Ireland’s strong economic growth to continue

IRELAND’S strong economic growth will continue for the foreseeable future, top economists said yesterday.

The Economic and Social Research Institute (ESRI) forecast Gross Domestic Product would grow by 5.7% this year.

The Quarterly Economic Commentary from the ESRI highlighted a slight rise in consumer price inflation to 2.5% in 2006, compared with an expected average of 2.3% this year.

ESRI economist, Dr Alan Barrett, said: “Employment growth continues to be remarkably strong. However, the concentration of much of that growth in construction raises a concern about future developments in the labour market.”

The rate of unemployment is expected to average at 4.2% this year and next.

The commentary said unemployment had remained low as gains in the construction industry had offset job losses in manufacturing and agriculture industries.

However, the ESRI economists behind the commentary warned this raised a question of sustainability as the employment gains were so concentrated in the construction sector.

The commentary warned the possibility of future increases in unemployment for both Irish and immigrant workers remained.

The economists said the year-on-year employment increase of 93,000, or 5.1%, suggested the economy is performing extremely well.

On employment, the economists forecast an average of 1.945 million in 2005, an increase of 80,000 over the 2004 average figure.

Due to a slight decline in house construction, the economists forecast employment growth will be lower in 2006. They said a second concern was the threat of global imbalances to the world economy.

The commentary said the possibility remained of a dollar decline or a sharp fall in US imports.

The commentary stated: “In spite of oil price increases and hurricanes Katrina and Rita, forecasts for global growth remain upbeat mainly because of strong performances in the US and China.

"However, closer to home, the British economy is now performing less well than in recent times and hopes of a sustained recovery in Germany were dealt a blow by the inconclusive election result.

"The reduced probability of a sustained recovery in Germany has led us to believe that any increase in interest rates in 2006 is now more likely to happen in the final quarter.”

The economists said this would be positive for growth in Ireland.