Immigration could accelerate growth

The economy has the potential to post cumulative growth of 45 per cent between now and 2016, with the performance to be fuelled by immigration, according to a new commentary from Goodbody Stockbrokers.

Growth of this magnitude would see the Republic expanding at more than twice the rate of the average euro-zone economy over the next decade.

Goodbody economist Dermot O'Leary said yesterday that the Republic has entered its second period of "above-trend growth" in less than 10 years.

"For this trend growth to be achieved, inward migration will play a vitally important role," Mr O'Leary said.

The newest EU countries will provide the greatest source of labour to fuel the new period of growth, according to the Goodbody analysis.

Mr O'Leary believes the economy could easily grow by between 4 and 4.5 per cent in gross national product (GNP) terms over the medium term.

He said the Republic's most likely average growth rate over the coming decade will be 4.2 per cent. For 2005, he expects GNP growth of 5.4 per cent.

Domestic demand - arguably a more stable gauge of the economy's performance - is set to expand faster this year than at any point since 2000, according to the commentary.

Over the longer term, the Irish economic "advantage" is to be supported by the State's demographic profile and its appeal to immigrants, Mr O'Leary said

He referred to projections from the Central Statistics Office that see 30,000 immigrants settling in the Republic over each of the next 10 years.

This, when coupled with the State's relatively high fertility rate and the young age of the Irish population, will underpin the highest population growth in the 15 pre-accession EU countries over the next 20 years, he said.

This 23 per cent annual growth would leave the Republic's population at 5.08 million by 2025. Over the same period, the 15 core EU states are to see their populations grow by an average of just 3 per cent.

The State's younger population will also help to drive growth by requiring lower pension funding at a time where mainland Europe is struggling with a pensions crisis.

Mr O'Leary believes the structure of the larger EU economies will make it hard for them to grow by enough to justify a euro zone interest rate of more than 4 or 4.5 per cent over coming years. He has pencilled in a euro-zone rate of 2.5 per cent for the end of this year, with this to reach 3 per cent before 2006 draws to a close.