DUBLIN - It is still uncertain whether Ireland will be able to make a full return to raising funds on the debt market in 2013, although downside risks to the modest economic growth expected this year have eased, the International Monetary Fund said on Friday.
Dublin, which signed up to an 85 billion euro ($113 billion) EU/IMF bailout in late 2010, aims to return to long term debt markets later this year to help it prepare for the ending of official funding next year and meet borrowing needs of about 20 billion euros in 2014.
The IMF, one of the country's Trokia of lenders along with EU institutions, said it was reasonable to expect that Ireland could achieve the modest market financing planned for this year through selling short-term treasury bills.
However it reiterated a call for extra European help to back Irish plans for a full return to bond markets next year for the first time since September 2010.
Whether the government manages to meet its financing needs next year will depend not only on continued strong policy implementation on its part, but also on developments in the euro area, IMF mission chief for Ireland Craig Beaumont said in a statement accompanying the IMF's latest bailout report.
Because of this uncertainty, the IMF is encouraging the European authorities to proactively take steps to reinforce the prospects of Ireland having adequate market access in 2013.
Ireland's performance has been held up by European leaders as a glowing example of how their plans to fight the euro zone debt crisis are working and the IMF said once more that Dublin's policy implementation remained strong.
However with weaker exports and a larger than expected decline in consumption weighing on Ireland's economy, it said the challenges were greater than envisaged at the outset of the program.
As a result, the IMF, like the European Commission, sees Irish gross domestic product (GDP) growth slowing to 0.5 percent this year, significantly lower than the 1.3 percent forecast the government is still holding onto.
There are some downside risks to this scenario, linked mainly to developments in the euro area, but the scale of these risks appears to have eased recently, Beaumont said.
DEBT TRAJECTORY VULNERABLE
The IMF said Ireland remained on target to reduce its budget deficit to 8.6 percent of GDP and again urged the government not to ramp up its austerity plans for this year, even if there is a further reduction in growth projections.
The European Commission took a very different view in its latest report earlier this week when it said the government may need make changes to its budget this year if the economy continues to deteriorate.
Instead the IMF favours reconsidering plans for 2013-15 if there is a major economic shock, saying such an approach would preserve the credibility of Ireland's medium-term targets.
The IMF still expects Ireland's debt to GDP ratio to peak at just above 118 percent next year, a touch better than Dublin's 119 forecast.
But it warned: The debt trajectory is vulnerable to lower medium-term growth. For example, debt would reach 138 percent of GDP by 2016 if growth were to stagnate.
On Ireland's banks, the IMF said that the authorities were considering adjusting the framework of their deleveraging programme, noting that faster than expected work in reducing the size of their balance sheets last year potentially constrained domestic credit. (Additional reporting by Lorraine Turner; Editing by Ruth Pitchford)($1 = 0.7501 euros)