The economy will perform far better than the Government expects, with surging employment the main driver, according to the latest forecasts from the Economic and Social Research Institute (ESRI), writes Una McCaffrey.
The institute also argues that concerns over declining productivity are overdone, judging that there has been no strong evidence of such a trend.
In a commentary to be published this morning, the ESRI predicts the economy will grow by 5.7 per cent this year.
This compares to the Government's own growth forecast of 5.1 per cent and is also significantly ahead of official growth figures for the year to date.
Data published by the Central Statistics Office (CSO) at the end of last week showed the economy grew by 4 per cent in the second quarter, following growth of 2 per cent in the first three months.
Dr Alan Barrett, new co-editor of the ESRI's quarterly commentary, was careful yesterday to point out that the institute is not saying the CSO is wrong.
Instead, he said, the ESRI is presuming a higher productivity among workers. The CSO is more of the view that recent employment growth has come in low-productivity areas.
The ESRI warns, however, that the economy has laid itself open to a number of risks, most notably on the employment front.
While the availability of jobs is not expected to cause problems over coming years, the institute is concerned that the State could be facing into "structural unemployment".
In effect, this would see jobs left unfilled because potential employees do not have the necessary skills, thus leading to a rise in unemployment among certain groups.
The theory is that job losses in areas such as manufacturing and agriculture have, to date, largely been absorbed by the fast-growing construction sector.
When construction slows, however, this "safety valve" will disappear, thus potentially leading to joblessness among workers who may not easily transfer into other sectors.
Dr Barrett noted yesterday that many immigrants could, in particular, fall into this "structural unemployment" category.