Will we become even wealthier?

What lies behind the recent success of the economy? Both long-term and short-term factors have contributed. One of the reasons why growth has been so strong is that the economy is getting a "payback" for years of investment in education and training. The billions of pounds spent with EU support in building up our industrial infrastructure are also paying off.

Meanwhile, overall economic conditions have been relatively stable for a couple of years. Relatively low and stable interest rates and a low rate of inflation have helped to build confidence and this has encouraged consumers to spend and businesses to invest.

And what has been the result?

All areas of the economy have expanded rapidly. In earlier years, much of the growth was concentrated among multinational exporters, while the rest of the economy remained flat. But now there is expansion across the board. As well as a strong performance from the foreign-owned sector, indigenous industry is also doing well.

And the result has been a strong lift in retail spending and in investment by business. The level of economic growth has averaged over 7 per cent for the last four years, an unprecedented performance by the Irish economy and one for which there are few international parallels.

How important has the flow of inward investment been?

The multinational sector has been a key contributor to economic growth. Overseas industry now employs well over 100,000 people and generates as many jobs again in other areas of the economy through the wealth it creates.

Looking at the fast-growing electronics sector, for example, total employment has been rising at more than 3,000 a year and is now well over 30,000. However, the closure of Seagate in Clonmel in February will hit this performance, as well as being a major blow to South Tipperary.

Can strong growth continue?

Most forecasters expect 1998 to be another good year for the economy. Economic growth - as measured by the rise in Gross National Product - is again expected to be 6 to 7 per cent. So far the rate of inflation has remained subdued, although it may start to pick up to an annual rate of 2 per cent moving into next year.

Another strong year for the jobs market is expected and the total number of people in employment is likely to continue to rise by 40,000 to 50,000 per annum.

What are the dangers?

In the short-term, there is a risk that inflationary pressures will start to affect the economy. Already house prices are racing ahead and the Government has initiated a study to look at what lies behind this and what might be done about it. Overall a high rate of growth in lending from banks and building societies is worrying the Central Bank, which is concerned that it will lead to an inflationary bubble in areas like the housing market which will then spread to the general economy.

However, the consumer price index inflation figures continue to show a moderate trend, with a year on year rise of 1.6 per cent to November. This was higher than market analysts had expected, but was still one of the lowest rates of inflation in the EU.

What about EMU?

Economic and Monetary union is approaching fast. It is due to commence on January 1st, 1999, and this State looks set to be one of its founder members. This will pose an entire new set of challenges for both Government and for business.

One of the key factors is that Britain will not be a member of the first group moving to monetary union, meaning that Ireland will be exposed as a euro member to swings in the value of sterling.

And how will we fare inside the single currency?

This State is likely to enter the single currency in a healthy condition, with economic growth set to remain high next year and the exchequer finances in a relatively flush position. Businesses here should be competitive enough to survive inside the single currency area, although in the years ahead monetary union will lead to new waves of rationalisation and competition sweeping across European industry.

There will be winners and losers in Irish business if the concept of monetary union succeeds and leads to a truly single market across Europe. Also, economic policy will increasingly be set at EU-level, rather than nationally by the Government here.