The economy will stagnate in 2011, despite an improved outlook for the euro zone and the US, the Organisation for Economic Co-operation and Development (OECD) said yesterday.
The Paris-based OECD has slashed its 2011 forecast for the Irish economy when compared to its November 2010 projections. It now has the most pessimistic outlook of any of the main international organisations.
The organisation’s analysis was downplayed by the Minister for Public Expenditure, Brendan Howlin, who described it as “out of line with our thinking and that of the consensus”.
The OECD believes that the Irish economy, as measured by gross domestic product (GDP), will not grow this year. Last week, the European Commission and the International Monetary Fund separately forecast GDP growth of 0.6 per cent.
Addressing a conference in Dublin yesterday, Patrick Lenain of the OECD said that its growth projection for 2011 is in line with the consensus among private sector forecasters.
The OECD also said it expects joblessness to reach almost 15 per cent this year in Ireland and for the rate to remain largely changed next year, as against both the European Commission and the IMF, which expect the unemployment rate to fall below 14 per cent in 2012.
It has suggested that there should be cuts in welfare payments to the long-term unemployed to encourage them back into the workforce.
Speaking this morning Minister for Social Protection Joan Burton said there were no plans to introduce reduced payments for those on long-term unemployment benefits.
However, she added there was provision in the current legislation to cut payments by about €44 a week for those who refused to engage in initiatives being rolled out to support the long-term unemployed.
"If over a period of time someone refuses a reasonable opportunity, whether that's to go back to work, to look for work, [or] to get themselves involved in training and work experience, in that case there is already provision in the social welfare legislation to actually reduce the amount of payments that they receive," she said.
Ms Burton said the legislation governing cuts to individual's welfare payments, which was introduced by the previous administration, had only come into force last month.
Yesterday, Mr Lenain - a French national - said the OECD supported Ireland’s corporation tax rate, but he added that taxes on property should rise because they are unusually low.
His comments came amid increasingly strong indications that French pressure on the Irish 12.5 per cent rate is coming mainly from president Sarkozy rather than from the office of French finance minister, Christine Lagarde.
There was some praise from the OECD for the Government’s jobs initiative yesterday, with Mr Lenain describing efforts to regain control of the public finances as “remarkable”.
However, he was critical of State training programmes, saying bluntly that the Government should stop spending money on training people for the construction sector.
