The OECD has forecast that the Irish economy will grow by 5% this year and next year, helped by strong domestic demand.
But in its latest World Economic Outlook, the Paris-based think-tank said wages were rising faster than productivity, and this could affect future economic performance. 'It is important that wage settlements in the current round reflect productivity developments,' the report said. It also called for the removal of what it called 'anti-competitive regulation in services'.
Overall, the OECD report said the world's industrialised economies were growing at 3.1%, but it warned that the US may have to raise interest rates further. It stressed the dangers from global imbalances, mainly US trade and current deficits, and quoted estimates that for the trade account to balance the dollar might have to fall by a third to a half.
Raising its global 2006 growth forecast by 0.2 percentage points from an estimate six months ago, the OECD said that the US, euro zone and Japanese economies might 'grow slightly above trend' in the next few months.
It forecast that the 30 OECD countries were set for growth of 2.9% in 2007, the same figure it signalled in November. 'Expansion is strengthening,' the report declared. Consumer demand 'is at its highest level since the late 1990s,' it said, but warned that house prices in several countries were too high.
In the euro area, the OECD said economic figures had not yet confirmed that spare capacity in the economy was shrinking. This was seen as meaning that the organisation does not think the ECB should raise interest rates further yet. The US Federal Reserve has increased its key rate several times to 5%, and the ECB has begun to tighten to 2.5%.
