Irish Economy Could Grow 3.75% Annually over Next Decade

Favorable trends in labor supply and productivity should keep growth above average.

Ireland's economy has the potential to rebound and grow by about 3.75% each year over the coming decade despite significant short-term problems, a the Economic and Social Research Institute (ERSI) said on May 14. The analysis is a boost for new Irish prime minister Brian Cowen, who last week stepped down as finance chief to replace Bertie Ahern in the top seat.

"When the current global economic slowdown ends, with appropriate policies the economy should recover quite rapidly," ERSI said. "Even if current difficulties prove more severe than anticipated, the economy is resilient and a global recovery would still see it rebound."

The latest study said the prospect of continuing medium-term growth above the EU average was underpinned by favorable trends in labor supply and in productivity. "While unemployment is currently rising, with a flexible labor market there should be a return to full employment. Despite current difficulties in building and construction, the economy needs continuing substantial investment in housing and infrastructure over the coming decade," it added.

"Exports of business and financial services are a vital contributor to growth. Domestic factors, including fiscal policy and the labor market, now have an increased influence on competitiveness", the study said.

In its quarterly commentary in March ESRI forecast that Ireland's economy would grow at the slowest pace for 17 years in 2008 because of an end to the country's housing boom amid the global credit crunch.

Copyright Agence France-Presse, 2008

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