The Economic & Social Research Institute (ESRI) has painted too bleak a picture of the impact on the economy of the terrorist attacks in the US, private sector economists have said.

Most are forecasting growth of around 5 per cent next year, compared with the more bearish forecast of 1.8 per cent contained in the ESRI's medium-term outlook, published on Thursday.

"I can't see the conditions being such as to create growth rates as low as the ESRI is talking about," said Mr Dermot O'Brien, economist at NCB Stockbrokers. "It's a bit alarmist frankly."

Mr O'Brien, who expects growth in gross national product (GNP) of around 5.5 per cent in 2002, believes the core elements of growth will remain secure, driven by domestic influences such as the strong demographic situation.

He notes that in the past, the Irish economy has performed poorly only when there have been significant negative influences on domestic activity such as the sharp rise in interest rates seen during the 1992/93 currency crisis.

Economists point to figures released yesterday, showing the Irish economy grew strongly in the first quarter of 2001. Quarterly national accounts data released by the Central Statistics Office (CSO) showed that GNP grew by 11.6 per cent and gross domestic product rose by 13.2 per cent in the first three months of the year. The data, which provide the first growth snapshot for 2001, show industrial output was particularly strong, rising by 26 per cent.

"This biases the whole average growth rate for 2001 up," says Dr Dan McLaughlin, economist with Bank of Ireland. Even if the economy was to record zero growth over the remaining three quarters of the year, the strength of the first-quarter figures would result in a full-year average growth rate of 3.5 per cent, he said.

Dr McLaughlin, too, is more optimistic about the outlook for this year and next than the ESRI, forecasting a growth rate of about 4.5 per cent in 2002 on top of a rate of 6.75 per cent this year.

Economists also note that while the downturn in the US may be sharp, it was not expected to be protracted with many commentators expecting the US economy to bounce back as early as spring of next year.

"The magnitude of the monetary and fiscal stimulus in the US means that recovery is inevitable toward the back end of next year," says Goodbody economist, Mr Colin Hunt, who is also predicting a 2002 growth rate of close to 5 per cent.

Only Davy Stockbrokers shares the ESRI's pessimism. The broker has cut its GNP forecasts for this year to 3.9 per cent from 5.4 per cent while next year it is expecting growth of 1.1 per cent, down from its 4.5 per cent forecast last July.

"We believe the trading environment for the economy over the balance of this year and into 2002 will remain difficult," Davy said. "Growth rates in the US economy could well be negative for several quarters and any substantial upturn is unlikely before the middle of next year."

Meanwhile, employers' group IBEC said it was concerned about the suggestion in the ESRI report that the rate of corporation tax should rise after 2010. "This is not the kind of comment that would inspire the confidence of investors, whether manufacturing or market services, and could do untold damage," IBEC economist Mr David Croughan said.