THE INTERNATIONAL MONETARY FUND (IMF) has revised its real GDP growth forecast for Ireland down to o.5 per cent over this year.

In its World Economic Outlook report, the IMF predicts eurozone growth at 1.6 per cent and global growth at 4.5 per cent.

The IMF had predicted growth of 0.9 per cent for Ireland this year at the time of the bailout agreement in November 2010.

It is also predicting inflation of 0.5 per cent for Ireland for 2011, compared with an average of 2.3 per cent for the euro area.

The IMF said that “strong policy responses” at a national and EU level had helped to limit the damage of banking sector losses to the affected eurozone economies.

Soverign debt issues

Although it said there were signs of a turnaround in the four weakest eurozone economies – Portugal, Ireland, Greece and Spain – the current account deficits of Greece and Portugal “remain excessively large” at 10.4 per cent and 9.9 per cent of GDP respectively.

The organisation said that a number of policies are already in place in Ireland to tackle the state’s financial adjustment, and recommends “building a national consensus so that the burden of the adjustment is shared broadly through wage moderation” to prevent a prolonged period of high unemployment.

Regarding the EU’s bailout fund, the IMF said that markets had to be reassured that sufficient funds are available and that a “decision on adjusting the interest rate charged” on loans from the European Financial Stability Fund is “urgently needed to help support fiscal sustainability”.

Releasing the report today, the IMF said that a decrease in the interest rate would be helpful for countries, including Ireland, which are receiving financial support.

Unemployment

The IMF expects Ireland’s unemployment for this year to average 14.5 per cent, compared with a 9.9 per cent average across the euro area. Unemployment in Ireland is currently at 14.7 per cent, according to March figures for the Live Register.

Globally, around 205m people are looking for work – a 30m increase since 2007. The IMF says young people have been particularly affected by unemployment during the financial downturn and even more so than in previous recessions.

Read the IMF’s World Economic Outlook report in full >