The International Monetary Fund said Ireland could delay some of the budget cuts required under its bailout program if the country's economy grows more slowly than expected next year.
The Washington-based lender, one of a trio overseeing Dublin's 85 billion euro ($112 billion) bailout, said Ireland had so far shown "steadfast policy implementation" with the conditions of its loan program, despite slower growth this year.
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The IMF's board agreed on Monday to disburse $1.2 billion of aid to Ireland after the country complied with the conditions of its bailout, bringing the total given so far to $25 billion. Ireland was the second euro zone country to be bailed out by the IMF, after Greece.
David Lipton, the IMF's first deputy managing director, said Dublin had met all targets so far in its two-year-old bailout program.
But the IMF projected the country's growth would slow to 1.1 percent in 2013, and 2.2 percent in 2014, making it more difficult for the government to meet debt-to-GDP (gross domestic product) targets. This ratio, which reflects the sustainability of debt, is expected to peak at 122 percent in 2013.
"If next year's growth were to disappoint, any additional fiscal consolidation should be deferred to 2015 to protect the recovery," Lipton said in a statement.
Ireland's studious application of its austerity plan - which still has at least three years to run - has so far impressed investors and helped push down yields on its government bonds.
But the IMF said Ireland faced risks down the road from a slowdown in its trading partners, high private debts, banks' limited lending, and from its own austerity program. ($1 = 0.7598 euros) (Reporting by Anna Yukhananov; Editing by Eric Walsh and Diane Craft)