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OECD: Irish economy recovering but government must stick to targets

In a report today, the body said that out debt-to-GDP ratio is set to peak this year and decline thereafter.

A REPORT FROM the OECD has said the Ireland is slowly getting back on its feet but it will need to stick to bailout targets for a full economic recovery.

In an economic survey of Ireland, the OECD said that the crisis “left a legacy of unemployment and debts and now is the time to implement policies that will promote sustainable growth and job creation”.

Despite gradual improvement, the report noted that “unemployment remains high, emigration has resumed, and poverty has increased, adding to heavy debts and financial distress”.


The OECD said that in 2013, Irish deficit is projected to remain at around 7.5 per cent of GDP. If the government implements the €3.1 billion consolidation effort outlined in the budget package, the general government deficit is projected to fall to 4.6 per cent of GDP next year.

Thanks to ongoing fiscal consolidation and positive growth, the debt-to-GDP ratio is set to peak in 2013 according to the OECD and decline thereafter. The report said it is “important to remain on the fiscal path set out in the government programme while pursuing growth-enhancing reforms”.


If government debt can be reduced gradually from over 120 per cent in 2013 to 60 per cent of GDP by 2030, an additional GDP adjustment of just 2.5 per cent would be required, the report noted.


However should real growth average only 1 per cent a year during 2014-21 instead of around 2.4 per cent, the debt ratio could rise to 136 per cent by 2021 instead of falling to 96 per cent.

The report recommended that a precautionary credit line from the IMF, ESM or ECB might be appropriate to address this.

This would act as a safeguard against potential adverse movements in financial markets confidence that could endanger the sustainability of Ireland’s successful return to the market.


(Click here for larger image)

The report also pointed out that Ireland has the second highest ratio of non-performing loans of all OECD countries.

It warned that failure by NAMA to redeem assets at or above their book value could trigger the government guarantee of the senior notes that were used to acquire the loans.

Overall, the report pointed to gradual recovery in the Irish economy but said that more must be done now to reinvigorate growth.

Read: Barroso: The crisis is not over but we have reason to be confident>

Read: Ruairí Quinn: ‘The budget cut has to be less than €3.1 billion’>

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