World Economy

ECB Warns Ireland of Risks to Economy

ECB Warns Ireland of Risks to Economy ECB Warns Ireland of Risks to Economy

Strong house price growth, Brexit, and an overreliance on multinational corporations pose significant risks to the Irish economy, European finance officials have warned.

The European Central Bank said that strong momentum in GDP growth was expected to continue in the short term but that risks remained “tilted to the downside”, Yahoo reported.

Officials from the bank, the European Stability Mechanism and the IMF arrived in Ireland on Wednesday and met with staff from the Central Bank of Ireland, the Department of Finance and the Department of Public Expenditure and Reform.

The ECB said in a statement Friday night that the country’s public finances had improved on the back of robust growth in output. “Risks to the economic outlook relate primarily to the outcome of the negotiations regarding the UK’s exit from the European Union and potential changes to the international taxation environment,” the bank said.

“Risks could also arise in the event of continued strong increases in property prices over the medium term.”

The ECB said that the level of Ireland’s national debt had diminished but remained elevated. It warned against a bill proposed by Michael McGrath, the Fianna Fail finance spokesman, that would allow the Irish central bank to cap interest rates on variable rate mortgages. It said that the plan could have negative implications for monetary policy, financial stability and bank competition.

The ECB found that a persistent shortage of housing matched with intense demand had driven strong increases in property prices and rents. “Residential property transactions remain subdued overall on the back of the limited housing stock,” it said. “The government is taking a number of measures to support the recovery of supply. New mortgage credit is starting to increase, albeit from a low base.”

The cost of buying a home in Dublin has risen by 87% in the past four years, according to the latest data from the Central Statistics Office. House prices are increasing at an annual rate of 12.8%, with the average price of a home nationwide now standing at €265,287 ($315,619).

The ECB also warned that Irish banks must continue to reduce their level of non-performing loans. It said that the pace of decline in the loans had slowed and that the high share of mortgage arrears “remains a concern”.

Some 32,169 mortgage customers had been in arrears for at least 720 days at the end of June, a fall of 784, or 2.4%, over the quarter. Borrowers in arrears for two years or more now account for just under 45% of all those behind on their payments.

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