Ireland: Housing slump fall out
Activity was strong in the first half of 2007, but the slump in house building will slow growth substantially. GNP is expected to increase by 3% in real terms in 2008, which is considerably below the growth rate of potential output, but to recover to grow at 4.5% in 2009 as housing construction levels out at a sustainable level. Inflationary pressures will ease, but unemployment is likely to increase.
Tax revenues partly depend on the property market and will grow more slowly in coming years. Expenditure growth needs to be limited to maintain sound public finances over the medium term. Public investment that eases supply-side constraints should be given priority over current spending, while sharp pay increases in the public sector need to be avoided. Regulatory reforms, particularly in network industries, have the potential to improve competitiveness.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
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