Celtic Tiger II could devour us whole

SINCE the 1960s this State has made economic development its main target and the Celtic Tiger was the culmination of that effort.

Economic growth is half the level it was in the glory days of the Tiger, but it is still more than double the EU average.

A new report from NCB Stockbrokers forecasts that we will continue to outpace Europe and deliver growth of 5% or more over the next 10 years followed by five years of 4% growth.

How economists can make such predictions begs serious questions.

Authors of the report, Dermot O’Brien and Eunan King, claim the economy has an in-built momentum sufficient to carry it forward to 2020 at the rates forecast.

Driving this scenario is the growing population, which NCB says is set to surge from 4.1 million to 5.3m by 2020 and rising to six million by 2050.

To an extent the report does not more than extrapolate from the population figures to make predictions and reach conclusions.

If correct, we will have 3m cars on our roads by 2020, double the current figure, while the level of housing is set to be sustained at a figure of 65,000 per year for the next 10 years falling to 55,000 towards the end of the cycle.

The figures debunk the house bubble theory and affordability looks well within the scope of most people, claim the authors.

If interest rates were to go above 4% there might be problems but that likelihood is slim given the poor outlook for EU growth.

Put simply population growth will drive the economy and sustain house prices.

For the record NCB’s growth forecasts in 1998, when it issued its first major assessment of Irish economic trends, were scoffed at.

Overall those forecasts have proved uncannily accurate, giving some credence to the latest projections.

The two economists’ basic argument now is a continuation of their original theme that growing numbers of people will drive demand in the economy irrespective of what happens elsewhere.

The duo also raised eyebrows when they played down the importance of the multinational sector as not that critical in their overall take on what is in store for the economy.

Their key argument is that the rapid advance in our population has an in-built momentum that will continue to drive demand for the next 15 years at least.

There may be difficulties along the way, but nothing short of oil going to $200 (€166) per barrel will prevent the forecasts from coming true, according to Mr O’Brien.

If we fail to deliver the social and infrastructure back up those kind of figures will require then they could represent our worst nightmare.

Rising crime rates, the lack of crèche facilities, a creaking health service and an outdated road and rail network are issues on which those growth figures will have a serious impact.

This week Engineers Ireland warned of a looming energy crisis and of a waste management problem that is threatening to consume us.

Neither the health, infrastructure nor the waste management issues have been tackled while the underspend on the last National Development Plan was over €3 billion.

Our growth levels have long been putting billions of extra money into the State’s coffers but for the Ryder Cup in September the main road from Dublin to Kildare would still be inadequate.

Arguing about whether the NCB report is over the top is missing the point.

This economy looks set to deliver strong growth for quite some time.

Unless we do something to deal with the waste and other major health and social issues we may yet live to regret the return of the Celtic Tiger.

If the Government has any sense it will use this report as a springboard to action. We haven’t even tackled the issues created by the Celtic Tiger boom.

Those of you out there with concerns about quality of life and where this country is heading should start praying that the NCB report has got it badly wrong.