The economy is expected to recover next year after the slowdown in the housing market bottoms out, according to a report published to day by Davy stockbrokers.
Following a year of below-trend growth of 2 per cent in 2008, growth is expected to strengthen next year to 3.5 to 4 per cent and maintain that growth rate until 2011 as the impact of the housing slowdown recedes. It notes that house prices fell 10 per cent in 2007 and are likely to fall by a similar percentage this year.
It notes that this growth rate will be far in excess of the 2 to 2.25 per cent average expected in the euro zone area. Over that period the net inward migration will slow although the population will grow about 1.5 per cent on average until 2011.
It expects net migration to halve to just 45,000 this year compared with 2007 and for migration to fall to just 20,000 by 2010.
Despite slowing immigration, the Davy report expects the labour force to grow by 1.5 per cent a year until 2011 and may grow more quickly as female labour force participation rates rise in the 25 to 54 age group. The report notes that the participation rate of Irish women in the 35 to 44-year-age group was the lowest in the former EU-15.
According to Davy fiscal policy will underpin demand with the State's debt to GDP ratio of 25 per cent comparing very favourably with the average of 61 per cent in the EU-27 states.
Other factors expected to contribute to the State's higher growth rate from 2009 are the relatively low labour taxes and strong educational investment which sees Ireland having one of the largest proportions of 25 to 34-year-olds with a third-level qualification.