THE Economic and Social Research Institute has forecast another year of strong growth in the economy.
Forecasting 5 per cent growth over the next 12 months, the ESRI suggests that the rapidly expanding economy would support up to 31,000 new jobs.
But it warned that the resumption of violence and any further deterioration in the peace process would significantly damage prospects for the longer term.
In its Quarterly Economic Commentary, issued yesterday, the ESRI said that while the ending of the IRA ceasefire might not immediately contribute to a slowdown in economic growth, continuous conflict would damage it.
Sustained strong economic growth again this year would promote further job creation, according to the report, whose forecast of up to 31,000 new jobs in 1996 follows record increases of 49,000 last year.
Unemployment would, however, remain high, it said, signalling a moderate reduction in the number of people signing on the Live Register by year end. The ESRI expected that the number of people out of work would have dropped by around 3,000, bringing the number of people signing on the Live Register to 275,000.
It said the prospects for interest rates were good, with rates now likely to remain low for most of this year. A weaker British currency by the end of the year might pose a threat, with a modest rise in short term interest rates likely in that situation. Inflation would remain under control, with average rates expected to stay close to current low levels of 2.25 per cent.
The public finances should again outperform the Government's Budget targets, according to the ESRI, with a small current Budget surplus and the exchequer borrowing requirement coming in well below 2 per cent of GNP.
But any further "serious deterioration" in the political and security position would affect long term prosperity, according to ESRI economist, Dr Terry Baker. An early political solution to the violence would underpin further strong growth over the next three to five years, he stressed.
"If things stay as they are, we may see some small fall off in tourism in the short term. A bomb in Dublin, however, would seriously damage the tourist trade this year," said Dr Baker.
The immediate effects of a breakdown of the peace process would be mainly felt in the Northern Ireland economy, he added.