The Republic will be able to maintain economic growth rates averaging 5 per cent a year, provided domestic policies are sound and conditions in the global economy remain benign.

David Croughan, the chief economist with employers' representative organisation Ibec said the policy priority in this context must be not to allow inflation embed itself in the economy.

He said that high inflation caused by a weakening exchange rate and high oil prices had become embedded in the economy in 2000, following a rapid rise in wages and a sharp rise in Government spending.

The loss of competitiveness as measured by the Central Bank's real trade weighted index was 28 per cent between 2002 and the end of 2004, he said.

"As we enter, hopefully, another phase of relatively strong growth, we must ensure that competitiveness does not slip further," he said, adding that there were already danger signs such as wage increases running ahead of the euro area average and service inflation creeping upwards.

He said that a very low rate of inflation in the delivery of public service must be built into any negotiations on a successor to the current national wage agreement. He also warned that a fall in the value of the euro "could not be used to accommodate unwarranted wage increases".

Mr Croughan predicted that the global economy would slow this year as oil price increases exerted some drag and US economic growth moderated. He said that Irish economic growth - in GNP terms - would drop back to 4.7 per cent before returning to 5 per cent in 2006.

"The impetus for growth is likely to come more from consumer spending which had been weak in recent years and continued strong expansion of the services sector," he said.