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Irish Recovery Stronger Than Expected

by Ulrika Lomas,, Brussels

17 October 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 shows that gains in competitiveness and increased exports are driving a modest recovery which should see gross domestic product (GDP) growth reach 1.2% in 2011, an upward revision from the zero percent rate projected last May in the OECD’s last Economic Outlook.

The OECD Survey urges Ireland to persevere on the path of fiscal consolidation established under an EU-IMF stabilization 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.

TAGS: tax | economics | Ireland | property tax | fiscal policy | public sector | banking | gross domestic product (GDP) | international financial centres (IFC) | budget | offshore | unemployment

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