Embargo: Tuesday April 25th 2006 at 00.01a.m.

Some of the main findings of the analysis include:

Strong economic growth will continue in 2006 with GNP forecast to grow by 5.1 per cent and GDP forecast to grow by 4.8 per cent. For 2007, we are forecasting GNP growth of 5.3 per cent and 5.1 per cent for GDP.

Domestic factors will remain the key drivers of growth. Consumption is forecast to grow by 5.9 per cent in 2006 and by 6.4 per cent in 2007. The higher rate in 2007 is related to SSIAs as most accounts will mature in that year. Investment will remain strong with growth rates of 7.8 per cent and 6.9 per cent forecast for 2006 and 2007 respectively. We are also expecting government expenditure to rise in the run-up to the General Election although we warn against this.

We forecast an improvement in Ireland's export performance with growth rates of 3.5 per cent in 2006 and 4 per cent in 2007. However, the growth in Ireland's exports is forecast to continue to be below the growth in world exports. Hence, Ireland's share in world trade will continue to decline in both years and this is a concern.

Employment creation is expected to remain strong with forecast increases of 67,000 and 60,000 jobs in 2006 and 2007 respectively. Our projections are for gross immigrant inflows of 53,000 in 2006 and 48,000 in 2007.

Given the poor performance of exports in recent years, we examine the evidence linking Ireland's declining competitiveness to this poor performance. As inflationary pressures appear to have contributed to the eroding of Ireland's competitiveness, the government needs to ensure that it does not add to the problem through an overly stimulatory use of the public finances. For this reason, we call on the government to avoid the situation that arose before the last General Election when very large increases in public spending were allowed. We also call on the government to follow the recent recommendations of the OECD on competition policy and to generate greater competition in areas such as pharmacies, pubs and the legal profession.

On house prices, we draw attention to the OECD finding for mid-2005 of a 15 per cent overvaluation. Given the acceleration in prices since then and the increase in interest rates, we believe that the possibility of there being a bubble has now increased. We add our voice to those expressing concern about the possibility of a bubble bursting. However, this does not imply that a sharp fall will occur. A soft landing is still the more likely outcome.

A Press Briefing will be held at the ESRI on Monday April 24th 2006 at 11:00am.

For further information contact:
Dr. Alan Barrett ESRI @ 6671525 (office) 086 3395390 (mobile);
Dr. Ide Kearney ESRI @ 00 31 206930020 (office);
Yvonne McCarthy ESRI @ 6671525 (office).