Central Bank: Irish economy continues to perform

The Central Bank said today that the Irish economy is continuing to perform well as it published its annual report for 2004.

Speaking at a press briefing to launch the annual report, Central Bank Governor John Hurley said that they forecast growth of 5.25% GNP (GDP 5.5%) this year, about the same as 2004.

Mr Hurley said: "Most indicators would point to the Irish economy continuing to grow strongly at a rate of about 5% over the next few years.

"As a very open economy, the performance of Ireland is significantly dependent on the global economy, the prospects for which are broadly favourable."

The Governor welcomed the development of a lower inflation environment in Ireland but said: "It is necessary now to embed the low inflation regime that we have experienced in order to protect our competitiveness".

"Internationally we have seen a sharp increase in oil prices and uncertainties remain in this regard. Unfavourable moves in exchange rates could also impact on growth.

"Domestically, there are also some risks, the main ones being the high and growing level of indebtedness, threats to competitiveness and the expanded construction sector."

He welcomed the recent slowdown in house price rises but said the main concern now is both the rapid growth and high level of indebtedness in the economy.

"Total private sector credit is growing at an annual rate of about 25%.

There is no longer any doubt that the private sector is highly indebted by international standards and that this level will very soon match the levels recorded in Europe's most indebted economies.

"This is occurring at a time of historically low interest rates so that any significant increase in rates or downturn in economic activity in the future would cause problems, particularly for recent and more highly indebted borrowers."

The Annual Report includes the Bank's financial results for 2004.

Profit for 2004 in the Central Bank amounted to €122.5m, an increase of €53m on the previous year.

The surplus income paid by the Central Bank to the Exchequer in respect of 2004 is €103m.