Ireland's once-booming economy needs to ensure that both income expectations and public finances adjust to slower growth, the OECD warned this morning.
Bringing wage demands under control was required to guard against a deterioration in competitiveness on overseas markets, according to the Paris-based Organisation for Economic Co-operation and Development.
Rigorous control over public finances would help boost fiscal sustainability and the maintenance of a supportive tax environment in the aftermath of the so-called "Celtic tiger" economy when Ireland enjoyed double digit rates of economic growth.
"Over the longer term, the broad aim of the authorities should be to ensure that the economy will continue to grow at a reasonably high rate and that policies will be more clearly oriented towards protecting interests of consumers rather than producers, notably through enhanced competition in service sectors," the OECD added.
Last month, the OECD predicted that gross domestic product growth in Ireland would slow to 3.25 per cent this year before accelerating in 2004 as exports recover. GDP growth came in at 6.3 per cent in 2002.
The slowdown in the global economy has hit tax receipts hard, while foreign multinationals complain that soaring inflation - the euro zone's highest, exceeding four per cent - threatens Ireland's ability to attract foreign investment.