OECD says Ireland needs tax increases, spending cuts
Wednesday June 24 2009
The Organization for Economic Cooperation and Development said Ireland needs further cuts in public spending and tax increases to address its widening budget deficit.
The “fiscal balance has deteriorated very sharply” and “substantial spending cuts and increases in taxation are required,” the Paris-based organization said in a report today. The country may experience “mild” deflation over the next two years, it said.
Ireland’s economy has been hammered by the collapse of the domestic property market and the global crisis, leaving the government grappling with a soaring budget shortfall. The OECD forecasts that Irish gross domestic product will contract 9.8 percent this year and 1.5 percent in 2010. Unemployment may rise to 14.8 percent next year.
The recovery, which is likely to begin in 2010, will be “sluggish,” the OECD said. “There are risks that the recovery will be weaker than anticipated or begin later as it may be hampered by tighter fiscal policy or falling wages depressing real incomes.”
Some 73 percent of Irish companies plan to cut jobs over the next six months, according to a survey published today by Mercer. Almost half of Irish companies have frozen salaries or deferred pay increases in the past six months, while 9 percent have cut pay, the survey showed. (Bloomberg)
- Colm Heatley
