The Organisation for Economic Co-operation and Development (OECD) has issued a warning that Ireland needs to do more to ensure its long term economic “resilience” and will have to up its game to stand a chance of meeting climate change ambitions.
In a detailed report on the state of the Irish economy published today, the OECD said that Ireland is facing long-term challenges including an ageing population, housing shortages, and environmental pressures.
Despite a strong economic performance and rising living standards in recent years, the OECD cautions that Ireland’s heavy reliance on multinational corporations is a risky strategy.
“High concentration of value-added in a few multinational-dominated sectors creates risks to growth and tax revenues”, the report warns.
And delays in upgrading critical infrastructure, particularly in housing and energy, could undermine Ireland’s competitiveness, the OECD said.
Ireland’s old-age dependency ratio is expected to double by 2050. The OECD warns that this would “add to long-term fiscal sustainability pressures”.
On climate change, the OECD warns that Ireland is “not on track” to meet its 2030 greenhouse gas emission targets.
There is now a need to make “faster progress in putting emissions on a sustained downward trend”, the report says.
“Meeting the ambitious climate targets of reducing greenhouse gas emissions by 51 percent from 2018 levels by 2030 and achieving climate neutrality by 2050 will also require substantial reforms and investment.”
Housing is another area of concern.
The report says that the government will have to work harder to make housing more affordable. The Housing for All plan may not fully meet rising demand, the OECD warns.
“Policies to increase housing density, improve land use and planning, and boost productivity and lower costs in the construction sector are needed for a well-functioning housing market. Ensuring adequate supply and funding for social housing would ameliorate living conditions for the most vulnerable, and help combat homelessness.”
Ireland’s National Development Plan up to 2030 allocates €165 billion for housing, the green transition, digital transformation and to healthcare.
“These investments are critical for future competitiveness and long-term growth but face capacity constraints, especially in terms of labour and skills.”
The OECD advises prioritising projects through careful “sequencing” to avoid causing short term inflationary pressure. Labour shortages could also act as a limitation on housing construction and green investments.
While economic growth is projected to remain robust into 2025-26, risks such as geopolitical fragmentation and rising inflation could dampen the Irish economy. The OECD urges “fiscal restraint” and improved efficiency in public spending to improve “fiscal sustainability” in the long term.
The OECD Economic Survey of Ireland is carried out every two years. It provides a “comprehensive analysis of economic developments”, the OECD says. The report highlights “key economic challenges”, but also makes “policy recommendations” advising how to address the most pressing economic issues.