Irish growth is set to continue, although the risk of inflation in increasing, according to Morgan Stanley's Mr Kevin Gardiner, the economist who first dubbed Ireland the Celtic Tiger.
In his latest report, Ireland and EMU: A Tiger by the Tail, he warns that Irish savers could be badly hit inside the single currency by a unilateral rise in inflation.
According to Mr Gardiner, the recent Budget and our probable participation as a founder member of the single currency should keep us the fastest-growing economy in the EU, if not the OECD. However, he points out that, when the economy eventually falters, the Government's failure to run a large budget surplus may be seen as a wasted opportunity. The recent Budget will do nothing to slow things down, according to Mr Gardiner. In addition, the single currency will add a further stimulus in the shape of an "unnecessary" loosening of monetary conditions.
Mr Gardiner points to two "significant risks" for the Irish economy.
Irish savers and pensioners have most to lose under the single currency if the tiger turns wild.
If, or when, the next recession bites, Ireland's ability to reinflate unilaterally will be constrained
Overall, he remains optimistic that Ireland will continue to grow strongly in the years ahead - with only a modest upturn in inflation. "But the current predicament of the original Asian tigers warns against complacency," he says.
Mr Gardiner outlines a number of statistics which paint an extremely optimistic picture of the economy. In 1997, he says, the Irish economy seems likely to have grown by 8 to 9 per cent, compared to a likely rate of 2.5 per cent across Europe.
Our employment record is better even than that of the US - although measured unemployment remains stubbornly high. In addition, the inflation rate is only two-thirds of the EU average.
Mr Gardiner also points out that Ireland has not been troubled by the "twin deficits" that can bedevil even the mightiest economy. There has been a surplus in the balance of payments over the past six years, while the deficit is close to being in surplus.
He notes that this obscures the fact that the private sector's financial surplus is disappearing, implying that domestic savings will have to be rebuilt at some stage.
Anecdotes from the property market, according to Mr Gardiner, are "more evocative of late-1980s Tokyo than the Dublin of popular imagination".
It is the inflation risk to which he returns. Ireland's small size has underpinned much recent economic growth. It also means that the chance of us ever misbehaving enough to attract the attention of the new European Central Bank (ECB) are minimal. Consequently, even a sharp unilateral acceleration in Irish inflation would only have a tiny impact on the wider euro-zone and the ECB would probably leave euro rates unchanged. Thus, higher domestic inflation could have a negative impact on the real returns paid to savings and the real value of fixed nominal incomes, such as pensions and benefits.
