State needs to tackle long-term unemployment, says think-tank
OECD also warns that progress is needed in area of mortgage arrears
THE OECD has warned that more action is needed to get young Irish people off the dole to address the prospect of persistently high long-term unemployment.
The Paris-based think-tank also said it was essential that the Government make faster progress in tackling mortgage arrears.
The Organisation for Economic Co-operation and Development (OECD) forecast growth of 1pc this year in Ireland – less than the 1.3pc projected by the Department of Finance.
It warned that the eurozone would contract 0.6pc this year and said the European Central Bank (ECB) needs to do more to lift the bloc out of recession.
It said protracted weakness could evolve into stagnation sparking negative implications for the world economy.
In its semi-annual global outlook, the OECD said Ireland must stick with its austerity budgets if it is to successfully exit the bailout.
"Financial market confidence has improved but the bank lending environment for firms and households remains adverse," the OECD report said.
"It is essential to make faster progress in dealing with non-performing loans.
"Decisive labour-market reforms are also needed to address the prospect of persistent high long-term unemployment, especially among young people, in particular by putting more resources into activation measures and better aligning skills with employers' needs."
Global GDP is expected to increase 3.1pc this year – down from the 3.4pc prediction in November – and by 4pc in 2014, the report said.
Key OECD forecasts include:
* Irish GDP will be 1pc this year, increasing to 1.9pc in 2014.
* Unemployment will be 14.3pc this year, falling to 14.1pc in 2014.
* Investment set to grow 0.3pc this year, jumping to 5.7pc in 2014.
* Consumption will grow 0.1pc in 2013, rising just fractionally to 0.2pc next year.
The Paris-based body said that unemployment would decline only slowly in Ireland, reflecting in part "persistent skill mismatches".
Unemployment for those aged under 25 was about 30pc in March.
It said exports will remain the main driver of growth, leaving Ireland heavily dependent on a recovery in the international economy.
"For Ireland to successfully exit the official lending programme, maintaining the strong record of fiscal policy implementation will be essential, although the automatic stabilisers should be allowed to operate," the OECD said.
Across OECD countries, GDP is projected to rise by 1.2pc this year and by 2.3pc in 2014, while growth in non-OECD countries will rise by 5.5pc this year and 6.2pc in 2014.
"The global economy is strengthening gradually, but the upturn remains weak and uneven," OECD Secretary-General Angel Gurría said.
"Supportive monetary policies, improving financial market conditions and a gradual restoration of confidence are at the root of the recovery.
"Also, the fiscal adjustment of the last few years is beginning to pay off. Several countries are close to stabilising their government debt-to-GDP ratios and ensuring a gradual decline in indebtedness over the longer term."
The OECD warned governments that urgent action must be taken to reduce unemployment, which has risen to "dangerous levels" in many countries.
It said unemployment was likely to continue to rise further in the euro area, stabilising above 12pc only in 2014.
US growth will be 1.9pc this year and 2.8pc in 2014.