The controversial bank guarantee of the Republic's banks was good for the financial sector but bad for the rest of the Irish economy, an IMF study has found.
In the opening chapter of the twice-yearly World Economic Outlook, the body said the move to guarantee all deposits had a negative impact on domestic firms fearing higher taxes as a result.
Those fears were offset in the financial sector by the immediate benefits of the bank bailout, the study said. The hugely controversial scheme announced in September 2008 left taxpayers on the hook for losses at six banks and was blamed by many for plunging the country into the EU/IMF bailout two years later.
The IMF study said that a bank bailout should help an economy in the short-term. But in Ireland's case, the state took on large amounts of liabilities to foreigners and the effect differed widely across firms, according to the IMF.
The guarantee on bank deposits ended last month, marking a sign of improved conditions for the state's financial sector.
The study comes as the IMF revised down its prospects for the global economy to growth of 3.3% this year.