The economy would have slowed significantly this year, even if there was no collapse in the tech industry, and if foot-and-mouth had never threatened the Republic. From now on, we should expect growth rates of around 5-7 per cent, rather than the 10 per cent a year that we have become used to.

The reason for this is straightforward. The economy's resources are growing at a sufficient rate to allow the economy to grow at around a 5 per cent pace. This is known as the "trend" rate of growth, although a better term might be its "natural" rate of growth. But, in fact, the economy has actually been growing substantially faster than this. No economy has ever been able to grow faster than its trend or natural rate for ever, because the only way it can do so is to dip into its "reserves" and, like any reserves, those do not last forever.

Why is it said that trend growth is around 5 per cent? The rate at which an economy can grow is determined, in the main, by just two factors. These are the rate of increase in the workforce and the rate of productivity increase. This is the same for any organisation, if you think about it. Any company can only grow its output either by increasing its workforce or increasing the efficiency of its workforce.

In the case of the Republic, the rate of potential increase in the workforce depends firstly on the increase in the working-age population and, secondly, on the percentage of the working age population that are actually available for work.

For the past several years, the growth of the population aged between 20 and 65 has been around 2 per cent, while net inward immigration has actually been quite steady, varying in a narrow range between 19,000 and 23,000 per year, although there have been recent indications that the pace may have picked up this year.

There is no real way of knowing just how many people can or will immigrate to this country per year, but we can see that the level of immigration has been very steady over the past three years, at a time when unemployment was low and the economy strong. So despite some recent indications, it hardly seems likely that there will be any significant increase from now on - particularly given the high level of house prices here, which must by now be a real deterrent to potential immigrants.

So if the workforce is to increase any faster than the 2 per cent pace at which the working population is set to rise, per year, then we would need to see a higher percentage of the adult population actually working. But unemployment is now at a very low level and few extra workers can be found from the ranks of the unemployed.

It may also be difficult to increase the percentage of women working outside the home. As recently as 1997, 42 per cent of women were in paid employment but last year that proportion had risen to 48 per cent. Although the percentage of women working is still lower than the EU average, it is now much closer than it was and childcare facilities are far less readily available than they are in most other countries, which will reduce the potential increase to about 0.5 per cent per year.

So far, we can conclude that the labour force is growing at a little more than 2 per cent per year, and neither higher immigration, a larger percentage of women working outside the home, nor a further large reduction in unemployment is likely to significantly boost that figure.

So for the next few years, it seems likely that the number of people available for work will grow by a maximum of 2.5 per cent per cent per year (2 per cent population growth plus about 0.5 per cent extra due to more women working outside the home).

The other side of the equation is productivity. If production in the economy is more efficient, the economy can grow more quickly than the speed at which the workforce grows. The Organisation for Economic Cooperation and Development estimates that productivity rose by a little more than 3 per cent in 1999, by about 6 per cent last year, and will grow by around 4 per cent this year. Taking an average implies that productivity growth has been increasing by a little more than 4 per cent per year recently.

However, we should also note that productivity has been dramatically stronger in the hightech sections of the economy than elsewhere, but that these sectors are unlikely to grow as quickly over the next few years as they have been over the past decade. A better forecast for productivity growth is probably around 3.5 per cent to 4 per cent.

This means that the "normal`' rate of growth for the economy (combining the growth of productivity with the growth of the workforce) should be a little more than 6 per cent - which is in fact the rate of growth I expect this year.

More importantly, however, it means that it's most unlikely that the economy will rebound to anything like last year's 11 per cent figure, either next year or for the foreseeable future. So the real days of the boom are over, in my view. Growth rates of 6 per cent or so will be the order of the day - not disastrous by any means, but a good deal lower than we have been used to.

Eoin Fahy is chief economist with KBC Asset Management. The views expressed in this article are those of its author, and do not necessarily represent the views of KBC Asset Management.