exchange Rate (REER) has been following a downward trajectory since before the recession,

peaking in 2008, and then dropping by 23% to its 2016 level. Figure 3 over shows the changes in Ireland’s REER from

2007-2016.

30 Quarterly Financial Accounts Q2 2017, Central Bank of Ireland, p. 2.

31 Quarterly Financial Accounts Q1 2016, Central Bank of Ireland, p. 2.

32 Why Real Exchange Rates?, International Monetary Fund, p. 47.

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17

Figure 3: Ireland’s REER 2005-2016, Index: 2010

3 year change in the Real Effec`ve Exchange Rate

Threshold

0%

2%

4%

6%

8%

10%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: AMR Statistical Annex.

The change in Ireland’s REER is not only a function of domestic economics, but is heavily affected by the balance

between the change in domestic price levels and the change in price levels in Ireland’s main trading partners.

The European Commission uses Real Effective Exchange Rate as an indicator of macro-economic imbalance for the

following reasons: “High values of the REER signal a loss of competitiveness, whereas very low ones may point to

problems related to domestic demand.”33 However, in Ireland’s case, this would not appear to be the case. In terms

of private consumption, Ireland has seen the largest growth from 2014 to 2016 of any of its top trading partners,

as illustrated in Figure 4 over. In addition, Ireland has one of the highest costs of living in the European Union,

so a decline in costs relative to main trading partners may not be cause for concern, if domestic demand is robust.

33 Competitiveness Indicators at a glance, European Commission, p.1.

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Figure 4: Average Comparative Private Consumption Levels as a proportion of 2010 levels

2014 (lhs) 2016 (lhs) % Change from 2014-2016 (rhs)2015 (lhs)

0%

25%

50%

75%

100%

125%

Irel

and

Uni

ted

Stat

es

Uni

ted

Kin

gdom

Euro

are

a

Ger

man

y

Swit

zerl

and

Bel

gium

0%

1%

2%

3%

4%

5%

6%

7%

8%

Source: OECD.

The change in Ireland’s REER is not a measure of Ireland’s nominal position in pricing terms, but of the annual change in

Ireland relative to its trading partners. A reduction in prices compared to key export markets denotes an increase in the

competitiveness of Irish exports in target markets. Figure 5 over compares the REER of Ireland to the European Union

from 2000-2016.

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Figure 5: Ireland and the European Union’s Real Effective Exchange Rates (2007=100%)

Ireland European Union (excluding Ireland)

75%

80%

85%

90%

95%

100%

105%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: Bruegel.

The Commission considers a decreasing REER a possible indicator of macro-economic imbalance as dropping prices

may result from a lack of domestic demand.34 However, economic indicators show that this is not the case in Ireland.

The Central Bank of Ireland predicts, “domestic demand … will drive growth over the forecast horizon.”35 Modified

domestic demand is expected to grow by 4.2% in 2017 and 3.9% in 2018.36 This would imply that the current trend for

the REER in Ireland is not indicative of low domestic demand, but is actually indicative of prices in Ireland adjusting

downwards towards EU averages.

Finally, it is also important to note that the nature of goods exported by any particular country has an impact upon the

REER, both in its nominal value and volatility over time.37 As Table 8 over shows, Ireland’s key exports by nature have

large fluctuations in their prices. This would imply that Ireland’s REER is likely to be more volatile than that of a country

that relies on imports and exports which have more stable prices.

34 At a glance: Competitiveness Indicators in the Euro Area, European Commission, p.1.

35 Quarterly Bulletin, No. 4 of 2017, Central Bank of Ireland, p. 14.

36 Ibid.

37 An Investigation of the Effect of Real Exchange Rate Movements on OECD Bilateral Exports, European Central Bank, p. 12.

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Table 8: Ireland Export Commodities and Prices

Division Group Price per Tonne

2015 2016 2017

Food and Live Animals €2,591 €2,651 €2,512

Beverages and Tobacco €1,641 €1,599 €1,630

Crude Materials except Fuels €350 €293 €384

Mineral fuels, lubricants and related products €281 €249 €369

Animal and vegetable oils, fats and waxes €541 €599 €734

Chemicals and related products €58,765 €58,472 €56,244

Manufactured goods classified chiefly by material €603 €564 €575

Machinery & transport equipment €43,406 €55,293 €48,848

Miscellaneous manufactured articles €43,140 €42,634 €48,497

Commodities and transactions not classified elsewhere €1,655 €2,443 €9,421

Source: Central Statistics Office, personal correspondence.

House Price Index

The House Price Index is an indicator designed by Eurostat to record the price changes of residential properties

purchased by households, including new builds and existing properties. Ireland’s breach in this indicator was marginal

for 2016, with a provisional figure of 6.6% change from 2015’s index value. However, recent data from Eurostat shows

that the increase in this figure is accelerating again, and the current figure for Q1 and Q2 2017 gives a year-on-year

increase of 9.95%.38 Figure 6 over shows the trend in this annual change from 2006 to present, with Ireland above

the 6% threshold from 2014 onwards.

38 House price index (2015 = 100) – quarterly data, Eurostat.

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21

Figure 6: HPI Annual Percentage Change

Threshold Euro area Ireland

-22

-12

-2

8

18

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

Source: Eurostat.

Domestically, ESRI has recently concluded that there is an undervaluation of less than 10% in the Irish housing market.39

They have estimated that the price of housing in Ireland is likely to rise by between 14 and 20 per cent over the next 4

years. The ESRI has concluded that the increase in Irish house prices since 2013 is a result of the sharp drop in prices

from 2008 to 2013 and a substantial increase in the economic fundamentals underlying house prices. The sharp rise in

house prices experienced since 2014 reflects a lack of supply combined with the underlying economic conditions.

Private Sector and General Government Debt

The two final thresholds that Ireland is in breach of relate to private and public debt. The two measures are tracked

as a proportion of GDP. Movement in these final two indicators is also reflected in the Net International Investment

Position, as debts are often held by foreign creditors. As Figure 7 over illustrates, the deterioration of Ireland’s

Net International Investment Position from 2013-2015 was a result of a rapid increase in the indebtedness of the

private economy, rising from 267.1% of GDP in 2013 to a peak of 306.5% of GDP in 2015.

39 Irish house prices: Déjà vu all over again?, ESRI, p. 13.

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Figure 7: NIIP, Public and Private Sector Debt

Consolidated Private Sector Debt (% of GDP) (rhs)

General Government Gross Debt (% of GDP) (rhs)

Net Interna`onal Investment Posi`on (-% of GDP) (lhs)

0% 20%

-100%

-200%

-300%

-400%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

220%

Source: Eurostat.

As can be seen in the above Figure, the trend in growth for public and private debt was roughly proportional until 2015.

The recent downward movement of the public debt-to-GDP ratio is a result largely of the winding down of the Irish

Banking Resolution Corporation in 2014,40 and the GDP growth rate of 26% in 2015. In nominal terms, the public

debt outstanding has decreased from a peak of €215 billion to €201 billion at the end of 2016.41 Looking forward,

the debt-to-GDP ratio is expected to decrease to 62.9% by 2021 from 75.4% in 2016. However, the nominal figure is

expected to increase to €210.9 billion in the same period.42 Figure 8 over compares the change in General Government

Debt as a percentage of GDP and per member of the labour force from 2016-2021.

40 Annual Report on Public Debt in Ireland, Department of Finance, p. 3.

41 Ibid.

42 Ibid, p. 18.

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23

Figure 8: General Government Debt 2016-2021

General Government Debt per Member of the Labour Force (lhs)

Average Annual Earnings (lhs)

General Government Debt (% of GDP) (rhs)

€0

€20000

€40000

€60000

€80000

€100000

2016

2017

2018

2019

2020

2021

55%

60%

65%

70%

75%

Source: CSO, Department of Finance & Davy.43

43 Statistic for population and average earnings sourced from Central Statistics Office tables. Estimated and forecasted General Government Debt sourced from Department of Finance, Annual Report on Public Debt, June 2017. Forecasted wage growth sourced from Davy Research Report ‘Irish Economy’.

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http://opac.oireachtas.ie/AWData/Library3/Findocslaid120617_133424.pdfhttps://static.rasset.ie/documents/news/davy.pdf

Context of the 2018 Annual Growth Survey

The 2018 Annual Growth Survey is an overview of the macroeconomic state of national economies in the EU. 2018 marks

a change in emphasis and direction for the survey, as it coincides with the adoption of the European Pillar of Social

Rights,44 and the new agenda articulated in the White Paper on the Future of Europe and the reflection papers,

especially the Reflection Paper on the deepening of the Economic and Monetary Union.45

The 2018 Annual Growth Survey covers three areas:

n Boosting Investment;

n Structural Reform; and

n Responsible Fiscal Policies.

There is an increased focus on the use of reforms for supporting the three goals outlined above. The White Paper

articulated a number of possible forward-looking strategies for the European Union, and the reflection paper on the

Economic and Monetary Union outlined concrete goals for the reform process up to 2025. The Annual Growth Survey

accordingly incorporates many of these proposed reforms within its recommendations under each of these headings.

Boosting investment to support the recovery and to increase long-term growth

These are the dual goals for investment described in the Annual Growth Survey:

1. Economic and Socially targeted investment, similar to current uses of European Structural and Investment

Funding

2. Regulation of the financial sector, particularly regarding the stock of non-performing loans held by banks.46

Under the first heading, the Commission are announcing an increase of €10 billion to the EU guarantee for the

Investment Plan for Europe and a further €2.5 billion in capital for the European Investment Bank as part of the

European Fund for Strategic Investment 2.0’s regulation.

As part of the second goal, the Commission plans to create a credit line from the European Stability Mechanism to the

Single Resolution Fund. 47 This would allow the Stability Mechanism to be activated in the case of a failure in the banking

market that was too large for the Single Resolution Fund to absorb.

44 Council document 13129/17.

45 COM(2017) 291.

46 Ibid.

47 Reflection Paper on the Deepening of the Economic and Monetary Union (COM(2017)291), p. 20.

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Annual Growth Survey

https://ec.europa.eu/commission/sites/beta-political/files/social-summit-european-pillar-social-rights-booklet_en.pdfhttps://ec.europa.eu/commission/sites/beta-political/files/social-summit-european-pillar-social-rights-booklet_en.pdfhttps://ec.europa.eu/commission/sites/beta-political/files/white_paper_on_the_future_of_europe_en.pdfhttps://ec.europa.eu/commission/white-paper-future-europe/white-paper-future-europe-way-ahead_enhttps://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf

Structural reforms for inclusive growth, upward convergence and competitiveness

The European Commission argues that, “structural reforms are essential to enable the economy to deal with shocks,

adapt to longer term structural changes and improve social outcomes.”48 The European Union’s main mechanism for

funding structural reforms is the European Structural and Investment Funds or the Structural Reform Support

Programme.

However, it must be noted that these are allocated partly based on relative GDP as a percentage of EU average. Ireland’s

economic growth has seen its allocation under the Structural Funds shrink from €5.8 billion (£4.6 billion) in 1994-1999

to €1.2 billion in 2014-2020. It is unlikely that this trend can be expected to reverse, particularly taking into account the

possible implications of Brexit for the EU budget.

Responsible fiscal policies to support sustainability and convergence

Fiscal policies in the Annual Growth Survey cover:

1. Reducing the level of public debt;

2. Reforming taxation policy, especially VAT and Corporation Tax; and

3. Public spending reviews, and coordinated spending on defence.

For public debt, the policies proposed could be seen as contradictory. The Commission proposes that countries should

be reducing public debt on one hand, and borrowing to finance public investment on the other. Sixteen Member States

are currently above the 60% threshold for government debt-to-GDP ratio and others are close to the threshold.49

The majority of Member States are either not in a position to borrow, or would risk breaching the Macroeconomic

Imbalance Procedure by increasing public debt to finance investments.

The Next Steps

The Commission will now expect Member States to take account of the trends identified in the Annual Growth Survey

when producing their national policies and National Reform Programmes. The next phase of the European Semester

will involve bilateral dialogue between Member States and the Commission, which will culminate in the production

of Country Reports by the Commission.

The Commission will publish its Country Report for Ireland in February 2018, including the in-depth review under the

Macroeconomic Imbalance Procedure. Ireland will then publish its National Reform Programme and Stability Programme

updates in April, before the Commission proposes Country Specific Recommendations in May. The Recommendations

will ultimately be adopted by the Council of the European Union in July.

48 Ibid, p. 6.

49 Alert Mechanism Report, p. 46.

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26

Indi

cato

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2016

278.

1%72

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9.5%

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0.7

-3.6

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2015

306.

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.7-9

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2014

279.

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0.6

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2013

267.

1%11

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41.0

-8.0

2012

279.

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9.6%

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5.5

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272.

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2010

257.

2%86

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-3.2

5.4

18.5

2009

256.

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7.7%

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-1.3

2.1

15.3

2008

236.

4%42

.4%

5.2%

6.5%

1.30.

34.

6

2007

5.5%

-1

76.2

%

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-20.

5%

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9%

4.9%

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41

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%

-131

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-137

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12

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-114

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1.5%

3.

0%

-12.

0%

13.1%

4.

8%

24.9

%19

8.1%

23.9

%4.

5%9.

6%3.

1-0

.20.

4

Euro

pean

Sem

este

r 20

18 –

and

how

it in

tera

cts

wit

h Ir

elan

d’s

Bu

dget

201

9

27


Appendix 1: Macroeconomic Indicator Scoreboard for Ireland 2007-2016

PBO Initial Objectives & Services 4 October 2017

Commentaries

Post-Budget 2018 Commentary for the Committee on Budgetary Oversight 24 October 2017

Quarterly Economic and Fiscal Commentary (Q3 2017) 5 October 2017

Summary of Pre-Budget 2018 Commentary 4 October 2017

Pre-Budget 2018 Commentary for the Committee on Budgetary Oversight 25 September 2017

Briefing Papers

Briefing Paper 3 of 2017 Rainy Day Fund 19 December 2017

Briefing Paper 2 of 2017 Supplementary Estimates 2017 4 December 2017

Briefing Paper 1 of 2017 The role and functions of Ireland’s Parliamentary Budget Office (PBO) 24 November 2017

PBO Notes

Note 3 of 2017 Note on rainy Day Fund Proposals 19 December 2017

Note 2 of 2017 Public Service Performance Report 2016 17 November 2017

Note 1 of 2017 Gender Budgeting 17 November 2017

Infographics

Budgetary Cycle 2018 10 January 2018

Exchequer revenue – Significant months 6 December 2017Eu

rope

an S

emes

ter

2018

– a

nd h

ow it

inte

ract

s w

ith

Irel

and’

s B

udg

et 2

019

28


Publications

https://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-10-05_pbo-initial-objectives-and-services_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-10-25_post-budget-2018-commentary-for-the-committee-on-budgetary-oversight_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-10-09_quarterly-economic-and-fiscal-commentary-q3-2017_en.https://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-10-04_summary-of-pre-budget-2018-commentary_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-09-27_pre-budget-2018-commentary-for-the-committee-on-budgetary-oversight_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-12-20_rainy-day-fund_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-12-04_pbo-briefing-paper-2-supplementary-estimates-2017_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-11-24_the-role-and-functions-of-ireland-s-parliamentary-budget-office_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-12-20_note-on-rainy-day-fund-proposals_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-11-20_pbo-note-on-public-service-performance-report-2016_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-11-20_pbo-note-on-gender-budgeting_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2018/2018-01-10_budgetary-cycle-2018_en.pdfhttps://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2017/2017-12-06_exchequer-revenue-significant-months_en.pdf

Contact: [email protected] Go to our webpage: www.Oireachtas.ie/PBO Publication date: 15 January 2018

mailto:[email protected]://www.Oireachtas.ie/PBO

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Table of ContentsRelevance of the European Semester to Ireland - Budget 2019Executive SummaryCommission Opinion on Ireland’s BudgetOfficial Commission OpinionStaff Working DocumentMacroeconomic DevelopmentsFiscal DevelopmentsImplementation of Fiscal Structural ReformsConclusions

Alert Mechanism ReportSummary of Ireland’s Scoreboard in the Alert Mechanism ReportNet International Investment Position (NIIP)Real Effective Exchange Rate (REER)House Price IndexPrivate Sector and General Government Debt

Annual Growth SurveyContext of the 2018 Annual Growth SurveyBoosting investment to support the recovery and to increase long-term growthStructural reforms for inclusive growth, upward convergence and competitivenessResponsible fiscal policies to support sustainability and convergenceThe Next Steps

Appendix 1: Macroeconomic Indicator Scoreboard for Ireland 2007-2017Publications

an oifig buiséid pharlaiminteach parliamentary budget office · box 5: real effective exchange...

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