14/10/2011 - The Irish economy faces tough challenges as the country exits from a deep recession and banking crisis, but its long-term prospects now appear better than many of the other hard hit European countries, according to the OECD’s latest Economic Survey of Ireland.
The report, presented today in Dublin, shows that gains in competitiveness and increased exports are driving a modest recovery which should see growth reach 1.2 percent in 2011, an upward revision from the zero percent rate projected last May in the OECD’s last Economic Outlook.
The new forecast comes with significant downside risks, however, notably market fears over financial stability in the euro area.
The OECD Survey urges Ireland to persevere on the path of fiscal consolidation established under an EU-IMF stabilisation programme, notably that its budget defict drop below 3% of GDP by 2015. The OECD projects that the Irish deficit will be 10% of GDP this year before beginning a downward trajectory in the coming years.
To meet fiscal consolidation targets, the report recommends spending restraint be focused on public sector efficiency, welfare reform and infrastructure projects. It also suggests broadening the tax base, through a reduction in tax expenditures and introduction of property taxes.
“Provided the economy continues to grow, Ireland should consider reducing the budget deficit faster than required by the programme, to help gain credibility in financial markets,” said Robert Ford, deputy director of the OECD country studies division.
A special chapter in the Survey underlines the need for urgent reforms to restore health in the banking sector. This must include improvements to the household bad debt resolution process as well as a narrowing of bank liability guarantee schemes and focusing supervision on a limited set of indicators.
A second special chapter in the Survey says Ireland should take steps to bring down its 14.2 % unemployment rate and help the long-term unemployed back to work, notably through better policies to help job seekers find jobs and welfare reform.
Further information on the Economic Survey of Ireland is available http://www.oecd.org/eco/surveys/ireland.
Journalists seeking further information should contact the OECD Media Division: email@example.com, +33 1 45 24 97 00.