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Contents | Executive summary | How to obtain this publication | Additional information
The following OECD assessment and recommendations summarise chapter 1 of the Economic survey of Ireland published on 16 April 2008.
Contents
Growth has slowed, testing the resilience of the economy
The Irish economy expanded rapidly in recent years, driven by domestic demand, but activity is now easing. In particular, the housing market has cooled: house prices are falling and fewer houses are being built. Despite the slowdown, growth could remain above the euro area average, although downside risks prevail in the short run. Economic fundamentals remain strong, however, with a skilled workforce, a flexible labour market, moderate taxation, a business-friendly regulatory environment and a still sound fiscal position. Following many years of a booming economy, slowing economic activity will test the resilience of the drivers of economic growth, and the fiscal, financial and macroeconomic frameworks. At the same time, the physical infrastructure and public services need to be improved further. Ireland should also ensure that social progress is sustainable in the long term, particularly as the population ages.
Raising productivity growth is the key long-term challenge
Labour productivity levels are high in international comparison in the manufacturing sector but the previously rapid productivity growth has slowed. Performance is less impressive in the services sector. The buoyancy in construction and in lower-productivity services sectors has weighed on overall productivity growth in recent years. Ireland remains a favoured destination for foreign direct investment (FDI) and is successful in attracting investment in higher valued-added activities such as pharmaceuticals, biotechnology, finance and software. But the real exchange rate has appreciated and competiveness has been eroded. There has been some loss of export market share, although strong performance in financial and business services has partly mitigated these effects. Wage and price moderation are needed to avoid a more serious weakening of export performance. Indeed, gaining competiveness would crowd in foreign demand, offsetting slowing domestic demand. Stronger competition would help to raise productivity and reduce costs. The abolition of the Groceries Order has lowered prices and shows what can be achieved from increasing competitive pressures. Some progress has been made to increase competition in other areas but more remains to be done, especially in network industries and sheltered professions. Innovation capacity in the Irish-owned sector is weak. Spending on research and development (R&D) is relatively low, despite rapid increases, and public resources in this area should be allocated more effectively.
Competitiveness has declined as relative prices have risen
1. Relative consumer prices in terms of consumer price indices.
Source: OECD (2007), Economic Outlook 82 database.
Greater female participation would boost labour supply
Growth has been boosted by rising employment of women and net inward migration. The female participation rate is rising rapidly and will increase further with additional childcare places coming through investment in the National Childcare Strategy. Another area to be addressed is increased out-of-school-hours care. More should be done to help lone parents participate in the labour market. Incentives for second earners to work full time should be sharpened further. Moreover, child support should be tied to the actual use of childcare. Effective implementation of recent plans to move to a mutual obligations approach for single parents would raise employment and reduce child poverty.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Ireland 2008 is available from:
- SourceOECD for subscribing institutions and many libraries
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Government officials with accounts ( subscribe) can go to the "Books" tab on OLIS
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Additional information
For further information please contact the Ireland Desk at the OECD Economics Department at eco.survey@oecd.org. The OECD Secretariat's report was prepared by Sebastian Barnes and David Rae under the supervision of Peter Hoeller. Research assistance was provided by Isabelle Duong.
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