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Economy to grow by just 0.3pc next year – OECD

THE economy will hardly grow over the next two years, the Organisation for Economic Cooperation and Development warned today.

The Paris-based think tank forecast the economy will expand just 0.3pc next year and 0.6pc the following year after growing 1.8pc this year.

Unemployment will remain high as a result, it added.

“While marked progress has been made in resolving the financial and banking crises, economic growth is projected to remain low, but positive, during the next two years,” the OECD said in a chapter on Ireland contained within the organisation’s semi annual report on the world economy.

A deal with Europe to reduce the national debt would “ease the burden of repaying bank-support-related debt” it added.

The OECD blamed the slow growth on the weak European economy which “accounts for a majority of Irish exports by destination”.

The anticipated slowdown in exports will make it difficult to offset the drag from ongoing fiscal consolidation, household deleveraging, low credit availability and subdued sentiment, it added.

The Government should continue to implement its medium-term fiscal plan and halt the rise of public debt, it added.

Turning to the world economy, the OECD slashed its global growth forecasts, warning that the debt crisis in the recession-hit euro zone is the greatest threat to the world economy. It also urged central banks to prepare for more exceptional monetary easing if politicians fail to come up with credible answers to the debt crisis.

The report says that the global economy would grow 2.9pc this year before expanding 3.4pc in 2013. The estimate marked a sharp downgrade since the OECD last estimated a rate in May of 3.4pc for this year and 4.2pc in 2013.