The OECD has advised the Government to stick to its planned €2 billion adjustment in the budget amid growing calls for a let-up in austerity.

In its biannual report, published today, the Paris-based think tank delivered an upbeat assessment of the Irish economy, predicting recovery would continue to strengthen throughout the remainder of this year and next.

However, it warned Ireland needed to implement the troika-agreed consolidation plan to keep the country's high public debt "firmly on a declining path".

Based on the troika’s forecast for the economy, a fiscal adjustment of around €2 billion is required to bring the deficit down to 3 per cent of GDP by 2015.

The OECD’s comments come amid a growing clamour for tax cuts in the upcoming budget.

Minister for Finance Michael Noonan has indicated he will reduce the tax burden on hard-pressed middle-income earners if resources permit.

In its latest economic commentary, the OECD projected the Irish economy would expand by 1.9 per cent this year and by 2.2 per cent in 2015, noting investment, including in the housing market, had “turned around”.

It said recovery would be further cemented by export growth, aided by a pick up in growth abroad.

The organisation forecast Irish employment growth would continue to bring down the country’s jobless rate, while “spare capacity” would help keep wage and price inflation subdued.

Nonetheless, it warned the process of restoring health in the banking sector must be reinforced by continuing to reduce the elevated level of non-performing loans and repairing the bank credit channel.

“Improving the public employment service and activating the long-term unemployed must remain a priority to ensure the recovery benefits society as broadly as possible.”

“Growth potential should be boosted by complementing high attractiveness to foreign investment with further efforts to foster innovation across the whole economy and to ease firms’ access to capital.”