Economy midway through `Golden Age', says broker

The economy should continue with its strong growth rising by 7.4 per cent this year, according to Goodbody Stockbrokers.

This is lower than the forecast of 8.4 per cent by Davy Stockbrokers last week.

Goodbody predicts a slight slowing to 7.2 per cent in 2001 but, in common with other brokers, rejects the boom-and-bust cycle prediction of over-heating.

The review maintains that rather than being on the verge of economic decline "the Irish economy is merely midway through a Golden Age".

"Talk of boom-bust is inappropriate in an Irish context," said Mr Colin Hunt, chief economist, Goodbody Stockbrokers.

"Ireland's economic performance in recent years is a reaction to a sea-change, a structural shift in the country's economic fundamentals.

"From a heavily interventionist, low value-added, fiscally chaotic economy, in 12 short years we have transformed Ireland into a high value-added, flexible, efficient world-beating entity."

He said a continuation of tax cuts to promote labour market supply and capital spending to enhance infrastructure would "help to sustain our growth going forward. Text-book management is dead and so it should be".

The Goodbody review says inflation should average 3.3 per cent this year.

In addition, real income growth for the average household should ease to 5.2 per cent from an estimated 12.6 per cent last year.

It also says net immigration of 20,000 a year is needed.

"If the Government continues with its controversial but efficiency enhancing individualisation proposals, this will align the UK and Irish tax regimes by 2002, thus enabling us to remove barriers to mobility in the labour market and compete with the UK for the same pool of workers," said Mr Hunt.

The greatest threat to growth, he added, was posed by wage inflation.