Concerns over Irish debt have eased due to greater clarity on its banking sector but the debt position is far from comfortable because of the euro zone debt crisis, one of the country's deputy central bank governors said on Thursday.
In one of his first speeches since being appointed in July, Stefan Gerlach said Ireland's progress under its EU/IMF bailout had been better than most might have expected when it was signed a year ago but that much remained to be done.
He said that the consensus view, including that of Ireland's international creditors, was that Ireland's debt-to-GDP ratio would peak in 2013 before gradually beginning to decline, but cautioned of significant risks to that forecast.
While the debt position remains manageable, it could not be described as comfortable. In particular, continuing strains in the euro area and global economies clearly pose some risk to the outlook, the Swedish-born economist said in a speech delivered in Frankfurt.
One could be somewhat more confident about the outlook if the external backdrop was more favourable. What Ireland is trying to achieve is difficult. Policy implementation has been strong and important progress has been made, but much will depend on how the international situation evolves.
Ireland's export-led economy is set to return to growth this year for the first time since 2007 but declining external demand has forced Dublin to twice cut its growth forecasts for 2012 in the past five weeks, the latest coming this week as it hiked taxes and slashed spending to the tune of 3.8 billion euros.
The impact of slowing external growth has also been seen in Ireland's debt to GDP ratio, a key measure of debt sustainability, which is currently forecast to peak at 119 percent in 2013 compared to 102.5 percent this time last year.
Ireland is doing well in terms of its own adjustment programme. We will find out in time is that enough, Gerlach said.
(Reporting by Padraic Halpin; editing by Carmel Crimmins)