Irish economy cheered on by OECD

The Irish economy has expanded beyond expectations

The Irish economy has enjoyed a decade of "remarkable" growth but is facing clear risks, says the Organisation for Economic Cooperation and Development.

The OECD said that although Ireland had produced "exemplary" results it needed to boost competition, improve education and encourage enterprise.

It also called on the country to improve its infrastructure.

However, if growth slows down the economy is likely to experience a soft landing, the OECD added.

"Growth remains strong, foreign investment is still coming in, industry has shrugged off global shocks and house prices keep on climbing," it said in an economic survey of the country.

The economy doubled in size in the 1990s, achieving the fastest growth in the OECD over that period.

Bottlenecks

However, Ireland's infrastructure has come under severe pressure due to the "extraordinary" growth in population and economic activity.

Ireland has continued its exemplary economic performance, attaining some of the highest growth rates in the OECD OECD

Bottlenecks have emerged that may put a brake on growth, the OECD is warning, while lack of competition in the retail sector is pushing up consumer prices.

Pressure is evident especially in the areas of transport, electricity transmission, landfill, waste water treatment and broadband internet.

Insufficient investment in environmental infrastructure has led to pollution and soaring prices for some services such as landfill which the government is hoping to tackle.

Property pressures

The key domestic risk is the housing market, the OECD warned.

In the past decade, house prices have risen faster than in any other OECD country, with average prices having tripled in real terms.

Although prices may have overshot to some extent, prices are expected to level out or fall only slightly rather than crash.

Ireland's tax system is much more supportive to housing than in most other OECD countries, the report said, which could further underpin the property market.

The OECD advised the government to avoid any tax changes that make housing more attractive.

If prices are too high, it could deter foreign investors from settling in the country.

"Ireland has continued its exemplary economic performance, attaining some of the highest growth rates in the OECD," the report concluded.