Ireland's economy is turning the corner
There's light at the end of the tunnel for Ireland, which is set to exit its bail-out programme later this year.
There's light at the end of a long tunnel for Ireland, says Stephen Castle in The New York Times. The country is set to exit its bail-out programme administered by the European Union and the International Monetary Fund in December, after the last loan from these institutions is disbursed.
Ireland was forced to seek a rescue in late 2010. Its government's finances had been overwhelmed by the cost of bailing out its banking sector, which had been bankrupted when the property bubble burst.
The country has already made a partial return to the markets, selling long-term debt earlier this year, and it should regain full access to international debt markets next year.It has managed to meet its rescue programme targets and made steady progress on cutting its annual deficits.
Next year the deficit is set to come in at 4.8% of GDP, down from 13.4% in 2011. It can fund the deficit until 2015.
Gradually improving data is also spreading confidence. After shrinking for much of the past year, the economy is growing again. Manufacturing activity improved for the fourth month in a row in September. House prices rose for a fifth consecutive month in August. Last month unemployment fell to a three-year low of 13.3%. And consumer confidence has returned to pre-crisis levels.
Ireland's low corporation tax, its flexible labour market, and a crackdown on wages and prices amid the austerity of recent years have all contributed to this burgeoning recovery, by bolstering competitiveness.
But a rapid comeback is not on the cards, as Eamonn Quinn points out in The Wall Street Journal. Ireland is "relying almost totally on exports to drive the recovery". Now that the eurozone is emerging from recession, and Britain and America, the country's two biggest trading partners, are doing relatively well, the outlook on this front has improved.
But heavy mortgage debts, along with reductions in household income due to austerity, are weighing on consumption. The number of home loans in arrears has almost doubled in the past two years. That in turn means that banks are likely to need yet more help before they can be expected to boost lending significantly.
The upshot? Growth is expected to reach 0.5% in 2013, and the central bank is hoping for 2% next year. There is a long way to go. But the "economic emergency", as Prime Minister Enda Kenny puts it, does appear to be over.