The Celtic Tiger may be in hibernation but it will re-emerge soon, according to economist Mr Eoin Fahy, who predicts annual growth of 5 to 6 per cent in the economy over the next number of years.
While Mr Fahy, chief economist at KBC Asset Management, believes the 10 per cent growth rate of the economy in the late 1990s was a one-off, he argues that 5 per cent growth is very high by international standards and is well achievable here.
Speaking at the annual meeting of the Irish Brokers' Association in Galway yesterday, Mr Fahy said things were a bit sluggish at the moment but there were many positives to the Irish economy, including a low corporate tax rate, very low wage costs in manufacturing compared to the US and other EU countries, at €15 per hour, and very low interest and exchange rates.
Ireland still had a highly skilled labour force in comparison to other countries and, along with the US, had the highest spend on education.
It also still had a young population and, even by the year 2010, one-third of the population would still be under the age of 35.
There may be doom and gloom in the high-tech industry, but Mr Fahy said the pharmaceutical sector was going from strength to strength in Ireland and this was a much more stable market.
September 11th was a day that changed the world in many ways and had been a blow to consumer and corporate confidence, he said, but global consumer confidence had not fallen as low as the last recession in August 1990 when Iraq invaded Kuwait, and it was recovering much quicker.
One of the reasons for this, he explained, was that the US interest rate had fallen to its lowest level in 40 years and there had been a huge €160 billion injection of government investment into the US economy over the past months.
A major challenge facing the Irish economy was the fact that public sector pay had increased at five times the rate of inflation over the past five years with no subsequent increase in services, said Mr Fahy.
"Pay in the health sector has well over doubled over the last five years.Does anybody believe that the quality of healthcare has improved over this period, never mind doubled?
"It is obvious that we will not solve this problem by throwing money at it," he said.
The public sector benchmarking report due to be released in June will decide whether nurses, teachers and other civil servants are entitled to a pay rise. Mr Fahy said media reports suggest this increase may be as high as 15 per cent and he said the Government would have to raise the higher tax band by 11 percentage points and the standard rate by five percentage points if it were to fund such a pay increase by taxation alone.
"This could have a major impact on the future financial outlook for Ireland, far more of an impact on Irish finances than the budget," he warned.
