Central Bank optimistic that economy is set for soft landing

The economy is on target for a soft landing, according to the governor of the Central Bank, Mr Maurice O'Connell. In a rare public address, the governor said the impending slowdown was a positive development. He expects the Irish economy to grow by 6 per cent this year which "by anybody's standards is very good", he said.

The levels of growth experienced in recent years were unsustainable and "we want an orderly slowdown", the governor told the Ireland France Chamber of Commerce yesterday.

Mr O'Connell, who holds Ireland's seat on the European Central Bank, said the bank had wanted to see a slowdown for some time but had been unable to engineer one. "It now appears that outside factors are bringing us slowly to a soft landing," he said, referring to the downturn in the US economy and the impact of the foot-and-mouth epidemic in Britain.

The governor's relaxed comments come after a week in which the Economic and Social Research Institute predicted growth would fall to 6.1 per cent this year and 5.2 per cent next year. The Department of Finance also revealed this week that tax revenues were growing more slowly than predicted for the first time in more than a decade.

The Irish economy did not have the capacity to sustain growth of more than 4 or 5 per cent a year, said Mr O'Connell yesterday. "We are not in a bubble situation - as long as we continue to behave with common sense," he said.

The governor added that there were also welcome signs that credit growth was finally slowing, following its dip below 20 per cent last month. Credit growth has been one of the main concerns of the bank which has written to the commercial banks on several occasions asking them to tighten up their lending policies.

Mr O'Connell did warn that competitive gains made by the economy in recent years had been on the back of a weak euro and could disappear very quickly if the euro strengthened.

He defended the two-year old single currency, while admitting it was a project with "a lot of baggage" and no real track record. "It will become a powerful symbol of European identity and a serious challenge to the power of the dollar," he predicted.

Mr O'Connell also spoke out in defence of the European Central Bank, saying two years was a ridiculously short time to try and evaluate its performance.

The bank had fulfilled its primary mandate, low inflation and price stability, he said.

The governor said the reality was that Ireland no longer had an independent monetary policy. "Ireland is a region . . . Europe is never going to hold its breath over events in Ireland," he said.

He tempered his remark by pointing out that Ireland never had much real independence when it came to monetary policy even before the euro, as external factors tended to dictate events.

The Ireland France Chamber of Commerce 2000 award was presented by the French ambassador to Ireland, Mr Gabriel de Belsize, to Febvre & Co, the importer of high-quality French goods. The 2000 Emerging Company Award was given to Punch Industries for developing a product to stop colour runs in washing machines.