The Irish economy will stabilise during 2010 and a “meaningful recovery” will be under way by the end of the year, according to Merrill Lynch portfolio strategist Bill O’Neill.

It is possible that the economy could grow by as much as 3.5 per cent in 2011 if a “solid rebound in global trade” materialises.

However, he warned that Ireland’s private sector indebtedness could prove a drag on the economy, while the fragility of the banking sector remained a difficulty.

“I don’t see any return to Celtic Tiger growth rates, which were debt-fuelled,” he added.