The bulls were right. The economy did continue to grow in double-digit figures last year and there is no slowdown in sight.

Data released over the past couple of weeks paints a quite remarkable picture. The economy was growing at round 11 per cent in terms of Gross Domestic Product at the end of September last year. Over the first five months of 2000 there has not been any sign of a slowdown and it is quite possible that, when the figures for the whole of 1999 and, indeed, possibly 2000 are published, this will have continued.

But can the State sustain these levels of growth? The first concern is inflation. Consumer prices here are rising at almost 5 per cent. Domestic-induced services inflation is far higher and many commentators believe it could be running at up to 10 per cent by the end of the year.

The question is: does this matter? There are a number of ways of answering this. The argument as espoused by Dr Dan McLaughlin, chief economist at ABN-Amro - one commentator who last year predicted the continuing rapid growth - is that inflation simply does not really matter any more.

In pre-euro days, rising inflation would have meant a sell-off of the currency which would have prompted higher interest rates, he argues. That cannot happen now.

The currency, the euro, is indeed being sold off but not because of Irish inflation, and interest rates are not likely to rise above 4 per cent for a while.

In addition, the argument goes, most inflationary pressures here are determined by outside forces and there is nothing the authorities can do about either the weak euro or rising oil prices.

It is even possible that these may come to work in our favour. If the euro starts to rise against sterling - a trend that may already have started - and oil prices continue to fall, in a year's time we may all be wondering what the fuss was about.

The other problem in this situation would be a deteriorating balance of payments situation, as is happening in the US. But the main reason that the Department of Finance, the Central Bank and others got their growth forecasts so wrong last year was that they forecast a deteriorating balance of payments which simply did not happen.

In fact, according to Dr McLaughlin, the number of multinationals investing here is still growing and we are now the Silicon Valley of Europe. Even a downturn in the US economy, he argues, is unlikely to do much to growth here.

The most recent figures suggest that US multinationals get a significantly higher rate of return on capital investment here than anywhere else in Europe - 35 per cent in 1998 compared with 9 per cent across Europe. They may decide to move to Poland or Slovenia in the future but, for the moment, it is not looking likely.

The data suggest that Ireland's advantages - principally that it is low tax, relatively low wage and English speaking - continue to be far more attractive than what is being offered elsewhere. As Dr McLaughlin points out, of the 11 European Central Bank governors, only Mr Maurice O'Connell is a native English speaker and that is particularly attractive to Americans.

Of course there are problems with this benign inflation thesis. Anyone with a fixed income in particular, or indeed just a regular salary, is seeing the benefits eroded more and more quickly. Pensioners are feeling the pinch and bank officials only received average pay rises of 3.5 per cent last year according to the most recent Central Statistics Office data, far behind public servants, construction workers and others.

There are other ways for inflation to rear its head. The State is getting more difficult for many to live in and, for many, the quality of life is deteriorating.

According to Mr Jim Power, chief economist at Bank of Ireland, another couple of years of growth of around 10 per cent would put intolerable pressures on the system.

He argues that the economy is simply running free and no efforts whatsoever are being made by the authorities to control it. This will lead to serious consequences for the environment, for congestion generally and traffic in particular, for labour costs, for air pollution and for infrastructure.

He even goes so far as to argue that the u1 £1 billion (€1.27 billion) in tax cuts in the last Budget would have been better directed at improving infrastructure more rapidly than it is being done.

He admits it is highly unlikely the economy is going to crash or indeed lose serious competitiveness in relation to other EU countries. Nevertheless, he argues that growth for growth's sake is no longer enough.

Of course the more growth in the economy, the more borrowing by consumers and business and the more vulnerable the whole edifice in the event of a shock. The point is that there is no obvious shock coming any time soon. But that is also the nature of shocks . . . they are very rarely seen coming.