Greater competition in services and the professions could curb inflation which remains the main threat to Ireland's economic prosperity, the OECD said today.
The Paris-based think tank has given another positive assessment of Ireland's economic prospects but warned that inflation must be monitored.
"Curbing inflation pressures in the medium term should rely on unleashing market forces in services, including in network industries and the liberal professions, and easing regulations in retail trade," the OECD said in its country assessment of Ireland which accompanied its global economic outlook statement today.
The OECD said it expects Ireland's growth rate to rise by 5 per cent in 2004 and is set to expand roughly at that pace in 2005 and 2006, driven by buoyant net exports and consumption.
"With excess demand persisting, inflationary pressures are expected to rebuild gradually," the OECD said.
The OECD added that Ireland's open economy is vulnerable to a rise in the euro exchange rate or in interest rates.
Wage moderation should also be encouraged, the OECD added.