Aim to beat troika target, Ireland told

IRELAND should be striving to “over-perform” in its efforts to meet its annual recovery targets and should try to reduce its budget deficit ahead of schedule, the OECD said yesterday.

The latest Irish-related survey from the economic think-tank is broadly positive about the health of Ireland’s economy.

The Paris-based body upped its outlook for Irish GDP growth for 2011 from 0% to 1.2% and said we now “appear better than many of the other hard-hit European countries” and can make “an orderly return” to a more balanced financial position, despite amassing one of the highest national debt levels.

Bob Ford, the OECD’s deputy director of country studies, said that Ireland should remain on course to meet the EU/IMF/ECB target of getting its deficit to less than 3% of GDP by 2015 — and to around 10% this year — but, growth permitting, it should work to come in ahead of schedule.

“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 Mr Ford.

“If growth continues, serious consideration should be given to over- performing to the troika guidelines.

“Ireland’s budget deficit has to be corrected, and fairly quickly, so as its economy is not vulnerable to whatever next big shock comes down the line in the coming years,” Mr Ford added.

If, however, GDP growth slows next year (the OECD is predicting 1% growth here in 2012), Mr Ford said that it would be “pretty happy” with Ireland just meeting its set targets.

He added that a bounce in 2013 would still leave time to quicken Ireland’s budget deficit reduction ahead of 2015.

He declined to give an opinion, however, on whether the Government should go above the €3.6 billion budget target for next year.

A wide-reaching and highly detailed report, the latest OECD study into Ireland offers a lot of recommendations, including urgent reforms for the banking sector, improvements to the household debt resolution process, a broadening in the tax base and changes in the country’s public spending and welfare reform.

Finance Minister Michael Noonan welcomed the OECD study and noted that it provides “strong support” to the Government’s policies.

Mr Noonan added that the body’s recommendations “will feed into the preparation of the budget”.