Ireland should stick with its austerity plans even if its growth outlook should weaken, the International Monetary Fund said on Thursday, a day after approving a 3.9 billion euro disbursement to Dublin under the country's IMF rescue loan.
The planned amount of fiscal adjustment should be maintained in the event of adverse developments to avoid amplifying policy procyclicality, IMF First Deputy Managing Director David Lipton said in a statement.
He said Ireland would cut its public debt ratio through an equal mix of spending cuts and tax measures. A worsening euro zone debt crisis threatens to derail Ireland's fragile recovery and force even more austerity on its recession-weary population.
Irish Finance Minister, Michael Noonan, said on Wednesday he expects Ireland's debt to fall after peaking at 119 percent of gross domestic product in 2013. He has warned that if growth should weaken further, it could force Ireland to push through an even harsher austerity budget in 2013 to meet goals under its 85 billion euro (71.3 billion pound) IMF-EU bailout.
The IMF cut its 2012 growth forecast for Ireland in October to 1 percent, down from 1.5 percent it projected in September, saying exports were likely to slow due to weakening economic activity among its main European trading partners.
The IMF growth forecast is lower than the 1.3 percent the government forecast on December 6 when it shaved its outlook for next year from 1.6 percent, the second downgrade in a month.
($1 = 0.7694 euros)
(Reporting By Lesley Wroughton; Editing by Andrew Hay)