Economy slowing after seven remarkable years

After seven years of remarkable growth the Irish economy is showing signs of slowing, according to the Central Bank.

In its summer bulletin published today the Central Bank said the impact of the US economic downturn and foot-and-mouth disease will lower economic growth to 6.5 per cent this year.

With the economy at full capacity inflation is still a threat Central Bank's assistant director general Mr Michael Casey.

But the Government can still engineer a soft landing for Ireland by taking a cautious fiscal stance in the next budget, the Central Bank's assistant director general Mr Michael Casey said.

Mr Casey said a growth rate of 6.5 per cent is still above what the Central Bank says is the sustainable rate of growth for Ireland. "With the economy at full capacity inflation is still a threat," Mr Casey added.

The bank expects a fall in foreign direct investment this year as a result of the slowing US economy. Export growth will fall sharply from 20 per cent in 2000 to 10 per cent this year due to the US downturn, according to the bank.

But the sluggish performance of domestic firms is of greater concern to the bank. Manufacturing output of Irish firms is expected to grow by around 4 per cent this year compared growth of 12 per cent in the entire manufacturing sector.

With wage growth still rising at over 10 per cent per annum Irish firms will struggle to meet such pay demands with that level of performance, according to Mr Casey.