Irish bailout on track, growth remains subdued: EU-IMF

(DUBLIN) - Ireland's bailout programme is on track but faces "considerable challenges" this year from subdued economic growth and weak demand from key trading partners, the IMF said Thursday.

Officials from the European Commission, International Monetary Fund and European Central Bank -- known as the troika -- have been in Ireland for the past 10 days to assess the government's progress on meeting bailout targets.

"The teams' assessment is that the programme is on track but that challenges remain and that a continuation of steadfast policy implementation will be key," the troika said in a quarterly update on Ireland's 85-billion-euro ($109.5-billion) rescue package.

Dublin must meet various targets on deficit reduction, overhauling and repairing the nation's shattered banking system and other major reforms, under the terms of the enormous bailout.

"Programme implementation remains strong. The front-loaded fiscal consolidation is on track, with the 2011 (public) deficit significantly below the programme targets," the report added.

"The Irish authorities have continued to push ahead with wide-ranging reforms to restore the health of the financial system so that it can support Ireland's recovery.

"Reforms to enhance competitiveness and support growth and job creation are moving forward."

However the troika also warned that "looking ahead, Ireland nonetheless continues to face considerable challenges.

"Domestic demand remains subdued, unemployment high and trading partner growth is slowing. As a result, projected GDP growth for 2012 has been revised down to 0.5 percent, from an estimated 1.0 percent in 2011."

The report added that Ireland has slashed its 2011 general state deficit to about 10 percent of Gross Domestic Product, which was well under the target of 10.6 percent.

This year, Dublin must target further consolidation to lower the deficit to 8.6 percent of GDP, before reaching 3.0 percent -- the EU limit -- by 2015.

Irish Finance Minister Michael Noonan said the government was "pleased that the staff mission has assessed the programme to be on track and that all measures in the programme have been fully implemented."