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OECD Economic Surveys: Ireland 2008

image of OECD Economic Surveys: Ireland 2008

This 2008 edition of OECD's periodic survey of the Irish economy finds that it has performed remarkably well over the past decade, propelling per capita income to above the OECD average. Economic fundamentals remain strong, but economic activity is now easing. The survey examines some of the key challenges Ireland now faces including maintaining growth, the housing market slowdown, financial stability, adapting government spending to slower revenue growth, reforming the pension system, and integrating migrants.

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The housing market cycle has turned

After many years of sustained growth, the housing market has slowed: house prices are falling and there has been a sharp reduction in the number of new homes being built. The exceptional rise in property values in recent years was largely driven by higher income and demographics, but did appear to overshoot the sustainable level. House prices may ease further and could even fall below their long-run value. Residential investment is experiencing a sharp slowdown. This will have some effect on wider economic activity. If a more severe slowdown occurs, the housing market could pose risks for economic growth and the financial system. Phasing out policies that distort the housing market could help to dampen future housing cycles and maintain the competitiveness of the economy.

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