The Irish economy will match last year's growth levels in 2006 despite rising interest rates and higher inflation, Minister for Finance Brian Cowen said today.
Mr Cowen said he expected gross domestic product growth of 4.7 per cent this year, in line with last year's figure, thanks to strong consumer spending.
"Domestic demand is an important factor, consumer spend is up," he told a Reuters news forum in Dublin.
Ireland 's economy has been transformed over the past decade by a low tax regime, high levels of foreign direct investment, a property boom and Government spending in infrastructure.
Rising euro zone interest rates would take some heat out of the economy but would not prevent inflation rising to 2.7 per cent from 2.5 per cent in 2005, Mr Cowen warned.
Asked about the impact of higher rates on Ireland 's economy, Mr Cowen said they might be a good thing given strong consumption, house price growth running at 11.1 per cent a year and an annual rate of inflation of 3.3 per cent in February.
The Minister had said late last year that he would prefer no changes in euro zone interest rates, but since then Irish house price growth has outpaced expectations and private sector credit is growing at nearly three times the European average.
Mr Cowen said he would maintain a responsible budgetary position ahead of general elections due by mid-2007 but added that the Government would need to continue to spend to make up for infrastructure and social deficits.
He said that a cap on immigration - which has helped to fuel Ireland 's strong economic growth over the past decade - was not an option.
Three-year "Social Partnership" deals between government, Irish employers and unions have helped keep inflation under control during the boom.
But talks on a new deal have been hampered by union protests over Irish Ferries' decision to replace local employees with foreign staff. Mr Cowen said he saw continued commitment to the system of social partnership from all sides.