Irish economic growth 'to slow'

Ireland's government needs a steady hand to steer the economy

Economic growth in Ireland has lost much of its momentum this year as the global economic slowdown begins to bite, according to a report by the International Monetary Fund (IMF).

Output growth should continue to slow in 2002 and beyond as the maturing expansion converges to a more sustainable rate

International Monetary Fund

Last year's runaway 11.5% gross domestic product (GDP) growth is expected to slow to 7% this year with a further slowdown next year, the IMF predicted in its concluding report following its consultation with Ireland.

The slowdown is not all bad news for Ireland, though, given that its economy has expanded at breakneck speed for several years.

"Signs of potential overheating appeared during 1999-2000 [but] recent developments point to a moderation in growth to a more sustainable, albeit still high, rate," the Fund said.

"Output growth should continue to slow in 2002 and beyond as the maturing expansion converges, [again] to a more sustainable rate," the Fund added.

Sustainability is key

During the past five years, the Irish economy has raced ahead, with average annual GDP growth of 9.5%.

House prices have rocketed in Dublin

Such rapid growth caused both house prices and private sector credit growth to rocket, although this year the growth of both have slowed.

Last December, house prices had risen 21.3% in a year. By May, house price inflation had slipped back to 18.4%.

Credit growth, meanwhile, peaked at 35% in March 2001. By May this year, it had fallen to 18.7%.

Confidence hit

Ireland's output growth began to slow down during the first half of this year as both consumer and producer confidence was hit by trouble both in the technology sector and elsewhere in the global economy.

In addition, foot-and-mouth restrictions that prevented people from moving freely around Ireland further dampened economic growth, the Fund said.

"However, easy monetary conditions, strong growth in disposable income, and low unemployment should support private consumption and residential investment growth and cushion the slow-down," the Fund stated in the report.

Unemployment fell to a historic low of 3.7% during the quarter ending in February this year.