Irish Minister of Finance, Brian Cowen has this week welcomed the OECD’s generally positive assessment of the Irish economy.
Commenting on the Report, Cowen observed that:
“The OECD, while recognising the challenges facing Ireland in the period ahead, acknowledges the remarkable performance of the Irish economy over the past decade."
"It states that the fundamentals including - a skilled workforce, a flexible labour market, moderate taxation, a business-friendly regulatory environment and a sound fiscal position – all remain strong. Of particular note is the OECD’s assessment that Irish fiscal plans remain prudent overall.”
In terms of recommendations, the OECD made a number of specific suggestions, and these will now be reflected upon in the context of future policy formulation, the Finance Minister went on to explain.
Specifically, the OECD highlighted the need to raise productivity growth as a key long-term challenge to the Irish economy, and argued that wage moderation is needed to avoid a weakening of export performance. Mr Cowen expressed agreement with this assessment.
In commenting on the Republic's fiscal position, the OECD noted that the rate of public spending needs to slow, and that it is important not to lock-in expensive spending commitments.
Cowen accepted this advice in view of the present economic climate.
Additionally, Cowen noted the OECD assessment that, while a correction to the very strong Irish housing market was necessary, the downswing is expected to be short-lived.
In terms of the tax treatment of housing, he also noted the views of the OECD, and said that this issue needs to be seen in the wider economic and social context.
Mr Cowen welcomed the OECD’s assessment that Irish banks are profitable and well capitalised. The OECD observed that rapid economic growth had provided extensive earnings opportunities for Irish banks, ensuring they are well positioned to deal with recent developments.
Additionally, Cowen welcomed the OECD’s view of the Central Bank and Financial Services Authority of Ireland as a highly respected institution that has acted in a timely manner to contain risks.
With regard to long term planning, the report highlighted the potentially significant impact of ageing for Ireland.
Finally, Cowen pointed out that the rationale for publishing the Green Paper on Pensions last year was to stimulate debate on how to address the challenge of sustainability. The findings of the OECD will be a useful input in that context.
An OECD Policy Brief on its Economic Survey of Ireland can be found in the Tax-News Resources section.
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